Ryan Hardy and Matthew O’Connor, Plaintiffs v. Granite State Insurance Company, Defendant

2020 DNH 090

• Court: District Court, D. New Hampshire
• Decided: May 28, 2020
• Docket: 20-cv-216-SM
• Status: Published

Opinion

UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

Ryan Hardy and Matthew O’Connor, Plaintiffs

v. Case No. 20-cv-216-SM Opinion No. 2020 DNH 090

Granite State Insurance Company, Defendant

O R D E R

This is a declaratory judgment action in which plaintiffs

seek a judicial determination of the limits of coverage provided

under an insurance policy issued by defendant, Granite State

Insurance Company. Plaintiffs originally filed their petition

in the Hillsborough County Superior Court, seeking a declaratory

judgment under state law. See N.H. Rev. Stat. Ann. (“RSA”)

491:22. Granite State removed the action, invoking this court’s

diversity subject matter jurisdiction. Plaintiffs then amended

their petition to include a count under the federal Declaratory

Judgment Act. See 28 U.S.C. § 2201.

Pending before the court is Granite State’s motion to

dismiss the Amended Complaint. Granite State asserts that plaintiffs are neither parties to, nor insureds under, the

insurance contract and, therefore, lack standing to sue.

Granite State also says plaintiffs’ claims are not ripe for

adjudication. Plaintiffs object. For the reasons discussed,

Granite State’s motion to dismiss (document no. 11) is denied.

This matter is, however, remanded to the Hillsborough County

Superior Court.

Standard of Review

When ruling on a motion to dismiss under Rules 12(b)(1) and

12(b)(6), the court must “accept as true all well-pleaded facts

set out in the complaint and indulge all reasonable inferences

in favor of the pleader.” SEC v. Tambone, 597 F.3d 436, 441

(1st Cir. 2010). See also Lyman v. Baker, 954 F.3d 351, 359–60

(1st Cir. 2020) (noting the same basic standard of review

applies to motions under 12(b)(1) (lack of subject matter

jurisdiction) and 12(b)(6) (failure to state a claim)).

Although the complaint need only contain “a short and plain

statement of the claim showing that the pleader is entitled to

relief,” Fed. R. Civ. P. 8(a)(2), it must allege each of the

essential elements of a viable cause of action and “contain

sufficient factual matter, accepted as true, to state a claim to

relief that is plausible on its face,” Ashcroft v. Iqbal, 556

2 U.S. 662, 678 (2009) (citation and internal punctuation

omitted).

Background

In April of 2016, Ian MacPherson purchased a firearm from

Chester Arms, a federally licensed firearms dealer in Derry, New

Hampshire. About six weeks later, Manchester Police Officer

Ryan Hardy saw MacPherson walking in Manchester and noticed that

he met the description of a man suspected of having recently

robbed a gas station. Officer Hardy approached MacPherson and,

at some point during their encounter, MacPherson shot Hardy

several times in the face and torso. Hardy radioed in his

status, location, and the direction in which MacPherson fled.

Approximately thirty minutes later, Manchester Police

Officer Matthew O’Connor and members of the State Police saw a

man fitting MacPherson’s description. During the officers’

efforts to apprehend him, MacPherson shot Officer O’Connor in

the leg. MacPherson again escaped, but was arrested a few hours

later. The weapon MacPherson used to shoot both officers was

the one he had purchased from Chester Arms.

In July of 2018, Officer Hardy and Officer O’Connor brought

separate lawsuits in state court asserting, among other things,

3 that MacPherson was a “prohibited person” (that is, someone

barred from lawfully purchasing, owning, or possessing a

firearm) and that Chester Arms had been negligent in selling the

firearm to him. That negligent sale, say plaintiffs,

proximately caused their injuries when MacPherson subsequently

shot them.

Chester Arms is insured by the defendant in this

proceeding, Granite State Insurance Company. Under the terms of

its policy, Granite State provides Chester Arms with liability

coverage of up to One Million Dollars ($1,000,000) for each

insured “occurrence,” with an aggregate limit of Two Million

Dollars ($2,000,000). Granite State has acknowledged coverage

under the policy and is providing Chester Arms with a defense in

state court.

At issue in this case is the proper interpretation of that

insurance policy. Officers Hardy and O’Connor say they were

shot and injured in separate “occurrences” and, therefore,

Granite State’s policy provides Chester Arms with One Million

Dollars of coverage in each of their separate lawsuits. Granite

State disagrees and says the officers’ injuries were the product

of a single insured “occurrence” (presumably Chester Arms’

negligent sale of the firearm to MacPherson). So, says Granite

4 State, because there is only a single covered “occurrence,”

Chester Arms’ insurance coverage is limited to a total of One

Million Dollars (for both claims).

As the defendant in the state negligence actions, and the

insured under Granite State’s policy, Chester Arms presumably

shares the officers’ interest in maximizing insurance coverage

under the policy. After all, its potential liability in the

state negligence actions is substantial. Yet, Chester Arms is

not a party to this declaratory judgment action.

Discussion

In their Amended Complaint, plaintiffs advance two

virtually identical claims for declaratory relief: first, under

the federal Declaratory Judgment Act, and second, under New

Hampshire’s state analog. In each count, plaintiffs seek a

judicial declaration:

A. That Granite State Insurance Company is obligated to provide Chester Arms with liability insurance coverage in the amount of One Million Dollars ($1,000,000) per occurrence, subject to an aggregate of Two Million Dollars ($2,000,000);

B. That the two separate and distinct incidents in which Ryan Hardy and Matthew O’Connor were shot and injured constitute two separate “occurrences” with respect to the Granite State insurance policy;

5 C. That Granite State Insurance Company is obligated to satisfy any judgment rendered against Chester Arms in favor of Ryan Hardy in the action presently pending in the Rockingham County Superior Court up to an amount of One Million Dollars ($1,000,000); and

D. That Granite State Insurance Company is obligated to satisfy any judgment rendered against Chester Arms in favor of Matthew O’Connor in the action presently pending in the Rockingham County Superior Court up to an amount of One Million Dollars ($1,000,000).

Amended Complaint at 7-8.

Granite State’s pending motion does not address the merits

of plaintiffs’ interpretation of the underlying insurance

policy. Rather, Granite State asserts that neither officer has

standing to bring this action because neither is an insured

under the policy. The contract of insurance is between Granite

State and Chester Arms. So, says Granite State, only Chester

Arms has standing (at least at this juncture) to question

Granite State’s interpretation of the policy language. And, as

noted earlier, Chester Arms is not a party to this action. 1

1 The parties have not addressed whether Chester Arms is a necessary party to this litigation that should be joined under Fed. R. Civ. P. 19(a). Nor have they discussed whether adding Chester Arms (a limited liability company) would defeat this court’s diversity subject matter jurisdiction. See,e.g., Carden v. Arkoma Assocs., 494 U.S. 185, 195-96 (1990) (providing that diversity jurisdiction in a suit by or against an artificial entity depends on the citizenship of all its members). See also Pramco, LLC ex rel. CFSC Consortium, LLC v. San Juan Bay Marina,

6 Moreover, Granite State asserts that the police officers’

claims are not ripe for judicial resolution because Chester

Arms’ liability (if any) to the officers has not been resolved,

and no fixed monetary claim for indemnification has been made

against the insurance policy. Accordingly, says Granite State,

plaintiffs’ amended complaint should be dismissed.

I. Plaintiffs’ Standing.

Many federal courts have concluded (sometimes in slightly

different procedural postures) that tort victims can have

standing in declaratory judgment actions seeking a determination

of the scope of insurance coverage provided by a tortfeasor’s

insurer. See, e.g., Maryland Casualty Co. v. Pacific Coal & Oil

Co., 312 U.S. 270 (1941). See also Ricchio v. Bijal, Inc., 424

F. Supp. 3d 182, 186–87 (D. Mass. 2019) (collecting cases). See

generally Bankers Tr. Co. v. Old Republic Ins. Co., 959 F.2d

677, 681–82 (7th Cir. 1992); Eureka Fed. Sav. & Loan Ass’n v.

Am. Cas. Co. of Reading, Pa., 873 F.2d 229, 232 (9th Cir. 1989);

Federal Kemper Insurance Co. v. Rauscher, 807 F.2d 345 (3d Cir.

Inc., 435 F.3d 51, 54 (1st Cir. 2006)(noting that this rule applies to partnerships and limited liability companies). See generally Franchise Tax Bd. of State of Cal. v. Constr. Laborers Vacation Tr. for S. California, 463 U.S. 1, 15–19 (1983) (observing that the federal Declaratory Judgment Act does not independently vest federal courts with subject matter jurisdiction. Rather, the court’s jurisdiction turns on whether the requirements of either 28 U.S.C. § 1331 or § 1332 are met).

7 1986); Penn Am. Ins. Co. v. Valade, 28 F. App’x 253, 256–57 (4th

Cir. 2002).

Similarly, the New Hampshire Supreme Court (and,

necessarily, the New Hampshire Superior Courts) have, on many

occasions, permitted victims to pursue declaratory judgment

actions against their tortfeasor’s insurance provider (without

directly addressing the question of standing). See, e.g.,

Cogswell Farm Condo. Ass’n v. Tower Grp., Inc., 167 N.H. 245

(2015); St. Pierre v. State Farm Mut. Auto. Ins. Co., No. 2014-

0225, 2014 WL 11485835 (N.H. Nov. 21, 2014); White v. Vermont

Mut. Ins. Co., 167 N.H. 153 (2014); Brown v. Concord Grp. Ins.

Co., 163 N.H. 522 (2012); Warner v. Clarendon Ins. Co., 154 N.H.

331 (2006); Guilfoy v. United Servs. Auto. Ass’n, 153 N.H. 461

(2006); Banfield v. Allstate Ins. Co., 152 N.H. 491 (2005); High

Country Assocs. v. New Hampshire Ins. Co., 139 N.H. 39 (1994);

Brown v. City of Laconia, 118 N.H. 376 (1978). 2

2 The only apparent opinion from a New Hampshire court standing in opposition is one from the Strafford County Superior Court, in which the court declared, without elaboration, that a tort victim lacked standing to bring a declaratory judgment against his tortfeasor’s insurer. Yet, despite that finding, the court went on to rule on the merits of the plaintiff’s claims. See O’Connor v Certain Underwriters at Lloyd’s of London, No. 03-E-0064, 2005 WL 6310216 (N.H. Super. Jan. 25, 2005).

8 Granite State argues that the decisions cited above are

distinguishable because, in each, the court “inadvertently”

failed to recognize the standing issue. Defendant’s Reply

Memorandum (document no. 14) at 10. But, a plaintiff’s standing

(or lack thereof) implicates the very core of the court’s

authority to preside over a matter: subject matter jurisdiction.

See, e.g., Duncan v. State, 166 N.H. 630, 640 (2014) (explaining

that “standing is a question of subject matter jurisdiction”).

In every case before them, courts must first assess their

subject matter jurisdiction – sua sponte, if necessary. See,

e.g., Arbaugh v. Y&H Corp., 546 U.S. 500, 514, (2006) (“Courts,

including [the Supreme Court], have an independent obligation to

determine whether subject-matter jurisdiction exists, even in

the absence of a challenge from any party.”). See also

Libertarian Party of New Hampshire v. Sec’y of State, 158 N.H.

194, 195–96 (2008) (same).

The New Hampshire Supreme Court undoubtedly considered its

jurisdiction to hear each of the cases cited above and likely

accepted that a victim’s standing to bring a declaratory

judgment action under RSA 491:22 against its tortfeasor’s

insurer is so obvious and well-understood that it required no

argument from counsel and no discussion from the court.

9 II. Remand to State Court is Appropriate.

But, this court need not resolve the standing/ripeness

issue under the federal Declaratory Judgment Act. Nor is it

necessary to settle the analogous question under RSA 491:22 (or

certify the question to the New Hampshire Supreme Court). The

absence of Chester Arms from this litigation - whether

intentional or inadvertent – gives rise to prudential

considerations that weigh against this court’s exercise of its

discretion to consider the plaintiffs’ petition for declaratory

judgment.

It is a well-understood proposition that federal courts are

vested with discretion to determine whether it is appropriate to

entertain a petition for declaratory relief. As the Supreme

Court has observed:

There is nothing automatic or obligatory about the assumption of jurisdiction by a federal court to hear a declaratory judgment action. By the Declaratory Judgment Act, Congress sought to place a remedial arrow in the district court’s quiver; it created an opportunity, rather than a duty, to grant a new form of relief to qualifying litigants. Consistent with the nonobligatory nature of the remedy, a district court is authorized, in the sound exercise of its discretion, to stay or to dismiss an action seeking a declaratory judgment before trial or after all arguments have drawn to a close. In the declaratory judgment context, the normal principle that federal courts should adjudicate claims within their

10 jurisdiction yields to considerations of practicality and wise judicial administration.

Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995) (citations,

footnote, and internal punctuation omitted). See also Diaz–

Fonseca v. Puerto Rico, 451 F.3d 13, 39 (1st Cir. 2006) (“The

[Declaratory Judgment] Act neither imposes an unflagging duty

upon the courts to decide declaratory judgment actions nor

grants an entitlement to litigants to demand declaratory

remedies. Consequently, federal courts retain substantial

discretion in deciding whether to grant declaratory relief.”)

(citations and internal punctuation omitted).

In this case, issues of comity, judicial restraint,

fundamental fairness, and the efficient use of judicial

resources all counsel in favor of declining to address

plaintiffs’ petition. This court (DiClerico, J.) previously

identified and discussed several of those issues in a case that

presented a substantially similar procedural posture to this one

– that is: (a) a declaratory judgment action, (b) filed by a

tort victim against the tortfeasor’s insurance carrier, and (c)

to which the insured tortfeasor was not a party. See Warner v.

Frontier Ins. Co., 288 F. Supp. 2d 127 (D.N.H. 2003).

11 Judge DiClerico’s thoughtful reasoning in Warner need not

be rehearsed. It is enough to note that even if this court were

to resolve the present dispute between the officers and Granite

State over the limits of policy coverage, that determination

likely would not bind Chester Arms (since it is not a party to

this litigation). Nor, indeed, would it bind the state courts.

See generally Massachusetts Delivery Ass’n v. Coakley, 671 F.3d

33, 47–48 (1st Cir. 2012). That, in turn, leaves open the

possibility that the state court might subsequently reach a

conflicting interpretation of the policy language at issue (say,

in an action brought by Chester Arms against Granite State). As

Judge DiClerico noted in Warner, that kind of uncertainty and

potential conflict could prejudice the parties, inject needless

confusion into their dispute, and even adversely affect

settlement negotiations. See Id. at 131. See also Maryland

Casualty, 312 U.S. at 274 (discussing the potential problem of

conflicting state and federal interpretations of an insurance

policy when each interpretation is binding on fewer than all

affected parties).

Conflicting interpretations of the same insurance policy

language should be avoided – particularly when such potentially

conflicting interpretations involve the same or related parties,

or arise out of the same underlying factual circumstances. By

12 declining to entertaining plaintiffs’ declaratory judgment

action in the absence of Chester Arms, this court can avoid

potential conflicts by deferring to the state court, which

plainly has both subject matter jurisdiction and personal

jurisdiction over all parties.

Conclusion

For the foregoing reasons, as well as those expressed by

the court in Warner v. Frontier Ins. Co., 288 F. Supp. 2d 127

(D.N.H. 2003), the court declines to exercise its discretion to

hear plaintiffs’ declaratory judgment claims.

Nevertheless, Granite State Insurance Company’s motion to

dismiss (document no. 11) is denied and the Clerk of Court shall

remand this matter to the Hillsborough County Superior Court -

the state court from which it was removed. Defendant’s motion

to strike (document no. 15) is denied as moot.

SO ORDERED.

____________________________ Steven J. McAuliffe United States District Judge

May 28, 2020

cc: Gordon A. Rehnborg, Jr., Esq. Mark D. Morrissette, Esq. Tamara S. Holtslag, Esq.