THE STATE OF NEW HAMPSHIRE SUPREME COURT Docket No. 2014-0285 Terry Ann Bartlett v. The Commerce Insurance Company, Progressive Northern Insurance Company and Foremost Insurance Company APPEAL FROM FINAL ORDERS ON MOTIONS FOR SUMMARYJUDGMENT HILLSBOROUGH COUNTY SUPERIOR COURT, NORTHERN DISTRICT REPLY BRIEF FOR PETITIONER TERRY ANN BARTLETT Gordon A. Rehnborg, Jr., #2123 McDowell & Osburn, P.A. PO Box 3360 Manchester, NH 03105 603-623-9300 grehnborg@mcdowell-osburn.com Gordon A. Rehnborg, Jr. will represent the Petitioner at oral argument
TABLE OF CONTENTS TABLE OF AUTHORITIES... ii INTRODUCTION... 1 ARGUMENT... 1 I. THE TRIAL COURT ERRED WHEN IT HELD THAT BARTLETT S CLAIM AGAINST FOREMOST FOR UNDERINSURED MOTORIST BENEFITS IS BARRED BY NEW JERSEY S STATUTE OF LIMITATIONS... 1 A. Foremost s Position As To When Bartlett s Cause Of Action Arose Is Incorrect And Illogical... 1 B. Bartlett s Right To Demand Arbitration Or Bring An Action To Determine Whether She Is Legally Entitled To Recover Damages From The Underinsured Tortfeasor And, If So, The Amount Of Damages To Which She Is Entitled Is A Contractually Created Cause Of Action Which Arose While She Was A New Hampshire Resident.... 2 II. PROGRESSIVE S FAILURE TO RESPOND TO BARTLETT S REQUEST FOR PERMISSION TO SETTLE FOR THREE AND ONE-HALF YEARS IS UNREASONABLE AS A MATTER OF LAW.... 9 CERTIFICATE OF SERVICE... 10 i
TABLE OF AUTHORITIES Cases Blinda v. Royal Ins. Co., 144 N.H. 613 (2000)... 8 Charest v. Union Mut. Ins. Co., 113 N.H. 683 (1973)... 9 Keeton v. Hustler Magazine, Inc., 131 N.H. 6 (1988)... 6 Merchants Mut. Cas. Co. v. Kennett, 90 N.H. 253 (1939)... 8 Metropolitan Prop. & Lia. Ins. Co. v. Walker, 136 N.H. 594 (1997)... 5, 6 Sinclair v. Brill, 857 F.Supp 132 (D.N.H. 1994)... 4 Waterfield v. Meredith Corp., 161 N.H. 707 (2011)... 6 ii
INTRODUCTION Bartlett submits the following brief in reply to the opposition briefs filed by Foremost Insurance Company ( Foremost ) and Progressive Northern Insurance Company ( Progressive ). ARGUMENT I. THE TRIAL COURT ERRED WHEN IT HELD THAT BARTLETT S CLAIM AGAINST FOREMOST FOR UNDERINSURED MOTORIST BENEFITS IS BARRED BY NEW JERSEY S STATUTE OF LIMITATIONS. A. Foremost s Position As To When Bartlett s Cause Of Action Arose Is Incorrect And Illogical. Foremost s position is that uninsured/underinsured motorist coverage is contractual in nature and therefore Bartlett s cause of action enabling her to pursue Foremost to recover underinsured motorist benefits did not arise until Foremost breached the insurance contract. According to Foremost, the breach entitling Bartlett to institute legal proceeding to recover underinsured motorist benefits did not arise until May 25, 2012 when Foremost, in its Answer to Bartlett s Petition for Declaratory Judgment, wrongfully claimed that Bartlett violated the terms of the insurance policy by failing to give it the required 30 days-notice of her tentative settlement with the underinsured tortfeasor s liability insurance company. Since Bartlett was not a resident of New Hampshire when Foremost breached the policy by wrongfully denying coverage, and thereby creating her cause of action, she, according to Foremost, is not entitled to the benefit of the New Hampshire s principles pertaining to the application of the statute of limitations. Foremost claims that Bartlett s cause of action to recover underinsured motorist benefits did not arise until she filed her petition which precipitated the breach by Foremost. But for the denial of coverage, formally articulated for the first time eight years after the accident, Bartlett s cause of action, according to Foremost, never would have accrued. Furthermore, Foremost argues that 1
somehow or other the breach that occurred for the first time on May 25, 2012 is barred by a statute of limitations that had run before the breach occurred. That argument is illogical and leads to an absurd result. B. Bartlett s Right To Demand Arbitration Or Bring An Action To Determine Whether She Is Legally Entitled To Recover Damages From The Underinsured Tortfeasor And, If So, The Amount Of Damages To Which She Is Entitled Is A Contractually Created Cause Of Action Which Arose While She Was A New Hampshire Resident. The problem with Foremost s position is that it conflates the concept of the accrual of a cause of action for breach of contract with the concept of the accrual of a cause of action or right to bring suit or demand arbitration to determine issues of liability and damages in the context of an underinsured motorist claim. Foremost, and the trial court, are absolutely correct in asserting that an insured, like Bartlett, does not have a cause of action for breach of contract until the insurance company breaches the contract by denying the existence of insurance coverage or wrongfully claiming that the coverage under the policy has been forfeited by some act committed by the insured that violates the terms of the contract. That makes perfect sense since one cannot have a cause of action for breach of contract without the contract having been breached in the first instance. A breach of contract is a factual predicate for a lawsuit alleging breach of contract. However, the insured s right to bring suit or demand arbitration to determine whether the insured is legally entitled to recover damages on account of the negligence of the underinsured tortfeasor and, if so, the amount of damages to which the insured is entitled is a cause of action or a legal right that arises by virtue of the operation of the insurance contract. That right is contractual in nature and wholly independent of any breach or perceived breach of the policy. The Foremost insurance policy obligates Foremost to pay compensatory damages which an insured is legally entitled to recover from the owner or operator of an uninsured motor 2
vehicle because of bodily injury sustained by an insured. App. at 360. If the insurance company and the insured do not agree whether the insured is legally entitled to recover damages; or the amount of damages which are recoverable by that insured then the matter may be arbitrated. However, disputes concerning coverage under this Part [uninsured motorist coverage] may not be arbitrated. App. at 363. The insurance policy clearly contemplates that if the parties cannot agree as to whether or not the underinsured motorist was at fault for the accident and/or the amount of damages sustained by the insured in the accident then the insured can either demand that those issues be resolved through arbitration or the insured can file suit in order to have a jury make those determinations. The only thing that must occur before the insured has a contractual right or, more precisely, a contractual cause of action entitling the insured to demand arbitration or file suit to resolve issues of liability and/or damages is that the insured be involved in a motor vehicle accident with an uninsured or underinsured motorist. The right to proceed to arbitration or a trial by jury is a cause of action that is bestowed on the insured by the insurance contract. There is no requirement that the insurance company first breach the contract before the insured can proceed to litigate the issues of liability and damages. The cause of action being exercised by the insured is created by the contract and comes into existence upon the occurrence of the motor vehicle accident. The claim itself is functionally equivalent to a tort action. The uninsured or underinsured motorist carrier stands in the shoes of the tortfeasor s liability insurance carrier and is obligated to pay its own insured those damages that its insured would have been able to recover from the tortfeasor s liability insurance carrier if the tortfeasor had liability insurance coverage or, in the case of an underinsured motorist, sufficient liability insurance coverage. 3
In the normal tort case arising out of an automobile accident an injured party can immediately bring suit as his or her cause of action arises simultaneously with the accident. Sinclair v. Brill, 857 F.Supp. 132, 135 (D.N.H. 1994)( A tort victim s cause of action and the statute of limitations begins to run at the moment the tortfeasor completes the tortious act. ). There is no requirement that the plaintiff first inquire of the defendant whether he or she acknowledges responsibility for the accident and agrees to pay the plaintiff those damages to which the plaintiff claims an entitlement. The same holds true in an uninsured and/or underinsured motorist case. The insured s contractually created cause of action, i.e. the right to demand arbitration or bring suit to determine issues of liability and damages with respect to the underlying accident, accrues simultaneously with the motor vehicle accident. If the tortfeasor is underinsured rather than uninsured and if the insurance policy contains an exhaustion clause then arguably the contractual cause of action does not arise until the underinsured tortfeasor s liability policy is exhausted. The right to pursue legal redress in determining issues of liability and damages has nothing to do with a breach of contract by anyone and is significantly different from a situation where there is a true breach of contract on the insurance company s part. When there is an actual breach of the contract, the insured s right to sue and the statute of limitations governing that suit does not start to run until the breach occurs. This would seem to be self evident since absent a breach of the contract there is no case in controversy justifying a lawsuit. For example, if an insurance company were to take the positon that the uninsured motorist coverage in the policy was extinguished because the insured settled his or her claim with the tortfeasor without giving proper notice to the company or obtaining permission to settle that, if not true, would be a breach of the contract on the part of the insurance company creating a common law cause of action on 4
the part of the insured entitling the insured to sue for breach of contract. There the breach would start the running of the appropriate statute of limitations should the insured choose to contest the insurance company s denial of coverage. That the parties understood that there is a distinction between an action to determine issues of liability and damages and an action for breach of contract concerning disputes regarding coverage is clear from the contract. It establishes an arbitration procedure that may be followed, if both parties agree, to resolve issues of liability and damage with respect to the underlying accident. The policy specifically provides that disputes concerning coverage are not subject to arbitration. App. at 363. In New Hampshire, when an insurance company breaches its contract by incorrectly denying the existence or applicability of uninsured or underinsured motorist coverage the statute of limitations starts to run insofar as the insured s cause of action for breach of contract is concerned. Metropolitan Prop. & Lia. Ins. Co. v. Walker, 136 N.H. 594 (1997). That is exactly what happened in Walker. The insured was involved in an accident with an underinsured tortfeasor. He notified his own insurance company that he intended to make a claim for underinsured motorist benefits once he had exhausted the tortfeasor s liability coverage and then proceeded to sue the tortfeasor. It took in excess of six years to resolve the tort case. Once the tortfeasor s policy had been exhausted the insured proceeded to demand underinsured motorist benefits from Metropolitan who took the position that its coverage was no longer available because of the operation of the statute of limitations. Metropolitan denied any obligation to provide insurance coverage. It did not simply dispute who was responsible for the accident or the extent of the damages to which its insured might be entitled. Its denial of coverage based on its misapprehension of the applicability of the statute of limitation was the breach that this Court 5
held was the event that triggered the statute of limitations. Walker says nothing about when an insured s cause of action with respect to his or her right to seek a determination as to liability and damages accrues. 1 In this case, Bartlett has a contractual right to require a determination as to whether or not the alleged tortfeasor was legally liable for the accident and, if so, the amount of damages she sustained. Her right to do so, or her cause of action as to those issues, was created by the Foremost insurance policy and arose either simultaneously with the accident or, if the Foremost policy is found or deemed to contain an exhaustion clause, once Allstate liability coverage was exhausted. That right exists by virtue of the insurance policy and does not require as a condition precedent to either its existence or exercise any sort of a denial or contractual breach on the part of Foremost. As of both of those times [i.e. the accident (2004) and the exhaustion of Allstate s liability coverage (2009)] Bartlett was a resident of New Hampshire. App. at 1023. Accordingly, she is entitled to the benefit of New Hampshire s principle s regarding the statute of limitations. Waterfield v. Meredith Corp., 161 N.H. 707 (2011); Keeton v. Hustler Magazine, Inc., 131 N.H. 6 (1988). In fact, there is no statute of limitations that applies to exercising one s contractual right to seek a jury determination as to the issues of liability and damages. At least there is no applicable statute of limitations that applies unless and until the insurance company refuses to participate by claiming, for whatever reason, that it has no obligation to do so. On the other hand, Bartlett s right to go to court to challenge Foremost s denial of coverage because she allegedly settled without giving Foremost notice of the settlement and an opportunity to make an advance payment did not accrue or exist until Foremost denied its 1 None of the other cases cited by Foremost having to do with when a cause of action for breach of contract accrues involve uninsured or underinsured motorist coverage. 6
coverage obligations under the policy. That denial did not occur until May 25, 2012; two months after Bartlett filed this Petition for Declaratory Judgment. There is no statute of limitations, either in New Hampshire, New Jersey, or elsewhere, that has been known to start running before the event giving rise to the dispute takes place. In order to make it as clear as possible, Bartlett submits that the appropriate way to analyze uninsured and underinsured motorist claims insofar as the statute of limitations is concerned is as follows: An insured s contractual right or cause of action to demand arbitration or institute suit against the uninsured motorist insurance company to determine issues of liability and damages comes into existence simultaneously with the occurrence of an accident involving an uninsured motorist. In the case of an underinsured claim, if the insurance policy contains an exhaustion clause, the contractual right or cause of action to demand arbitration or institute suit against the underinsured motorist insurance company to determine issues of liability and damages arises when the underinsured tortfeasor s liability policy is exhausted through the payment of settlements or judgments. If the insured is a resident of New Hampshire when the contractual right to demand arbitration or institute suit against the uninsured motorist carrier to determine issues of liability and damages arises there is no statute of limitations that comes into play. New Hampshire s three year statute of limitations is triggered only when one party to the insurance contract breaches the contract. In the case of the insurance company a breach would occur if the company wrongfully denies the existence of, or the applicability of, uninsured/underinsured motorist coverage or the insured s right to have issues of liability and/or damages determined. Here Bartlett s contractual cause of action to sue Foremost to obtain a legal determination as to her legal entitlement to recover damages from the underinsured tortfeasor and the amount of damage to which she is entitled arose while she was a New Hampshire resident and is not barred by the statute of limitations. Indeed, the only issue in this case which is 7
subject to any statute of limitations is Foremost s false claim that Bartlett forfeited her right to underinsured motorist coverage by not giving proper notice of her settlement with Allstate. Since that breach did not occur until after Bartlett had commenced legal action against Foremost, that claim cannot possibly be barred. Foremost asserts that if this Court were to adopt Bartlett s position it would allow an insured to bring an action against the insurer before the insurer has rejected coverage, and, indeed, potentially before an insurer is even aware that the insured has settled with the tortfeasor and UIM coverage may be at issue. 2 This further reveals that Foremost is conflating the issue of the existence of coverage with the issues of liability and damages. An insured would have no interest in bringing an action to ascertain the existence of coverage unless the insurance company either denies its existence or does something to constitute a genuine threat or prejudice to the [insured s] interest. Blinda v. Royal Ins. Co., 144 N.H. 613, 617 (2000)(quoting from Merchants Mut. Cas. Co. v. Kennett, 90 N.H. 253, 255 (1939). That, of course, is what this Court has repeatedly said is all that is necessary to justify the filing of a declaratory judgment action to resolve coverage issues. Id. ( a denial of coverage is not necessary to render declaratory judgment relief justiciable ). Here the June 22, 2010 letter from Foremost raising the issue of permission to accept the bodily injury limits from Allstate (App. at 157) constitutes the sufficient threat necessary to justify the filing of this declaratory judgment action. Furthermore, if Foremost, or any insurance company, wants to require a time interval between the accident and/or the insured s exhaustion of the underinsured tortfeasor s liability insurance and the initiation of legal proceedings to recover underinsured motorist benefits that would be easy to accomplish. For example, Foremost could require, as a condition precedent to demanding arbitration or pursuing legal action to determine issues of liability and damages, that 2 Foremost s Brief at 16-17. 8
the insured first make a settlement demand and then wait 30 days for the insurance company to respond. That would be consistent with the provision in the Foremost policy requiring the insured to give Foremost notice of a tentative settlement with the underinsured tortfeasor s liability carrier, which is the very issue Foremost is wrongfully relying on for its position that Bartlett forfeited coverage under its policy. App. at 363. II. PROGRESSIVE S FAILURE TO RESPOND TO BARTLETT S REQUEST FOR PERMISSION TO SETTLE FOR THREE AND ONE-HALF YEARS IS UNREASONABLE AS A MATTER OF LAW. Progressive s sole basis for denying coverage in this case is Bartlett s failure to obtain Progressive s written consent to settle with the underinsured tortfeasor. By letter dated March 27, 2009, Bartlett advised Progressive that she had negotiated a settlement with Allstate, the underinsured tortfeasor s liability insurer, for the full amount of the Allstate policy and asked for permission to consummate the settlement. App. at 149. Progressive never responded to that letter. It never objected to the tentative settlement. It never expressed an intention to advance an amount of money equal to the tentative settlement in order to protect whatever subrogation rights it might have had. It simply ignored Bartlett s letter. It was not until Progressive filed its Answer in this case on October 31, 2012 (App. at 59), some three and one-half years later, that Progressive took the position that Bartlett, by settling her claim against the underinsured tortfeasor without its consent, had breached the policy and forfeited her coverage, notwithstanding Progressive s years of silence. Progressive had an obligation to not unreasonably withhold its consent to settle. Charest v. Union Mut. Ins. Co., 113 N.H. 683, 687 (1973). A delay of three and one half years is, as a matter of law, unreasonable. 9
Progressive, in its brief, argues for the first time that it might never have received the March 27, 2009 letter. App. at 149. This is the first time that Progressive has advanced that argument and it acknowledges in its brief 3 that it never raised the issue of whether or not it received the letter in its summary judgment pleadings as it did not want to create an issue of fact. In the summary judgment proceedings in this case, all parties, including the trial court, assumed that Progressive received the letter of March 27, 2009. Progressive cannot now be heard to argue otherwise. CONCLUSION For the reasons set forth herein and in Bartlett s Opening Brief it is respectfully requested that this Court, as to Foremost, reverse the trial court s ruling and remand the case for further proceeds and, as to Progressive, reverse the trial court s decision and rule that Progressive is obligated to provide underinsured motorist coverage for Bartlett. Respectfully submitted, TERRY ANN BARTLETT By her attorneys, MCDOWELL & OSBURN, P.A. Dated: 11/25/2014 By: /s/ Gordon A. Rehnborg, Jr. Gordon A. Rehnborg, Jr. NH Bar #2123 282 River Road, PO Box 3360 Manchester, NH 03105 603-623-9300 CERTIFICATE OF SERVICE I hereby certify on this day two copies of the foregoing have been mailed, postage prepaid, to Kevin Truland, Esquire, Donald L. Smith, Esquire and Naomi L. Getman, Esquire. Dated: 11/25/2014 /s/ Gordon A. Rehnborg, Jr. Gordon A. Rehnborg, Jr. 3 See Footnote 5 at P. 12 of Brief on behalf of Respondents/Appellee Progressive Northern Insurance Company. 10