Jespersen v. Colony Ins. Co.

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Jespersen et al v. Colony Insurance Company

CIVIL No. 21-cv-846-JL

Opinion No. 2023 DNH 064

United States District Court, D. New Hampshire

May 22, 2023

Benjamin B. Folsom, Esq.

Graham Steadman, Esq.

Bruce W. Felmly, Esq.

William L. Boesch, Esq.

MEMORANDUM ORDER

JOSEPH N. LAPLANTE UNITED STATES DISTRICT JUDGE

At issue in these cross-motions for summary judgment are the applicability of the compulsory insurance doctrine, and an injured party's right to recover under an insurance policy notwithstanding the insured's failure to satisfy the insurance contract's notice requirements. The plaintiffs in this case, Margaret and David Jespersen, are New Hampshire residents who obtained a default judgment in state court against the owner-operator of Penuches Musical Hall after Margaret fell on the restaurant's premises and suffered injuries. Penuches did not appear or take part in the proceedings leading up to the default judgment, nor did it notify its insurance carrier, defendant Colony Insurance Company, of Margaret's fall or the resulting litigation. Colony first received notice of these issues from plaintiffs' counsel roughly four months after the default judgment was entered.

The plaintiffs now seek to collect the judgment, which amounts to almost $400,000, from Colony under the insurance policy that Penuches held at the time of Margaret's fall. On cross-motions for summary judgment, Colony contends that Penuches' failure to notify it of Margaret's fall and the related litigation constitutes a material breach of the insurance contract and relieves Colony of any duty to pay. The plaintiffs, in turn, assert that the compulsory insurance doctrine applies to nullify the notice defense and compel Colony to pay the default judgment.

The court has subject-matter jurisdiction under 28 U.S.C. § 1332 (diversity), as the plaintiffs are New Hampshire residents, and Colony is a Virginia corporation. After reviewing the parties' submissions and holding oral argument, the court grants Colony's summary judgment motion, upon finding that Penuches was delayed in notifying Colony of Margaret's fall, the record indicates no justification for this delay, and the delay resulted in prejudice to Colony. The court denies the plaintiffs' motion because New Hampshire courts apply the compulsory insurance doctrine only in narrow circumstances, which are not present in this case.

I. Applicable legal standard

For cross-motions, the court views “each motion, separately, in the light most favorably to the non-moving party, and draw[s] all reasonable inferences in that party's favor.” Sun Capital Partners III, LP v. New England Teamsters & Trucking Indus. Pension Fund, 943 F.3d 49, 55 (1st Cir. 2019). Summary judgment is appropriate where “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “A genuine issue is one that could be resolved in favor of either party, and a material fact is one that has the potential of affecting the outcome of the case.” Vera v. McHugh, 622 F.3d 17, 26 (1^st Cir. 2010) (internal quotation omitted).^[1]

II. Background

The following facts are not in dispute.^[2] On May 28, 2018, the Jespersens visited Penuches in Manchester, New Hampshire. They sat in the outdoor dining area, which was located on the sidewalk in front of the restaurant. Both Margaret and David are legally blind, and were carrying their probing canes that day. They entered the establishment at some point and asked an employee where the restroom was located. The employee informed them that the restrooms were in the basement, and the Jespersens asked if an elevator was available. Despite the availability of an elevator, the employee told the Jespersens otherwise and directed them to a flight of stairs.

As Margaret was descending the staircase, her cane got caught in the railing and she fell down nine stairs, resulting in injuries including multiple fractures. The paramedics arrived and placed her on a stretcher, at which point another Penuches employee suggested that the paramedics use the restaurant's elevator to transport Margaret upstairs to the street level. At some point after this incident, Penuches posted a sign at the top of its stairs stating that an elevator was “available upon request.”

A. Penuches' insurance policy

Penuches operated its sidewalk dining area pursuant to a license issued by the city of Manchester. Section 97.34 of the Manchester Code of Ordinances sets forth a general prohibition against sidewalk encumbrances, but also enables businesses in a portion of downtown to apply for licenses allowing such encumbrances, subject to certain conditions. Section 97.34(B)(2) requires that the licensees abide by § 115.60's insurance requirements. Section 115.60, in turn, provides that the application for a license must include “a certificate of insurance” showing “that the applicant has been issued an insurance policy by an insurance company licensed to do business in the state,” which “protect[s] the licensee and the city from all claims . . . which may arise from operations under or in connection with the license.” Manchester Code of Ordinances § 115.60(B)(7)(a). The ordinance further provides that “the policy shall not terminate or be cancelled prior to the expiration date except with 30 days' advance written notice to the city.” Id.

At the time of Margaret's fall, Penuches held a commercial general liability insurance policy issued by the defendant Colony. Penuches' insurance agent, Frontline Insurance Company, submitted a certificate of insurance to the city confirming that the policy was effective as of April 2018, and that the city was listed as an additional insured under the policy.^[3] The insurance contract provided that Colony was bound to “pay those sums that the insured become legally obligated to pay as damages because of ‘bodily injury' or ‘property damage' to which th[e] insurance applies.”^[4]

Section IV of the policy is entitled “Commercial General Liability Conditions.” Parts 2(a) and 2(b) of Section IV require Penuches to notify Colony “as soon as practicable” of any claims or suits brought against Penuches, as well as any “‘occurrence' or [] offense which may result in a claim.”^[5] Part 2(c) adds that Penuches must “[i]mmediately send [Colony] copies of any demands, notices, summonses or legal papers received in connection with the claim or ‘suit,'” and cooperate in the “investigation and settlement of the claim or defense against the ‘suit.'”^[6] Finally, Part 3 states that no party can sue Colony “unless all of the terms” of the policy, including the notice provisions, “have been fully complied with.”^[7]

The insurance policy was ultimately cancelled in September 2018, a few months after the plaintiffs' visit to Penuches, for failure to pay the premium. The city was not provided advance notice of the cancellation, as required under § 115.60 of the Manchester Code. Instead, the city learned of the cancellation months later, around April 2019.

B. Procedural background

The plaintiffs retained counsel after Margaret's May 2018 fall. Plaintiffs' counsel sent Penuches a letter in September 2018 discussing the injuries Margaret suffered after the fall, Penuches' potential liability, and the plaintiffs' interest in settling the matter without litigation.^[8] Penuches did not respond or notify Colony of these developments.

A few months later, on November 20, 2018, the plaintiffs filed a complaint against Penuches with the New Hampshire Commission for Human Rights, asserting that the actions of the Penuches employee who directed Margaret to take the stairs constituted disability-based discrimination. Shortly after the complaint was forwarded to Penuches, its owner contacted plaintiffs' counsel over the telephone. Counsel responded with a letter dated the same day as the complaint. In the letter, counsel acknowledged that the owner “seem[ed] to indicate” that he “did not intend to advise [his] insurance carrier.”^[9]Counsel “encourage[d] [the owner] to not follow that course ....”^[10] Penuches did not respond or inform Colony of the legal action.

In June 2019, the plaintiffs removed their case to Hillsborough Superior Court, where they asserted claims for negligence, unlawful discrimination in violation of N.H. Rev. Stat. Ann. 354-A, and loss of consortium. Plaintiffs' counsel also sent Penuches a letter the following month, stating that Penuches was required by court rules to “identify all insurance that may be available in coverage for th[e] injury” and requesting that Penuches advise its insurance carrier of the suit.^[11] Again, Penuches did not respond to the complaint or notify Colony of the suit.

In December 2019, the plaintiffs filed a motion for the entry of default judgment, and the state court held a hearing in August 2020. Penuches did not respond to the hearing notice or appear at the hearing. On October 7, 2020, the state court entered a default judgment in favor of the plaintiffs and awarded them $193,686.91 in compensatory damages, consisting of past and future medical expenses; lost wages; loss of consortium; and pain, suffering, and loss of enjoyment of life. The court also granted $100,000 in enhanced compensatory damages and $97,896.30 in attorney's fees under RSA 354-A:21-a. The court awarded attorney's fees based on two findings--that Margaret's injury “apparently resulted in the public benefit of having [Penuches] . . . make the elevator available to other patrons with disabilities,” and that Penuches was “totally unresponsive to th[e] litigation[,] . . . [and this] utter disregard of th[e] case . . . left the plaintiffs without compensation or relief.”^[12]

About four months...