Answer in the Form of a (Special Jury) Question
The New Hampshire Supreme Court held last month that limiting language in a policy heading is ineffective if the text of the provision promises broader coverage. The result is not surprising, but the Court’s analysis will be of use to insurers and insureds facing similar issues of policy interpretation. More importantly, the decision illustrates why insurers need to remain alert for cases which may require special jury questions to resolve coverage disputes.
This coverage dispute arose from an underlying personal injury suit brought by a doctor against a property owner and commercial lessee after the doctor fell through a porch railing. The property owner and lessee brought a contribution claim against a third party, GAD, for its alleged negligent construction, installation and maintenance of the railing. A jury found that GAD was 45% at fault for the doctor’s injuries – but did not specify whether that liability was for GAD’s negligent construction, installation, maintenance, or some combination.
GAD in turn filed suit against lessee’s insurer, Philadelphia Indemnity, seeking coverage for the contribution claim. GAD relied on the policy’s “additional insured” endorsement – the provision in which the heading and text were at odds. The endorsement stated, in part, that:
Each of the following is also an insured:
f. Managers, Landlords, or Lessors of Premises – Any person or organization with respect to their liability arising out of the ownership, maintenance or use of that part of the premises leased or rented to you . . . (italics added)
The Court agreed with GAD that, despite the heading, the endorsement reasonably could be interpreted to provide coverage to any person – not just the managers, landlords or lessors referenced in the heading – with respect to liability arising out of maintenance of the leased premises.
The Court went on to conclude that Philadelphia Indemnity did have to indemnify GAD. As the Court noted, under New Hampshire’s declaratory judgment statute, Philadelphia had the burden of proving that no coverage existed. The insurer wasn’t able to carry that burden because of the way the jury had determined fault in the underlying suit The jury had been instructed to determine whether GAD exercised reasonable care in the “construction, operation and maintenance” of the property, and it had returned a general verdict finding GAD negligent. Unfortunately for Philadelphia, that general verdict left the insurer with no way to show that the verdict was based on GAD’s uncovered negligent construction of the railing, rather than on GAD’s covered negligent maintenance of the railing.
This case is a valuable reminder that when coverage is disputed and the insurer will or may have the burden of proof on the coverage question, the insurer may need to move to intervene in the underlying action for the purpose of proposing special jury questions and accompanying instructions. If Philadelphia Indemnity had done so here (and it may have tried to and been rebuffed), it could have asked that the jury separately find whether GAD was negligent in maintaining the railing. A negative answer on that question would have permitted Philadelphia to carry its burden of showing that the judgment on the contribution claim was not covered.
The decision, Great American Dining, Inc. v. Philadelphia Indemnity Insurance Co. (NH 2013), is available on the New Hampshire Supreme Court website.
About Anne: I specialize in Insurance Law and Litigation at Anderson & Kreiger, primarily in the areas of professional malpractice, commercial liability and D&O insurance. My most recent post for Between the Lines explores an IL case that sheds light on how no-apology policies may fare under MA’s increasingly pro-apology medmal regime.