Kelly v Liberty Insurance Corp

2018 DNH 107

• Court: District Court, D. New Hampshire
• Decided: May 18, 2018
• Docket: 15-cv-234-JL
• Status: Published

Opinion

UNITED STATES DISTRICT COURT DISTRICT OF NEW HAMPSHIRE

Brendan Kelly

v. Civil No. 15-cv-234-JL Opinion No. 2018 DNH 107 Liberty Insurance Corp., d/b/a Liberty Mutual

FINDINGS OF FACT AND RULINGS OF LAW AFTER BENCH TRIAL

This insurance coverage case requires the court to

determine whether a named insured validly rejected uninsured

motorist coverage. The dispute arises from a motor vehicle

accident in which plaintiff Brendan Kelly was seriously injured.

Kelly, an employee of Plum Creek Timber Co., was driving a

company truck when an oncoming vehicle crossed a double-yellow

line and caused a head-on collision. After collecting the

liability insurance policy limit from the other driver’s

insurance carrier, Kelly sought underinsured motorist (UM)

coverage under an umbrella policy defendant Liberty Mutual

issued to Plum Creek. New Hampshire law requires that umbrella

policies include UM coverage unless rejected by the named

insured. See N.H. Rev. Stat. Ann. § 264:15. Liberty Mutual

denied the claim on the basis that Plum Creek had expressly

rejected UM coverage. Claiming that Plum Creek’s rejection is

invalid under New Hampshire law, Kelly filed a petition for

declaratory judgment seeking coverage under the Liberty Mutual policy. See N.H. Rev. Stat. Ann. 491:22. This court’s subject

matter jurisdiction is premised on diversity of citizenship. 28

U.S.C. § 1332.

After granting partial summary judgment to Liberty Mutual

on plaintiff’s claim that New Hampshire law required Liberty

Mutual to attach Plum Creek’s written rejection of UM coverage

to the policy,1 the court held a one-day bench trial on the

remaining issue of whether the Plum Creek representative who

executed the rejection form was properly authorized to do so.

The parties each submitted proposed findings of fact and rulings

of law, pre-trial briefs, as well as a jointly-submitted

statement of agreed facts and a timeline of events. Relying on

these materials, the court makes the following findings of fact

and rulings of law, see Fed. R. Civ. P. 52(a), resulting in

judgment for Liberty Mutual.

1 The court ruled from the bench on the parties’ cross motions. See Endorsed Order, Mar. 28, 2017. A written Order on Liberty’s motion is issued this day under separate cover.

2 I. Findings of fact2

A. Underlying accident and insurance

1. In December 2013, plaintiff Kelly, a Plum Creek

employee driving a truck Plum Creek owned, was en route to a job

site when a vehicle driven by George Motard crossed into Kelly’s

lane of travel and struck Kelly’s truck head-on, killing Motard

and injuring Kelly. The New Hampshire State Police determined

that Motard was entirely at fault for the collision.

2. At the time of the collision, Progressive Casualty

Insurance covered Motard under a policy containing a $100,000

auto liability limit. Progressive tendered its policy limits to

Kelly.

3. Plum Creek carried its primary auto liability insurance

through ACE American Insurance Company (“ACE”), with auto

liability limits of $1,000,000.

4. The ACE policy provided UM coverage with limits of

$1,000,000. ACE tendered its policy’s UM coverage limits, minus

credit for the payment from Progressive, to Kelly.

2 Unless otherwise indicated, the court’s findings of fact are drawn directly from the parties’ joint statement of agreed-upon facts. Doc. no. 54.

3 B. Liberty umbrella policy

5. At the time of the collision, Plum Creek was also

insured under a Commercial Liability Umbrella policy issued by

Liberty, (“the Liberty policy”) with effective dates of June 1,

2013 to June 1, 2014.

6. Kelly is an “insured” under the Liberty policy because

he was acting within the scope of his employment for the named

insured, Plum Creek, at the time of the accident, and because he

was using a “covered auto” with Plum Creek’s permission.

7. The Liberty Policy provides auto liability umbrella

coverage with limits of $5,000,000 for each occurrence and a

$5,000,000 general aggregate.

8. Kelly sought UM coverage under the Liberty policy. As

part of his claim, he submitted medical records and bills

showing the serious and permanent injuries that resulted from

the collision. The bills exceeded $440,000.

9. Liberty denied Kelly’s claim for coverage under the

Liberty Policy because Plum Creek had rejected UM coverage.

10. A “New Hampshire Excess Uninsured Motorists Coverage

Selection or Rejection Form” was not attached to the Liberty

Policy.

4 C. Authority for rejecting UM coverage

1. Lisa Duetsch

11. Lisa Duetsch signed the UM rejection form on behalf of

Plum Creek.

12. Duetsch began working at Plum Creek in January of

2005. In 2008, she assumed the title of Manager, Risk &

Insurance. Plum Creek provided Duetsch with an office in its

corporate offices in Montana where Duetsch met with Plum Creek’s

insurers and insurance brokers.

13. Plum Creek also provided Duetsch with a company email

address, which she used to communicate with insurers and

insurance brokers. The email address and her business cards

included her title.

14. Duetsch executed UM coverage forms on behalf of Plum

Creek so as to reject coverage annually from 2005 to 2015.

15. On May 30, 2013, Duetsch completed and signed the New

Hampshire UM selection/rejection form, rejecting UM coverage.

Duetsch likewise rejected UM coverage in Florida, Louisiana and

West Virginia. Duetsch completed and signed UM coverage forms

for the same states the previous year.

16. Duetsch’s supervisor, Kent Jones, issued Duetsch

delegation of authority memoranda throughout her employment.

5 The memoranda authorized Duetsch to sign “contracts, agreements,

statements” including “Auto UI/UnderI forms.” Duetsch regularly

referred to the delegation memoranda to ensure she was acting

within the scope of her authority.

17. On or about June 1, 2005, Jones verbally instructed

Duetsch to complete the UM forms associated with Plum Creek’s

casualty insurance policy renewals. Jones reviewed the forms

before Duetsch sent them to Plum Creek’s insurer(s). During a

scheduled weekly meeting with Duetsch the following year, Jones

verbally instructed Duetsch to complete the UM forms. He

indicated that he was comfortable not reviewing them, given

Duetsch’s demonstrated comprehension of Plum Creek’s intent to

reject UM coverage, as well as the accuracy of the prior years’

forms. Until Jones updated the delegation of authority

memorandum explicitly to grant Duetsch authority to complete the

UM forms, she always notified Jones of her intent to complete

the UM forms and received his verbal authority to do so. After

Jones updated the delegation memorandum, Duetsch informed Jones

of the status of her completion of these forms during their

scheduled meetings.

18. Based on conversations with Jones, Duetsch understood

that Plum Creek wished to reject UM coverage in states in which

6 it was permitted to do so because Plum Creek had already secured

insurance coverage for its employees in the form of workers’

compensation insurance.

19. Duetsch understood that the delegation of authority

memoranda she received, together with Jones’s verbal

instructions, authorized her to reject UM coverage where

permitted by law.

20. Duetsch understood that Jones was aware of her

execution of UM forms because it was one of her job

responsibilities for over 10 years.

21. Duetsch understood that failure to reject UM coverage

on behalf of Plum Creek would have been inconsistent with Plum

Creek’s judgment and with Jones’s instructions.

22. Duetsch and Jones met annually with Plum Creek’s

primary casualty insurer’s underwriter. During these meetings

Duetsch and the underwriter discussed the execution of the UM

rejection forms in Jones’s presence.

2. Kent Jones

23. Kent Jones began working at Plum Creek in May of 1999

as a Resource Accounting Manager.

24. In 2001, Jones assumed the role of Director of

Accounting–Shared Services, Manufacturing and Risk Management.

7 He reported directly to David Brown, Plum Creek’s Vice President

and Chief Accounting Officer.

25. Brown authorized Jones to decide whether to accept UM

coverage on behalf of Plum Creek.

26. Beginning in 2002, and based on Jones’s understanding

of Plum Creek’s past practice and his own professional judgment,

Jones annually rejected UM coverage on behalf of Plum Creek in

each state in which such rejection was permitted.

27. Thereafter, Jones delegated the responsibility of

executing UM rejection forms to Lisa Duetsch. Jones furnished

Duetsch with a written delegation of authority memorandum.

28. Jones maintained similar memoranda in his files

delegating authority to Duetsch for the years 2004, 2005, 2007,

2010, 2011, 2012, 2013, 2014 and 2015. He updated them as

needed.

29. The delegation of authority memorandum in effect in

May 2013 stated in paragraph five that the Risk Manager,

Duetsch, was authorized to sig\n “contracts, agreements,

statements” including “Auto UI/UnderI forms.”3

3 Although the memorandum is dated September 20, 2016, the parties agree it is the document furnished to Duetsch prior to May 2013.

8 30. When Jones first assigned Duetsch the responsibility

of executing UM coverage selection/rejection forms on behalf of

Plum Creek, he verbally instructed Duetsch to reject such

coverage where permitted by law.

31. In Jones’s view, Duetsch’s failure to reject coverage

would have been a direct deviation from Jones’s instructions and

would have reflected poorly on Duetsch’s performance.

32. Jones was aware that Duetsch rejected UM coverage on

behalf of Plum Creek in each of the years in which she was

authorized to do so.

33. Jones was aware of Duetsch’s execution of the UM

coverage forms because an electronic file so indicating was

placed in a shared access folder, and because the invoice or

premium cost for the Liberty policy reflected a cost which did

not include uninsured or underinsured motorist coverage for any

of the four applicable states.

3. David Brown

34. In 2012 and 2013, Brown was Plum Creek’s Vice

President and Chief Accounting Officer. He began working for

Plum Creek in 1994. Brown earned Bachelor’s and Master’s

Degrees in accounting, and Master’s Degrees in Business and

Taxation.

9 35. Between 1994 and 2016, Brown held multiple titles with

Plum Creek, including Controller; Vice President, Controller;

Vice President, Controller (Chief Accounting Officer); and Vice

President and Chief Accounting Officer. Regardless of his

title, in Brown’s view, he was responsible for the Plum Creek’s

accounting. Brown retired following Weyerhaeuser’s acquisition

of Plum Creek in 2016. He was never on the Plum Creek Board of

Directors (the “board”).

36. During the relevant time period, the Plum Creek Board

of Directors elected Brown to the position of Vice President and

Chief Accounting Officer. Brown signed Plum Creek’s Form 10-K

filing with the United States Securities and Exchange Commission

(“SEC”) in his capacity as Vice President and Chief Accounting

Officer.

37. Plum Creek was the largest private landowner in the

United States, deriving revenue from selling trees,

manufacturing wood products, selling and/or developing its land,

and mineral rights. Brown understood that, as a publicly-traded

company, Plum Creek was subject to oversight by the SEC.

38. As Plum Creek’s Vice President and Chief Accounting

Officer, Brown’s primary job responsibility was to oversee the

Company’s annual disclosure of financial information in order to

10 meet various SEC requirements. He worked with various

accountants, attorneys, and board members to make sure “we got

it right.”4

39. Brown was also responsible for internal controls at

Plum Creek. Those controls included protocols and practices to

prevent material misstatements in earnings reports and to ensure

that all material transactions were properly approved in

accordance with the requirements of Plum Creek’s Board of

Directors. The board and Chief Financial Officer (“CFO”) David

Lambert gave Brown these responsibilities.

40. After implementation of the Sarbanes-Oxley Act of

2002, the SEC issued guidance to public companies regarding

internal controls. The SEC directed management of public

companies to focus on verifying that all accounting transactions

were properly recorded and executed in accordance with

delegations of authority. Delegations of authority were

specifically included in the SEC’s definition of proper internal

controls.

41. Brown spent approximately 25 percent of his time

ensuring that Plum Creek had proper internal controls in place

4 Brown Dep., Trial Exhibit (“Tr. Ex.”) 3, at 8.

11 and approximately 75 percent of his time ensuring that “the

numbers were correct.”5

42. Based on his knowledge of federal regulations

governing public companies and his educational and professional

experience, Brown understood that adequate internal controls

over financial reporting, specifically those intended to ensure

all material transactions are properly authorized, required that

Plum Creek have adequate delegations of authority in place.

43. Beginning in approximately 2004 and continuing through

the relevant time period, Plum Creek’s Audit Committee met nine

times per year. Brown attended each meeting. Brown provided

the committee with an update on his responsibilities related to

financial reporting, including internal controls and delegations

of authority.

44. At all relevant times, Brown understood that his

authority came from his direct superior, CFO Lambert.

45. CFO Lambert delegated to Brown the primary

responsibility of ensuring that “all of the accounting was

correct” for the Company.6 Brown also understood that, based on

5 Id. at 17. 6 Id. at 23.

12 the BOD Delegation of Authority, he had a “specific level of

authority for certain transactions that he was allowed to

approve.”7

46. Brown had different levels of financial authority

depending on the category of payment involved, and he maintained

a file to review whenever he was asked to approve a payment in

order to ensure the payment was within his authority.

47. Brown met weekly with his direct supervisor, Lambert.

During these meetings, Brown discussed “basically anything and

everything that [Brown] thought was important to [Lambert]

relating to financial reporting,” which included accounting for

transactions, the annual audit, internal controls, and

personnel-related matters.8

48. Brown was Kent Jones’s direct supervisor. Insurance

was within Jones’s job description and the description of those

who reported to him.

7 Id. at 23. 8 Id. at 44.

13 49. As Plum Creek grew, Jones hired Duetsch so that Jones

would have someone to whom he “could delegate some of his

insurance responsibilities.”9

50. Brown viewed Jones as the “top person in the company

to make sure that all of [Plum Creek’s] insurance decisions were

done correctly.”10 Brown believed that Jones was an expert in

the area of insurance and did not want to micromanage Jones.

51. Jones’s authority encompassed anything having to do

with insurance, except for authorizing payments beyond a certain

sum. Jones was responsible for ensuring that Plum Creek was

buying the correct amount of insurance, subject to whether the

payments were within his delegation. For any payments above the

level of his delegation of authority, Jones was required to seek

approval from someone senior to him with the requisite

authority, such as Brown or the CFO.

52. A delegation of authority in effect in 2013 gave Jones

authority to approve insurance payments under $1 million.

Payments greater than $1 million required Brown’s approval.

9 Id. 10 Id. at 24.

14 53. Brown worked for Plum Creek in Seattle and Jones

worked out of a Montana office. They had a one-hour call each

week during the period in which Jones reported to Brown. Each

prepared an agenda in advance of their call.

54. Brown conducted an annual evaluation of Jones

beginning in 2001 and continuing through the relevant time

period. He also received external feedback that, with respect

to insurance, risk management, manufacturing and accounting, and

shared services, Jones was “about as good as any employee in the

industry.”11

55. Brown reported to CFO Lambert with respect to

insurance, asking Lambert how he wanted to manage that area.

Lambert provided the authorization in 2012 and 2013 for

purchasing Plum Creek’s insurance.

56. Because the annual policy premiums for Plum Creek’s

insurance generally exceeded Brown’s authority, Jones asked

Lambert to approve the premium payments to insurers.

57. Lambert, Brown, Jones and Plum Creek’s insurance

brokers attended several meetings each year at Plum Creek’s

Seattle office regarding insurance purchases. Duetsch

11 Id. at 27-28.

15 occasionally attended as well. Prior to each broker meeting,

the participants received written materials, including a

spreadsheet with a summary of the different coverages, premiums,

and deductibles. During these meetings, Jones and the brokers

walked through Plum Creek’s insurance renewals, reviewed

premiums, coverages, and deductibles, and discussed the “prudent

thing to do.”12 Meeting participants had an opportunity to

question Jones and other company experts.

58. After these meetings, and once Plum Creek received the

final premium quotes from its insurers, Jones emailed Lambert to

ask for approval of various coverages and payments. Jones

copied Brown on the email. Lambert emailed his approval back to

Jones, copying Brown, who could not recall seeing any instance

in which Lambert did not provide such approval to Jones.

59. During the relevant time period, Brown and Jones

discussed Plum Creek’s automobile insurance coverage, which

included a Powerpoint presentation summarizing the level of

coverage, the deductible and generally the “prudent thing to

do.”13

12 Id. at 24. 13 Id. at 28.

16 60. Brown never expressly discussed UM coverage with

Jones. He never directed Jones to accept or reject UM coverage

in the umbrella policy. Although he and Jones met weekly, the

topic of UM coverage never came up. Brown did not know whether

Plum Creek purchased UM coverage in 2012 or 2013. He did not

know of any reason why that would be something he would have

needed to know.

61. Brown fully authorized Jones to decide whether to

accept or reject UM coverage for Plum Creek. Jones made that

decision based on his training and experience.

62. Jones’s full authority encompassed anything having to

do with insurance, except for authorizing payments over a

certain amount. To the extent Jones delegated his authority to

Duetsch, Brown was “totally comfortable” with either Jones or

Duetsch “signing on behalf of the company.”14

63. Brown was not surprised to learn that Plum Creek did

not purchase UM coverage. In Brown’s view, Jones purchased the

correct amount of insurance, and the premium was within Jones’s

delegation of authority.

14 Id. at 37.

17 64. Brown did not know how many vehicles Plum Creek owned

during the 2012-2013 period, or how many vehicles Plum Creek had

in New Hampshire.

65. Brown was always aware of the agenda for board

meetings because he wanted to know if the board was discussing

anything significant in the areas of internal control or

financial reporting. Brown also received copies of the

materials provided to the board during their meetings and copies

of the meeting minutes after the fact so that he could determine

whether anything significant had come up regarding financial

reporting.

66. Insurance was not a standard item on a board meeting

agenda. Periodically, Jones sent Brown Powerpoint presentations

that would then be included in the materials sent to the Board.

The board was always more interested in the directors’ and

officers’ insurance coverage, rather than automobile liability

coverage.

67. In the relevant time period, Jones never appeared in

front of the Board of Directors and none of Jones’s memos were

ever presented to the Board or the Board’s Audit Committee.

18 4. By-laws and corporate governance

68. The Plum Creek by-laws provide (and provided during

the relevant time period) that the “Board of Directors . . . may

exercise all such powers of the Corporation and do all such

lawful acts and things as are not by statute or by the

Certificate of Incorporation or by these By-Laws required to be

exercised or done by the stockholders.”15

69. In 2003 or 2004, in connection with Sarbanes-Oxley,

the Plum Creek Board of Directors issued a written delegation of

authority (“BOD delegation”). Under the BOD delegation, Brown

reported to the CFO, Lambert, who in turn reported to the Chief

Executive Officer who in turn reported to the Board of

Directors.

70. The BOD delegation addressed the power of individual

corporate officers to approve payments to third parties on

behalf of the Company. Payments above certain thresholds

required Board approval, while authority over smaller amounts

was delegated to others. From there, the delegations would

“cascade down throughout the [C]ompany.”16

15 Plum Creek by-laws, Tr. Ex. 41. 16 Brown Dep., Tr. Ex. 3, at 36.

19 71. The BOD delegation did not contain a separate line for

insurance. Insurance fell under the general category of

approval for payments. Brown “guessed” that there were

approximately 15 specific categories of payments, and insurance

would have been one of the normal recurring expenditures.17

Brown received a copy of the BOD delegation in the first year

the board approved it.

72. Internal and external auditors reviewed the BOD

delegation quarterly. If the auditors raised any issues, they

would first bring them to Brown’s attention, then Brown and the

auditors would bring the issues to the attention of the board’s

audit committee.

73. Plum Creek’s external auditor, Ernst & Young, reported

on its audit of Plum Creek in its 2013 10-K. Ernst & Young

reported no material weaknesses in the Company’s internal

controls, including its BOD delegation.

74. Brown received feedback from both internal and

external auditors that they “weren’t really aware of any company

that did [internal controls] better than Plum Creek.”18

17 Id. 18 Id. at 35.

20 5. AON insurance broker

75. AON Risk Services (“AON”) was Plum Creek’s insurance

broker. AON serves as an intermediary between its clients and

various insurance carriers.

76. Michael Day is an Account Executive, Senior Vice

President at AON. He has served as a Senior Vice President at

AON since 1999 and has worked in the insurance industry for over

30 years.

77. During the relevant time period, Day had two primary

responsibilities. First, as an account executive, he was

the direct client service contact, with day-to-day interaction

with his AON clients. Second, as a casualty broker, he sought

casualty insurance within the marketplace on behalf of his own

clients and clients of other account executives at AON.

78. Day began working with Plum Creek in June of 2009 when

AON’s previous casualty broker retired. AON had an internal

client service team that worked with Plum Creek. The team

included Day, Donna Keane and Jacquie Brissey.

79. In 2012, Plum Creek became a new customer of Liberty

for purposes of umbrella coverage. In 2012 and 2013, Paulo

21 Aguiar was a Liberty senior underwriter. His assistant was

Evelyn Surban.

80. In May 2012, Aguiar and Day exchanged emails regarding

Plum Creek’s umbrella coverage. Day asked Aguiar to confirm

that Liberty would charge no additional premiums if Plum Creek

rejected UM coverage where permitted. Day noted that he “[j]ust

wanted to make sure there are no minimum charges since the

insured does not buy this coverage in their primary.”19 Neither

Jones nor Duetsch was copied on this email.

81. Later in May 2012, Day provided instructions to

Liberty on behalf of Plum Creek with respect to Plum Creek’s

umbrella coverage for the policy effective June 1, 2012 to June

1, 2013. These instructions were provided by telephone to

Aguiar and were documented in a follow-up email. Among other

things, this email stated, “The insured is declining Terrorism

and UM. If you need the rejection forms signed, please let me

know.”20 Neither Jones nor Duetsch was copied on this email.

This email was stored in Liberty’s underwriting file for Plum

Creek.

19 Tr. Ex. 2A. 20 Tr. Ex. 2B.

22 82. Liberty issued a Commercial Umbrella Policy to Plum

Creek with an effective date of June 1, 2012 to June 1, 2013.

83. On June 15, 2012, Day sent an email to Liberty’s

Surban, attaching signed UM rejection forms for the states of

Florida, Louisiana, New Hampshire and West Virginia for the year

2012. Neither Jones nor Duetsch was copied on this email which

was stored in Liberty’s Plum Creek underwriting file.

84. Liberty’s underwriting file for the 2012 underwriting

of Plum Creek’s umbrella coverage reflects that Liberty

personnel did not communicate directly with Plum Creek

personnel. Rather, all communications relating to the

negotiation and issuance of the policy were relayed through AON

personnel, including Day.

85. In May 2013, Day emailed Aguiar, Surban and Liberty

Executive Underwriter Connie Cameron requesting that Liberty

provide a quote to renew its umbrella coverage. Neither Jones

nor Duetsch were copied on this email.

86. Aguiar provided the quote to Day a short time later

(with a copy to Cameron). Aguiar stated that “just like last

year I am offering [UM] coverage for vehicles garaged in the

states of FL, LA, NH, and WV . . . . If there are any changes

that need to be made to the [UM] offer we can amend it later if

23 the insured’s interested in the coverage this year (they

rejected it last year . . .).”21 Neither Jones nor Duetsch were

copied on this email.

87. Liberty issued a Commercial Umbrella Policy to Plum

Creek with an effective date of June 1, 2013 to June 1, 2014.

88. On June 3, 2013, AON sent an email to Liberty,

attaching signed UM rejection forms for Florida, Louisiana, New

Hampshire and West Virginia for the year 2013. Neither Jones

nor Duetsch was copied on this email. This email and its

attachments were stored in Liberty’s Plum Creek underwriting

file.

89. Liberty’s underwriting file for the 2013 policy

reflects that Liberty personnel did not communicate directly

with Plum Creek personnel. Rather, all communications relating

to the negotiation and issuance of the policy were relayed

through AON personnel.

90. During the relevant time period, Day did not recall

any specific conversations with Plum Creek regarding UM

coverage. He worked off of his renewal files and from those

files understood that UM coverage had been rejected in the past.

21 Tr. Ex. 2H.

24 91. Day understood the rejection of UM coverage to be

consistent with Plum Creek’s strategy with respect to insurance.

92. When Day receives signed forms from a client, he

expects that those documents have been signed with the authority

of the client, according to the client’s own internal protocols.

93. Day has never seen a written document or delegation of

authority giving a risk manager the authority to purchase

94. The protocol within AON is that the people with whom

AON works are established in their role. AON does not “have

someone coming in and declaring themselves authorized without

the proper relationship already having been established.”22

95. Day understood Jones’s role at Plum Creek to be that

of “director in risk management.” He understood Duetsch’s role

at Plum Creek to be that of “risk manager.”23

96. In Day’s experience, risk managers are typically in

charge of the insurance matters for the organization that they

represent. If there is a risk manager in an organization, that

22 Day Dep., Tr. Ex. 1, at 93. 23 Id. at 18, 56.

25 is the person Day typically interacts with on insurance matters

and questions that may come up regarding contracts.

97. The “New Hampshire Excess Uninsured Motorists Coverage

Selection or Rejection Form” Duetsch signed on May 30, 2013, was

at all relevant times stored in the Liberty underwriting file in

the ordinary course of Liberty’s business.

6. Liberty’s UM Selection/Rejection Form

98. Liberty submitted the forms for its commercial

umbrella product to the New Hampshire Insurance Department for

approval in June 2010. Liberty included the “New Hampshire

Excess Uninsured Motorists Coverage Selection or Rejection Form”

in its list of “Form Attachments.” The Department subsequently

approved Liberty’s commercial umbrella product.

99. On August 26, 2014, Liberty claim representative

Joseph Covert provided plaintiff’s counsel with a copy of the

Liberty Policy. A “New Hampshire Excess Uninsured Motorists

Coverage Selection or Rejection Form” was not attached to the

100. On September 15, 2014, Covert emailed Paul Stuart of

ACE and Lisa Duetsch of Plum Creek stating “[o]ur policy is not

a ‘follow form’ policy and it contains an exclusion for UM/UIM

benefits. I am working with our underwriter to confirm we

26 obtained the appropriate rejection forms and will be issuing a

coverage position [regarding Kelly’s claim] shortly.”24 Also on

that day, Covert supplied a copy of the NH UM Selection/

Rejection Form to plaintiff’s counsel by email, stating that

“the attached form confirms that the coverage was rejected by

the insured.”25

101. The New Hampshire UM Selection/Rejection form Covert

provided Covert identified the “Applicant/Named Insured” as

“Plum Creek Timber Company, Inc.”

102. Duetsch signed the form on May 30, 2013. Duetsch’s

initials are written on a line next to the sentence “I reject

Uninsured Motorists Coverage.” The signature line does not

state Duetsch’s title.

103. Liberty received the signed NH UM Selection/Rejection

Form on June 3, 2013.

II. Rulings of Law

107. The parties agree that New Hampshire law controls this

dispute. Therefore, the insurer, Liberty, bears the burden of

proving by a preponderance of the evidence that Kelly’s claim is

24 Tr. Ex. 28. 25 Tr. Ex. 15.

27 not covered by the applicable policy. N.H. Rev. Stat Ann. §

491:22-a (2010); Carter v. Concord. Gen. Mut. Ins. Co., 155 N.H.

515, 517 (2011).

108. Plaintiff agrees that Plum Creek authorized Duetsch to

purchase insurance.26 He argues only that she was not authorized

to reject UM coverage.27

A. Rejection of UM coverage

109. New Hampshire law requires umbrella policies to “provide [UM] coverage equal to the limits of liability purchased, unless the named insured rejects such coverage in writing. Rejection of such coverage by a named insured shall constitute a rejection of coverage by all insureds . . . and shall remain effective upon policy amendment or renewal, unless the named insured requests such coverage in writing.”

N.H. Rev. Stat. Ann. § 264:15 (emphasis added). The parties

agree that Plum Creek is the “named insured,” and that Kelly is

“an insured” by virtue of the fact that he was operating the

truck in the course of his employment at the time of the

accident.

110. “[S]ettled principles of agency law . . . apply to the

rejection of UM coverage.” Bouffard v. State Farm Fire & Cas.

26 Transcript, doc. no. 65, at 14. 27 Id.

28 Co., 162 N.H. 305, 310 (2011). Accordingly, “an agent may waive

UM coverage on behalf of a principal so long as the insurer

proves the existence of an agency relationship, whether actual

or apparent.” Id. at 311. The question of an agency

relationship is one of fact. Id. (citing Dent v. Exeter Hosp.,

155 N.H. 787, 792 (2007)).

111. Liberty argues that Plum Creek rejected UM coverage.

It supports this claim with a copy of the rejection form Lisa

Duetsch signed.28 In response, plaintiff argues that Liberty has

not proven that Duetsch was authorized by Plum Creek’s board of

directors to reject the coverage. As explained below, the court

finds that Plum Creek has met its burden under New Hampshire law

and proven by a preponderance of the evidence that Duetsch was

properly authorized to reject UM coverage on Plum Creek’s

behalf. Specifically, Plum Creek’s bylaws expressly authorized

the company’s board of directors to act on the company’s behalf.

The board, in turn, authorized Chief Financial Officer Lambert

and Chief Accounting Officer Brown to approve financial

transactions, including those related to insurance. Brown and

Lambert, in turn, authorized Risk Management Director Kent Jones

28 Tr. Ex. 7.

29 to handle Plum Creek’s insurance matters, including the decision

whether to reject UM coverage. Finally, Jones authorized

Duetsch to execute, inter alia, the UM rejection form.

1. Actual Authority

112. “[T]he necessary factual elements to establish agency

involve: (1) authorization from the principal that the agent

shall act for him or her; (2) the agent’s consent to so act; and

(3) the understanding that the principal is to exert some

control over the agent’s actions.” Dent, 155 N.H. at 792

(quotation omitted). “The granting of actual authority and

consent to act with such authority may be either express or

implied from the parties’ conduct or other evidence of intent.”

Id. “Express authority arises when the principal . . .

explicitly manifests its authorization of the actions of its

agent.” Demetracopoulos v. Strafford Guidance Ctr., 130 N.H.

209, 213 (1987). “Implied authority, on the other hand, follows

as a reasonable incident or construction of the terms of express

authority, or results from acquiescence by the principal in a

course of dealing by the agent.” Bouffard, 162 N.H. at 311-12

(quoting Demetracopoulos, 130 N.H. at 215)); see also, Mannone

v. Whaland, 118 N.H. 86, 89 (1978) (citing Restatement (Second)

of Agency § 43, cmt b (“If the agent performs a series of acts

30 of a similar nature, the failure of the principal to object to

them is an indication that he consents to the performance of

similar acts in the future under similar conditions.”)).

a. Duetsch’s authority

113. The trial evidence, comprised of affidavits,

deposition transcripts and stipulations, establishes that

Duetsch had both implied and express actual authority to reject

UM coverage.

114. With respect to the first element of agency --

authorization from the principal -- Plum Creek’s Director of

Accounting -- Shared Services, Manufacturing and Risk Management

Kent Jones stated unequivocally that he expressly delegated the

responsibility of executing the UM rejection to Duetsch. Jones

instructed Duetsch to reject the coverage in each state where it

was permitted, just as he had done when the responsibility was

his, beginning in 2002. He also issued a written delegation of

authority memorandum giving Duetsch authority to sign contracts,

including “Auto UI/Under I forms.”

115. Even if Jones did not expressly delegate authority to

reject UM coverage to Duetsch, she nevertheless possessed

implied authority by virtue of Jones’s knowing acquiescence to

31 Duetsch’s rejection of UM coverage for the previous 10 years.

Mannone, 118 N.H. at 89.

116. The second factor pertinent to Duetsch’s actual

authority, the agent’s consent to act, is demonstrated by

Duetsch’s execution of her duties in compliance with Jones’s

instructions.

117. Liberty proved the third factor in the authority

analysis, the principal’s control over the agent’s actions, with

evidence that Jones monitored and controlled Duetsch’s

performance of her job responsibilities, including the rejection

of UM coverage. In the first year that he delegated this

authority to Duetsch, Jones verified that she had completed the

forms correctly. Thereafter, the two met weekly, during which

time Duetsch informed Jones of the status of her completion of

the UM forms. In addition, Jones required that Duetsch save the

completed forms in a shared network folder where he could review

them. Jones also regularly updated the delegation of authority

memorandum in order to delineate the limits of Duetsch’s

authority. This is sufficient to establish Jones’s control over

Duetsch. See Herman v. Monadnock PR-24 Training Council, Inc.,

147 N.H. 754, 759 (2002) (holding that control by the principal

does not mean actual control at every moment; rather, it turns

32 upon the principal manifesting some continuous prescription of

what the agent shall or shall not do).

b. Jones’s authority

118. Chief Accounting Officer Brown, and Brown’s superior,

Chief Financial Officer Lambert expressly authorized Jones to

purchase the Liberty umbrella policy. After the meetings with

Plum Creek’s insurance brokers, Jones delivered a spreadsheet to

Lambert and Brown summarizing Plum Creek’s policies, premiums

and deductibles. Jones then submitted a written request to

Lambert, by email, copied to Brown, seeking permission to

purchase the 2013 umbrella policy, which Lambert supplied.

119. In addition to the Jones’s express authority to

purchase the 2013 Liberty umbrella policy, several factors

support the conclusion that Jones possessed implied actual

authority to reject UM coverage for the 2013 policy year.

First, the decision to reject UM coverage in certain states was

a decision subsidiary to binding the 2013 umbrella policy

itself. Accordingly, the decision to accept or reject optional

coverages “follow[ed] as a reasonable incident or construction

of the terms of express authority[.]” See Bouffard, 162 N.H. at

307. Next, Jones rejected UM coverage in each year from 2002 to

2005 and Duetsch, his direct report, rejected it each year from

33 2005 through 2015. Yet at no point did any superior at Plum

Creek direct him to do otherwise. Their acquiescence implied

Jones’s authority. See Mannone, 118 N.H. at 89 (“authorization

for the actions of an agent may be found by acquiescence of the

principal in a series of acts performed by the agent in the

past” (citing Restatement (Second) of Agency § 43(2)).

Moreover, Brown and Lambert viewed Jones as an expert on

insurance and trusted him to make decisions with respect to

insurance on behalf of Plum Creek. Thus, Jones reasonably

understood, based on his interactions with his superiors, Brown

and Lambert, that the decision to reject UM coverage fell within

the scope of his authority to manage Plum Creek’s insurance

program. See Restatement (Third) of Agency § 2.01, cmt. c. (The

“focal point for determining whether an agent acted with actual

authority is the agent’s reasonable understanding at the time

the agent takes action.”). The acquiescence of Brown and

Lambert to Jones’s actions also constituted ratification of his

conduct. See id., § 4.01 (“A principal may ratify an act by

failing to object to it or to repudiate it.”).

120. The second element related to Jones’s actual authority

-- his consent to act on behalf of the principal -- was

satisfied when Jones acted upon Brown and Lambert’s

34 authorization by rejecting UM coverage in the years 2002 to

2005, by subsequently directing his direct report, Duetsch, to

do the same, and by monitoring Duetsch to ensure she had done

so. See Bouffard, 162 N.H. at 312 (intentionally securing

insurance policy on behalf of the principal was sufficient

evidence of the agent’s assent to act on principal’s behalf).

121. The final requirement to establish Jones’s actual

authority, control by the principal, was satisfied by the

several ways in which Lambert and Brown monitored Jones’s

compliance with the limits of his authority, including:

ensuring adherence to monetary limits; requiring that he seek

authorization for expenditures in excess of those limits;

participating in and asking questions at regular broker meetings

with Jones and AON personnel; Brown’s and Jones’s weekly

meetings during which they discussed Jones’s performance; and

through Brown’s formal reviews of Jones’s performance. See id.

(finding sufficient evidence of control where principal and

agent discussed the coverage to be purchased in advance and

principal had opportunity to review the policy documents should

she so choose).

35 c. Lambert and Brown

122. The next link in the chain of authority requires the

court to ascertain whether Plum Creek’s Board of Directors

authorized CFO Lambert and CAO Brown to reject UM coverage.

Dent, 155 N.H. at 792; see also, Daniel Webster Council, Inc.

Boy Scouts of America v. St. James Ass'n, Inc., 129 N.H. 681,

683 (1987) (observing that corporate officers have “only those

powers conferred on them by the bylaws of the corporation or by

the resolution of the directors”). The evidence points only to

the conclusion that Lambert and Brown were so authorized.

123. The first required element -- grant of authority -- is

satisfied by the BOD delegation, which expressly empowered both

the CFO and the CAO to approve transactions within their

respective limits of financial authority.

125. More specifically, the Board’s written delegation

granted the two officers, Lambert and Brown, actual authority

regarding insurance matters. While that document did not

include “insurance” among its distinct categories of authorized

expenditures, that authority can be implied from the express

grant of authority for the approval of “normal recurring

expenditures.” The plaintiff does not dispute that annual

insurance premiums fit comfortably into that category.

36 126. Lambert’s and Brown’s implied authority to act on

insurance matters is also reflected in the Board’s acquiescence

to their actions. It is uncontradicted that the Board raised no

objection to Plum Creek’s insurance expenditures, including the

repeated rejections of UM coverage.

127. Next, Liberty established the second element necessary

to prove Lambert’s and Brown’s authority: that they accepted

the responsibilities of agency. See id. The two officers

demonstrated their acceptance of authority by, inter alia,

undertaking responsibility for insurance expenditures, meeting

with insurance brokers, and by supervising Kent Jones.

128. Liberty also established the final element necessary

to prove Lambert’s and Brown’s authority, the principal’s

control over the agent’s actions. Id. Brown’s and Lambert’s

action were subject to internal and external audits, they met

regularly with the Plum Creek board’s audit committee regarding

insurance expenditures, and Lambert made presentations regarding

insurance to the board. Taken together, these facts are

sufficient to establish that the Plum Creek Board “exert[ed]

some control” over the officers’ actions. Id.

37 d. Board’s authority

129. The final issue related to Duetsch’s authority is

whether Plum Creek’s Board possessed the authority to delegate

insurance matters to corporate officers. The court finds that

the Board was authorized to do so.

130. Plum Creek’s bylaws easily satisfy the first element

of agency -- authorization. Id. The corporate bylaws provide

that the board may act on the company’s behalf, including the

execution of contracts.

131. The court also finds that Liberty has demonstrated

that the board unquestionably consented to act on its authority

when it executed the delegation of authority and delegated

insurance-related decisions to officers such as Brown and

Lambert. This satisfies the second element necessary to prove

the Board’s actual authority, its consent to act on the

principal’s behalf. Id.

132. Finally, in addition to being governed by Plum Creek’s

bylaws, the Board’s actions could be monitored and controlled by

voting shareholders, thus satisfying the final element required

to establish the Board’s actual authority to delegate insurance

matters.

38 2. Apparent authority

133. Even if Duetsch lacked actual authority to reject UM

coverage, the court finds that she had apparent authority to do

so.

134. Apparent authority is “authority which a reasonably

prudent [person], induced by the principal’s acts or conduct,

and in the exercise of reasonable diligence and sound

discretion, under similar circumstances with the party dealing

with the agent, and with like knowledge, would naturally suppose

the agent to have.” Record v. Wagner, 128 A.2d 921, 922 (N.H.

1957). Apparent authority can result when the principal “fails

to disapprove of the agent’s act or course of action so as to

lead the public to believe that his agent possesses authority to

act . . . in the name of the principal.” State v. Zeta Chi

Fraternity, 142 N.H. 16, 24 (1997) (quoting 3 Am.Jur.2d Agency §

79, at 586 (1986)). Several factors support the conclusion that

Duetsch possessed apparent authority to reject UM coverage on

behalf of Plum Creek.

135. First, Plum Creek cloaked Duetsch with apparent

authority by its affirmative conduct. Plum Creek vested Duetsch

with the title “Manager, Risk & Insurance.” The company

likewise provided her with business cards noting her title, a

39 company email account, and an office in Plum Creek’s corporate

offices in Montana where Ms. Duetsch met with Plum Creek’s

insurance brokers. See Boynton v. Figueroa, 154 N.H. 592, 604-

05 (concluding that program permitting authorized builders to

use company logo, among other factors, could support jury

finding of apparent authority of builder). Duetsch’s title

signaled to Day, the AON representative, that Duetsch was the

person in charge of Plum Creek’s insurance matters. Day

exchanged business cards with Duetsch, learned of her title, and

met with her at Plum Creek’s offices. Based on his 18 years of

experience in the insurance industry, Day relied on these

indicia of authority in concluding that she was authorized to

execute the UM forms on behalf of Plum Creek.

136. In addition, by its acquiescence to Duetsch’s and

Jones’s conduct, Plum Creek cloaked Duetsch with apparent

authority vis-à-vis third parties like AON and Liberty. As

previously noted, AON and Liberty were aware that Plum Creek

rejected UM coverage every year since at least 2002, and Plum

Creek never provided any documentation to either AON or Liberty

to countermand those rejections. See Horseshoe Fish & Game Club

v. Merrimack Vill. Dist., 112 N.H. 94, 97-98 (1972) (finding

apparent authority where two purported agents were allowed to

40 operate as officers for a year without objection and

organization did nothing to correct outdated documents in

circulation giving authority to those purported officers).

137. Day also knew from his review of AON’s files that

rejection of UM coverage was consistent with Plum Creek’s

insurance practices, and Aguiar similarly relied on Plum Creek’s

rejection of UM coverage in 2012 to quote a 2013 renewal without

UM coverage. Further, Liberty relied on Plum Creek’s previous

rejection forms to offer the 2012 and 2013 policies without an

additional premium for optional UM coverage.

138. Both Plum Creek’s acquiescence to Jones’s and

Duetsch’s conduct, as well as the record of Plum Creek’s prior

course of dealing, gave rise to AON’s and Liberty’s reasonable

belief that Plum Creek intended to reject UM coverage where

permitted by law and that Duetsch was authorized to effectuate

that intent. See Zeta Chi Fraternity, 142 N.H. at 25 (“Apparent

authority can result when the principal ‘fails to disapprove of

the agent’s act or course of action so as to lead the public to

believe that his agent possesses authority to act . . . in the

name of the principal.’”)(quoting 3 Am. Jur. 2d Agency § 79, at

586 (1986)); see also Restatement (Third) of Agency § 2.03, cmt

41 c (recognizing that apparent authority can arise from prior

dealings between the parties).

139. Plum Creek’s affirmative conduct and prior course of

dealing with respect to its insurance policies and the rejection

of UM coverage, particularly in light of custom and practice in

the insurance industry, is further evidence of Duetsch’s

apparent authority to reject UM coverage. Day testified that

based on his experience in the industry, he would not interact

with personnel from a client regarding insurance unless that

person had been introduced to him and the proper relationship

had already been established using appropriate internal

protocols. According to Day, brokers ordinarily interact only

with certain client personnel. For Plum Creek, those

individuals were Jones and Duetsch.

140. In the insurance purchasing process, Plum Creek

channeled its communications with its broker through Duetsch and

Jones, while Day, the broker, communicated directly with Plum

Creek’s insurers. Liberty relied on this chain of communication

as valid because AON was Plum Creek’s insurance broker. Liberty

corresponded solely with AON throughout the insurance

underwriting process in 2012 and 2013, and relied on AON’s

42 instructions with respect to Plum Creek’s policies in those

years.

141. Liberty reasonably believed that AON supplied Liberty

with forms signed by Plum Creek’s duly authorized

representative. See Restatement (Third) of Agency § 1.03, cmt c

(“When [an organization’s] designated person speaks as to a

matter that is one of the types specified [by the organization],

and in a manner that conforms to [an] established routine, a

third party is justified in believing that the person speaks for

the organization.”).

142. Plaintiff argues that the lack of direct communication

between Plum Creek and Liberty about rejecting UM coverage is

fatal to any claim of agency. The court disagrees.

143. An insurance broker such as AON is “employed by the

insured to procure insurance from one of many potential

insurers.” Mut. Benefit Life. Ins. Co. v. Gruette, 129 N.H.

317, 322 (1987). “Ordinarily, when employed to procure

insurance, the broker becomes the agent of the person for whom

the insurance is procured at least to the extent matters

connected with the procurement itself are concerned . . . .” 43

Am.Jur. 2d Insurance § 116. Plaintiff does not argue, nor is

there any evidence to suggest, that AON was not acting as Plum

43 Creek’s agent, and that Liberty recognized AON’s agency. That

Liberty personnel did not speak directly with Plum Creek

personnel about rejecting UM coverage has no bearing on

Duetsch’s apparent authority to reject UM coverage on behalf of

IV. Conclusion

As noted, plaintiff concedes that Duetsch had authority to

make Plum Creek’s insurance purchasing decisions. He confines

his argument that Duetsch lacked authority to the sub-category

of rejecting UM coverage.29 He provides no authority for this

proposition -- in the form of cases from New Hampshire or any

other jurisdiction, treatises, or law review commentaries --

pursuant to which an agent already authorized to make insurance

decisions requires a special grant of authority with respect to

a particular aspect of coverage. Cf. Bouffard, 162 N.H. at 311

(“[W]e decline to allow a principal to accept the benefits of an

insurance policy as negotiated by an agent on the one hand, but

at the same time claim that one unbeneficial aspect of the

policy should not apply.”).

29 Trial Transcript at 14.

44 The court finds that Plum Creek granted Lisa Duetsch

express and implied actual authority to reject UM coverage in

the Liberty umbrella policy, and that, in the alternative, she

had the apparent authority to do so. Accordingly, Liberty has

met its burden of proving that Plum Creek validly rejected the

coverage, in compliance with N.H. Rev. Stat. Ann. § 264:15, I.

The court therefore finds in favor of the defendant. The clerk

shall enter judgment accordingly and close the case.

SO ORDERED.

____________________________ Joseph N. Laplante United States District Judge

Dated: May 18, 2018

cc: Robert A. Stein, Esq. Diane P. Hock, Esq. Nancy D. Adams, Esq. Lavinia M. Weizel, Esq. John B. Schulte, Esq.