Metrop. Prop. & Cas. Ins. v. Daigle CV-96-293-SD 05/14/97 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Metropolitan Property & Casualty Insurance Company; Allstate Insurance Company
v. Civil No. 96-293-SD
Richard Daigle; Irene Palmer; Donald Palmer David Smith
O R D E R
In its order of March 27, 1997, this court ruled that
Metropolitan Property & Casualty Insurance Company had no
contractual obligation to indemnify their insured, Richard
Daigle, for threatened legal liability arising from a civil
action brought against Daigle by Irene Palmer for the results of
a staged arrest. Under the insurance policy. Metropolitan was
obligated to indemnify Daigle for legal liability arising from an
"occurrence" or an "accident." Under caselaw construction of
similar policy language, liability-producing conduct is not
accidental if it is inherently injurious, which means that the
conduct is certain to result in some injury. Vermont Mutual Ins.
Co. v. Malcolm, 128 N.H. 521, 523 (1986) . While courts had not previously elaborated on the definition of "injury," this court
drew from the distinction between "injury" and "harm" in the
R estatement (S e c o n d ) of Torts § 7 cmt. a (1965) . Under the Restatement
definition, "injury" denotes invasion of a legally protected
interest, while "harm" denotes loss in fact, and the two concepts
are not co-terminus. Relying on this definition of injury, the
court held that the staged arrest perpetrated by Daigle was
inherently injuries (and thus not a covered "accident") because
it was certain to result in invasion of Palmer's legally
protected interest in freedom from restraint, even though no harm
or loss in fact was certain to attend that challenged conduct.
Daigle urges reconsideration on grounds that this court
misinterpreted the term "injury" for purposes of determining
whether conduct is inherently injurious.1 According to Daigle,
"injury" should be construed to mean loss in fact, and not
invasion of legally protected interests. Since the staged arrest
was not certain to result in loss to Palmer, Daigle's conduct was
not inherently injurious.
The court finds unpersuasive Daigle's argument that "injury"
should be construed as loss in fact rather than invasion of
1Both plaintiffs have filed assented-to motions to allow late filing of objections to the motion for reconsideration. The motions for late filing are herewith granted, and such objections were considered by the court in its ruling on the instant motion.
2 legally protected interests. First, this court rejects as
inaccurate Daigle's claim that the New Hampshire Supreme Court
used the term "injury" in the context of defining the scope of
insurance coverage in a manner inconsistent with an
interpretation of "injury" as invasion of legally protected
interests. In Fisher v. Fitchburg Mutual Ins. Co., 131 N.H. 769,
773 (1989), the New Hampshire Supreme Court held that the
insured's conduct was certain to result in injury, and thus was
inherently injurious. The insured had signed two purchase and
sale agreements for the same residential property and thereafter
refused to perform one of the two agreements. The court found
such conduct "inherently injurious" because "a reasonable person
would foresee that entering into two contracts to sell the same
property would inevitably lead to the breach of at least one of
the two contracts." Id. at 773. According to the court, the
"injury" that was certain to follow from the insured's conduct
was breach of contract, which can be characterized as an invasion
of another's legally protected interests, but cannot necessarily
be characterized as harm or loss in fact. It is not uncommon for
contract breach to produce efficient win-win results for both
parties to the contract. Thus, entering two contracts for the
sale of the same property would not inevitably result in loss in
fact, but it would inevitably result in invasion of another's
3 legally protected interests. The court's finding that the
insured's conduct was "inherently injurious" because it was
certain to result in breach of contract implies that the court
defined the term "injury" as invasion of another's legally
protected interests.
Daigle points to language in Provident Met. Fire Ins. Co. v.
Scanlon, 138 N.H. 301, 306 (1994), which he claims supports his
interpretation of "injury." In Scanlon, several boys were
playing a game of "daredevil," shooting BB guns at each other.
One of the boys was hit in the eye, and sued the trigger man
under a theory of negligence. The court held that the insured's
conduct of shooting the gun was not inherently injurious,
reasoning that " [c]onsidering that until the final shot, numerous
shots had been fired and three participants hit without injury,
we have little difficulty concluding that it was not certain that
the final shot would result in injury." Daigle claims that this
passage indicates that the court was eguating "injury" withharm
or loss in fact. However, the guoted passage is at best
ambiguous. The three participants who were previously hit with
BB shots suffered neither loss in fact nor invasion of their
legally protected interests. As the court recounted, the
previous hits had evoked only laughter, and the boys were so far
apart that the impact was light. The previous hits therefore
4 resulted in no loss in fact. Likewise, the three participants
suffered no invasion of their legally protected interests as a
result of the BB gun shots that hit them. A claim for battery
would fail because the participants consented to the contact. A
negligence claim was untenable because one of the elements of
negligence is harm, and the boys were not harmed by the BB shots.
Since the boys suffered neither loss in fact nor invasion of
their legally protected interests, no interpretive conclusions
may be drawn from the observation that "numerous shots had been
fired and three participants hit without injury."
Daigle next claims that the term "injury" should be given
the meaning that a reasonable person reading Metropolitan's
policy language would attach to it, because the preferred
interpretation of the term "injury" will have the effect of
setting the scope of the parties' contract rights. According to
Daigle, a reasonable reader would not attach the technical
definition, "invasion of legally protected interests," to the
term "injury." Rather, in common parlance, the term "injury" is
used to refer to loss in fact; i.e., "he entered the hospital
with head injuries." According to Daigle, this common usage of
the term "injury" should inform the determination of whether
conduct is "inherently injurious."
Granted, in many contexts, the term "injury" is often used
5 to denote loss in fact, the meaning that Daigle urges this court
to adopt. However, it is axiomatic that meaning varies with
context, and interpretive fallacy often results from fixing the
meaning of language in one context by reference to an entirely
different context. In this context, the term "injury" is used as
part of a general scheme of risk allocation between an insurance
company and its insured.
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Metrop. Prop. & Cas. Ins. v. Daigle CV-96-293-SD 05/14/97 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Metropolitan Property & Casualty Insurance Company; Allstate Insurance Company
v. Civil No. 96-293-SD
Richard Daigle; Irene Palmer; Donald Palmer David Smith
O R D E R
In its order of March 27, 1997, this court ruled that
Metropolitan Property & Casualty Insurance Company had no
contractual obligation to indemnify their insured, Richard
Daigle, for threatened legal liability arising from a civil
action brought against Daigle by Irene Palmer for the results of
a staged arrest. Under the insurance policy. Metropolitan was
obligated to indemnify Daigle for legal liability arising from an
"occurrence" or an "accident." Under caselaw construction of
similar policy language, liability-producing conduct is not
accidental if it is inherently injurious, which means that the
conduct is certain to result in some injury. Vermont Mutual Ins.
Co. v. Malcolm, 128 N.H. 521, 523 (1986) . While courts had not previously elaborated on the definition of "injury," this court
drew from the distinction between "injury" and "harm" in the
R estatement (S e c o n d ) of Torts § 7 cmt. a (1965) . Under the Restatement
definition, "injury" denotes invasion of a legally protected
interest, while "harm" denotes loss in fact, and the two concepts
are not co-terminus. Relying on this definition of injury, the
court held that the staged arrest perpetrated by Daigle was
inherently injuries (and thus not a covered "accident") because
it was certain to result in invasion of Palmer's legally
protected interest in freedom from restraint, even though no harm
or loss in fact was certain to attend that challenged conduct.
Daigle urges reconsideration on grounds that this court
misinterpreted the term "injury" for purposes of determining
whether conduct is inherently injurious.1 According to Daigle,
"injury" should be construed to mean loss in fact, and not
invasion of legally protected interests. Since the staged arrest
was not certain to result in loss to Palmer, Daigle's conduct was
not inherently injurious.
The court finds unpersuasive Daigle's argument that "injury"
should be construed as loss in fact rather than invasion of
1Both plaintiffs have filed assented-to motions to allow late filing of objections to the motion for reconsideration. The motions for late filing are herewith granted, and such objections were considered by the court in its ruling on the instant motion.
2 legally protected interests. First, this court rejects as
inaccurate Daigle's claim that the New Hampshire Supreme Court
used the term "injury" in the context of defining the scope of
insurance coverage in a manner inconsistent with an
interpretation of "injury" as invasion of legally protected
interests. In Fisher v. Fitchburg Mutual Ins. Co., 131 N.H. 769,
773 (1989), the New Hampshire Supreme Court held that the
insured's conduct was certain to result in injury, and thus was
inherently injurious. The insured had signed two purchase and
sale agreements for the same residential property and thereafter
refused to perform one of the two agreements. The court found
such conduct "inherently injurious" because "a reasonable person
would foresee that entering into two contracts to sell the same
property would inevitably lead to the breach of at least one of
the two contracts." Id. at 773. According to the court, the
"injury" that was certain to follow from the insured's conduct
was breach of contract, which can be characterized as an invasion
of another's legally protected interests, but cannot necessarily
be characterized as harm or loss in fact. It is not uncommon for
contract breach to produce efficient win-win results for both
parties to the contract. Thus, entering two contracts for the
sale of the same property would not inevitably result in loss in
fact, but it would inevitably result in invasion of another's
3 legally protected interests. The court's finding that the
insured's conduct was "inherently injurious" because it was
certain to result in breach of contract implies that the court
defined the term "injury" as invasion of another's legally
protected interests.
Daigle points to language in Provident Met. Fire Ins. Co. v.
Scanlon, 138 N.H. 301, 306 (1994), which he claims supports his
interpretation of "injury." In Scanlon, several boys were
playing a game of "daredevil," shooting BB guns at each other.
One of the boys was hit in the eye, and sued the trigger man
under a theory of negligence. The court held that the insured's
conduct of shooting the gun was not inherently injurious,
reasoning that " [c]onsidering that until the final shot, numerous
shots had been fired and three participants hit without injury,
we have little difficulty concluding that it was not certain that
the final shot would result in injury." Daigle claims that this
passage indicates that the court was eguating "injury" withharm
or loss in fact. However, the guoted passage is at best
ambiguous. The three participants who were previously hit with
BB shots suffered neither loss in fact nor invasion of their
legally protected interests. As the court recounted, the
previous hits had evoked only laughter, and the boys were so far
apart that the impact was light. The previous hits therefore
4 resulted in no loss in fact. Likewise, the three participants
suffered no invasion of their legally protected interests as a
result of the BB gun shots that hit them. A claim for battery
would fail because the participants consented to the contact. A
negligence claim was untenable because one of the elements of
negligence is harm, and the boys were not harmed by the BB shots.
Since the boys suffered neither loss in fact nor invasion of
their legally protected interests, no interpretive conclusions
may be drawn from the observation that "numerous shots had been
fired and three participants hit without injury."
Daigle next claims that the term "injury" should be given
the meaning that a reasonable person reading Metropolitan's
policy language would attach to it, because the preferred
interpretation of the term "injury" will have the effect of
setting the scope of the parties' contract rights. According to
Daigle, a reasonable reader would not attach the technical
definition, "invasion of legally protected interests," to the
term "injury." Rather, in common parlance, the term "injury" is
used to refer to loss in fact; i.e., "he entered the hospital
with head injuries." According to Daigle, this common usage of
the term "injury" should inform the determination of whether
conduct is "inherently injurious."
Granted, in many contexts, the term "injury" is often used
5 to denote loss in fact, the meaning that Daigle urges this court
to adopt. However, it is axiomatic that meaning varies with
context, and interpretive fallacy often results from fixing the
meaning of language in one context by reference to an entirely
different context. In this context, the term "injury" is used as
part of a general scheme of risk allocation between an insurance
company and its insured. The term should be understood to
contribute as much as possible to the sensibility of the overall
scheme of risk allocation between the parties. Interpreting
"injury" as invasion of legally protected interests creates a
sensible distribution of risk of legal liability between insured
and insurer, and is the more appropriate interpretation.
The following commercial realities of insurance bargaining
support this conclusion. Insurance contracts are aimed at
allocating the risk of undesirable conseguences, and, for a
premium, insurance companies assume certain types and degrees of
risk. If the insured exercises a greater degree of control over
materialization of the undesirable conseguences, the insurance
company is put at an informational competitive disadvantage and
could offer insurance against such conseguences only at a high
premium, if at all. For instance, insurance companies will
insure against death, but not suicide, because the insured fully
controls the occurrence or nonoccurrence of the latter. Here,
6 Metropolitan has not insured Daigle against legal liability
arising from "inherently injurious" or intentional conduct,
presumably because of the element of control exercised by Daigle.
When "inherently injurious" conduct is understood as that which
is certain to result in invasion of legally protected interests,
then "inherently injurious" conduct is animated by a great
measure of control over the occurrence or nonoccurrence of legal
liability. When an insured engages in such conduct, they can be
presumed to have willed the almost certain conseguence of adverse
legal liability. Understanding "injury" as invasion of legally
protected interests would produce a sensible scheme of risk
distribution between the parties, because allocation of risk
depends on the degree of control over the undesirable
conseguences, legal liability, exercised by the insured.
However, if "injury" is interpreted as loss in fact, then whether
or not conduct is "inherently injurious" has only an indirect
bearing on how great a risk of legal liability is posed by that
conduct. Loss in fact does not necessarily result in legal
liability, as the law permits all differing degrees and types of
harm without imposing sanctions. Thus, inherently injurious
conduct (or that which is certain to result in loss in fact)
would not exhibit the insured's heightened degree of control over
the occurrence or nonoccurrence of legal liability. If "injury"
7 is understood as loss in fact, allocation of risk turns on
factors irrelevant to the degree of control over the occurrence
or nonoccurrence of legal liability exercised by the insured.
Understanding "injury" as "invasion of legally protected
interests" rather than loss in fact produces the more sensible
scheme of risk distribution between the parties, and should
therefore be the preferred interpretation.
Daigle has presented no reason for this court to reconsider
the interpretation of "injury" that informed its previous order.
The caselaw cited by Daigle does not support his claim that this
court misinterpreted the term "injury." Application of regularly
relied-upon interpretive principles actually undermines Daigle's
claim that this court proceeded under an erroneous interpretation
of "injury." Daigle's motion to reconsider must be and herewith
is denied.
SO ORDERED.
Shane Devine, Senior Judge United States District Court
May 14, 1997
cc: Gary M. Burt, Esg. Doreen F. Connor, Esg. Brackett L. Scheffy, Esg. Kevin E. Buchholz, Esg. Roy A. Duddy, Esg.