Opinion ID: 2773335
Heading Depth: 1
Heading Rank: 3

Heading: Stratford's Coverage

Text: In New Hampshire, [t]he fundamental goal of interpreting an insurance policy, as in all contracts, is to carry out the intent of the contracting parties. Bates v. Phenix Mut. Fire Ins. Co., 943 A.2d 750, 752-53 (N.H. 2008) (quoting Tech-Built 153, Inc. v. Va. Sur. Co., 898 A.2d 1007, 1009 (N.H. 2006)); see also Hansen v. Sentry Ins. Co., 756 F.3d 53, 61 (1st Cir. 2014). Analyzing the language of the policy and an extrinsic agreement, the district court concluded that DAM and Stratford never intended to provide co-primary coverage to the tractor DAM leased from Ryder. Old Republic, 2014 WL 309390, at -6. The key question here under New Hampshire law is what sources a court may consult -- and in what circumstances -- to ascertain the parties' intent for coverage. The interpretation of a contract, including whether a contract term is ambiguous, is ultimately a question of law . . . . Birch Broad., Inc. v. Capitol Broad. Corp., 13 A.3d 224, 228 (N.H. 2010). [T]o determine what the parties, as reasonable people, mutually understood the ambiguous language to mean necessarily involves factual findings . . . . Id. Our search for the parties' intent as to the coverage of the tractor begins with the words of the policy itself. Bates, 943 A.2d at 753. The New Hampshire Supreme Court recently summarized: In interpreting policy language, we look to the plain and ordinary meaning of the policy's -10- words in context. We construe the terms of the policy as would a reasonable person in the position of the insured based upon more than a casual reading of the policy as a whole. Policy terms are construed objectively, and where the terms of a policy are clear and unambiguous, we accord the language its natural and ordinary meaning. . . . White v. Vt. Mut. Ins. Co., No. 2013-569, 2014 WL 6533298, at  (N.H. Nov. 21, 2014) (quoting Bates, 943 A.2d at 753). In this inquiry, we are not constrained to the specific terms of the provision involved; we must read the policy as a whole. See Great Am. Dining, Inc. v. Phila. Indem. Ins. Co., 62 A.3d 843, 848 (N.H. 2013). To go beyond the four corners of the policy, however, generally requires ambiguity. See White, 2014 WL 6533298, at ; Birch Broad., 13 A.3d at 228; Lawyers Title Ins. Corp. v. Groff, 808 A.2d 44, 48 (N.H. 2002). Clear and unambiguous policy language is generally the best evidence of the parties' intent, and courts do not lightly disregard it. See White, 2014 WL 6533298, at . When faced with an internally inconsistent policy, the New Hampshire Supreme Court has looked to objective extrinsic evidence, such as other agreements between relevant parties, to conclusively resolve[] the intent of the contracting parties. See Tech-Built, 898 A.2d at 1010. In Tech-Built, the New Hampshire Supreme Court considered a contract between Surge, an employee leasing company, and its insurer, Virginia Surety. Id. at 1008-09. At issue was whether Surge's Virginia Surety policy extended -11- coverage to Surge employees who were leased to Tech-Built, a corporation involved in the construction industry, or to Tech-Built itself. Id. at 1009. In the section titled, Who Is Insured, the policy stated: You are insured if you are an employer named in Item 1 of the Information Page. Id. The court acknowledge[d] that Item 1 of the information page itself reference[d] Surge 'etal [sic]' and the '[o]ther workplaces' subsection reference[d] the endorsement entitled 'Additional Named Insured and/or Locations.' Id. (third and fourth alterations in original). The endorsement in turn listed over 150 companies, including Tech-Built. Id. The court noted, however, that [o]ther language within the policy itself . . . reveal[ed] that the contracting parties anticipated that a single employer was named as the insured, namely Surge, and that coverage for that employer extended to all 'workplaces' of that employer listed in the endorsement . . . . Id. at 1009-10. In examining the entire policy, the court found a lack of clarity as to what the parties intended. See id. The New Hampshire Supreme Court used Surge's leasing agreement with Tech-Built to inform[] its understanding of the Virginia Surety Policy. Id. at 1011. The court concluded that Surge's leasing agreement with Tech-Built memorialized Surge's clear intent . . . to secure workers' compensation coverage only for its leased employees. Id. at 1010. The court recognized that, in general, we do not look beyond the four corners of the -12- insurance contract to discern the intent of the contracting parties regarding the scope and extent of insurance coverage. Id. But, the court explained, we will not ignore that [objective extrinsic] evidence in favor of dogmatic adherence to insurance maxims. Id. In this case, the Stratford Policy provides primary insurance coverage to three categories of autos, including, as is relevant here, hired 'autos.' Hired 'autos' are defined as those 'autos' [DAM] lease[s], hire[s], rent[s] or borrow[s]. The Stratford Policy states that [t]his Coverage Form's Liability Coverage is primary for any covered 'auto' while hired or borrowed by [DAM] and used exclusively in [DAM's] business as a 'trucker' . . . . To repeat, DAM leased or rented two types of vehicles in the course of its business. First, DAM rented small vans, similar to those it owned, for approximately $5,000 per year to deliver small packages during busy periods. Second, DAM leased large tractors from Ryder for approximately $240,000 per year to transport palletized freight. There is no dispute that the parties intended the Stratford Policy to provide primary coverage for the small vans DAM owned and rented. We must determine whether the parties intended the policy's primary coverage to also extend to the large tractors leased from Ryder. If we were to confine our consideration to only the definition of hired 'autos,' primary coverage would apply to the -13- large tractors in the same way as the small vans.2 Since DAM leased the large tractors from Ryder, they would qualify as hired 'autos,' for which coverage would be primary. Indeed, Stratford's Senior Litigation Specialist, Sandra McFarlane, conceded that the definition of hired 'autos' would include the Ryder tractor, but maintained that this was not the parties' intent. She explained, I think the problem was that there was an exposure out there that wasn't intended to be covered by the policy. The district court noted that, read in isolation, the policy's coverage provision and its definition of 'hired auto' would appear to provide primary coverage for the tractor that Girginoff was driving. Old Republic, 2014 WL 309390, at . But, the district court found, [t]he rest of the policy reveals a contrary intent. Id. We agree. It is a cardinal principle of contract interpretation that we must read the policy as a whole. See Great Am. Dining, 62 A.3d at 848. For this reason, our analysis cannot begin and end with the definition of hired 'autos.' Here, other provisions 2 We need not dwell on Stratford's argument that the trailer would not be covered even if the tractor was. Specifically described 'autos' are defined as those 'autos' described in Item Three of the Declarations for which a premium charge is shown (and for Liability Coverage any 'trailers' you don't own while attached to any power unit described in Item Three). The definition of auto includes trailers. Item Three includes any non-owned trailer while attached to a covered auto, with a liability premium of $254. The trailer is therefore an 'auto' described in Item Three of the Declarations for which a premium charge is shown so long as the tractor to which it is attached is a covered auto. -14- within the policy itself reveal a more tailored intent to insure only the smaller side of DAM's business, which conducted small package delivery in small vans and trucks. Highlighting this side of DAM's business, the Stratford Policy describes DAM's business as the delivery of office supplies and small household appliances. There is no mention in the policy of the additional portion of the business concerned with the transportation of palletized freight. DAM listed two of its small vans in the itemization of specifically described 'autos,' and provided an estimate for the cost of hired 'autos' that is consistent with similar small vans. DAM did not describe the portion of the business concerning palletized freight involving Ryder tractors. We find the estimated cost of hire for hired 'autos,' listed in the Stratford Policy, to be particularly instructive as to the parties' intent. The estimated cost of hire is a term within the four corners of the policy and cannot be ignored. For hired 'autos,' DAM estimated the yearly cost of hire to be $5,000. The parties agree that the cost of hire for small vans similar to those DAM owned was $5,000 per year, and that the cost of hire for the Ryder tractors was approximately $240,000 per year. The $5,000 estimate is not binding on the parties, but it is informative of their intent when the policy was created. Although the concurrence posits that an insured might lowball his estimate to reduce his premium, the dramatic $235,000 difference between the -15- estimate listed in the contract and the yearly cost to hire the Ryder tractors in this case belies any suggestion that Stratford and DAM intended their policy to provide primary coverage for those tractors.3 This incredibly low amount evidences that DAM attempted to insure its own vans as specifically described 'autos' and similar hired vans as hired 'autos,' and not the Ryder tractors. Further, contract interpretation rules require consideration of the cost estimate within the four corners of the policy as indicative of the intent as to what was being covered. As in Tech-Built, DAM's lease agreement with Ryder provides objective extrinsic evidence of the intent animating the Stratford Policy as to the scope of coverage. There, the New Hampshire Supreme Court used an extrinsic lease agreement as a means to obtain clarity as to whom coverage applied. See 898 A.2d at 1010. Tech-Built made it clear that inconsistent policy language must be viewed in terms of the background, circumstances, and context in which the policy was negotiated. See id. Here, we use a similar extrinsic lease agreement to obtain clarity as to 3 In addition, there is no indication that DAM lowballed its estimate in the hopes of reducing its premium for an intended coverage. As noted at oral argument, [t]here has been no suggestion whatsoever that DAM misrepresented its cost of hire. The question rather was whether, when DAM represented its cost of hire, it was referring to the vans, which is what they say they were referring to, or whether they were referring to something else. Indeed, when Stratford subsequently learned of the Ryder tractors, it chose not to retroactively increase the premium, but to simply include the tractors in the negotiations for renewal going forward. -16- which vehicles coverage applied given the potential inconsistency within the Stratford Policy. DAM and Ryder's lease agreement specified that Ryder was the party responsible for liability insurance for the tractors. DAM agreed that Ryder shall have the sole right to conduct accident investigations and administer claims handling and settlements and [DAM] shall adhere to and accept Ryder's conclusions and decisions. The district court found that this agreement between DAM and Ryder was entirely consistent with the portions of the Stratford Policy that suggest that DAM intended to insure only its small vans through Stratford. See Old Republic, 2014 WL 309390, at . When providing information on the scope of the coverage it needed for hired autos, the district court explained, DAM knew that Ryder was responsible for liability insurance on the tractors it leased to DAM, and DAM said nothing to Stratford about those tractors. Id. at . In sum, it cannot have been the intent of the parties for Stratford to provide primary coverage on a risk that DAM never sought to insure and that . . . Stratford knew nothing about when it issued DAM its policy and set the premium for it. Id. Considering the entirety of the Stratford Policy, including the pricing estimate, background, and circumstances, as informed by the lease agreement between DAM and Ryder, we agree with the district court that the Stratford Policy was never -17- intended to provide primary insurance for the Ryder tractors. Neither Old Republic nor the concurrence suggests that the policy or the extrinsic evidence supports the proposition that the parties did intend to provide primary coverage for the tractors; rather, they argue that the parties should be restricted to the one provision in the policy defining hired 'autos' despite any evidence of a contrary intent. The district court committed no legal error in its analysis of the Stratford Policy and DAM's lease with Ryder. Even viewing the facts in the light most favorable to Old Republic, the record demonstrates that DAM and Stratford did not intend the Stratford Policy to provide primary insurance for the Ryder tractors, which Ryder was already insuring through Old Republic as per its agreement with DAM. See Tech-Built, 898 A.2d at 1010 (finding no genuine dispute of material fact concerning the clear intent memorialized in the lease agreement). We repeat what the unanimous court in Tech-Built stated: under New Hampshire insurance law, where the intent of the contracting parties can be conclusively resolved by objective extrinsic evidence, . . . we will not ignore that evidence in favor of dogmatic adherence to insurance maxims. Id. So too, here. Because we conclude that Stratford's policy with DAM never provided co-primary coverage for the Ryder tractor, we, unlike the concurrence, need not consider whether New Hampshire law would conclude that Stratford and DAM's later post-loss General -18- Change Endorsement is a valid contract modification, which Old Republic disputes. We do note that Stratford has now committed itself to provide excess coverage as to the Ryder tractor both in its endorsement and independently in its representations to the district court and this court.