U.S. Appeals Court Revives Suit in N.H. School’s Missing Policy Case

The U.S. Court of Appeals for the First Circuit has revived a New Hampshire private school’s lawsuit seeking to prove that it is still covered by an insurance policy from almost 50 years ago even though there are no longer any copies of the policy and there is no definitive proof of the policy’s existence.

In reviving the lawsuit previously dismissed by the U.S. District Court in New Hampshire, the U.S. Court of Appeals in Boston stated on May 27 that the school made “a plausible showing” that the policy had been issued by the New Hampshire Insurance Co., a unit of American International Group, for the 1967-1968 school year.

The case involves the Cardigan Mountain School, a private middle school in Canaan, New Hampshire. The court documents show that in 2013, the school received a demand letter asserting a claim based on events that allegedly occurred during the 1967-1968 school year. No further details about the claim were provided.

In response, the school asked the New Hampshire Insurance Co. to defend against the claim as the carrier of the school’s comprehensive general liability insurance policy for that time.

But the insurer rejected the request, explaining that the company was not able to locate any policy covering the school for that time period, and thus it was not the school’s carrier at that time and had no duty to defend against this claim.

The school didn’t find a copy of the policy in its own records either and subsequently filed this lawsuit in New Hampshire state court. New Hampshire Insurance Co. then removed the suit to federal court.

New Hampshire Insurance Co. moved to dismiss the suit for failure to state a claim. The U.S. District Court in New Hampshire granted the insurer’s motion and dismissed the suit, concluding that the school’s complaint did not plausibly show the existence of the policy. The school’s appeal followed.

In its lawsuit, the school offered circumstantial evidence to prove that it had insurance with the carrier during the policy year in question. The school provided an audit report for the school dated September 1971, which showed that from September 1970 to September 1971, the school had a “Special Multi-Peril” insurance policy from New Hampshire Insurance Co. and that the policy included $1,000,000 in general liability coverage.

The school then stated in its complaint that one of the principals in the accounting firm that prepared the audit report believes that if the school had changed carriers between the 1969-1970 school year and the 1970-1971 school year, “then the auditors would have noted the change.” But no such change was noted in the audit report.

The school also quotes its former business manager from the 1967-1970 period who said he is “certain the school had insurance during his tenure” and that he does not believe the school changed carriers while he worked as business manager.

The school also said in the complaint that its former business manager at the time worked with a local insurance brokerage to secure the school’s insurance, and that brokerage “had a close association with” New Hampshire Insurance Co. and “advised most of its commercial clients like Cardigan to place their commercial lines of insurance with New Hampshire Insurance Co.”

In response, New Hampshire Insurance Co. argued that, except for the allegation concerning the audit report, the school’s lawsuit brings “nothing more than speculation and conjecture.” The District Court agreed with the insurer and dismissed the suit.

But in overturning the District Court’s decision and reviving the lawsuit, the U.S. Court of Appeals ruled that the school’s arguments are specific and factual. The complaint refers to individuals with relevant knowledge who are recalling facts plausibly known to them, the U.S. Court of Appeals said.

“We thus conclude that the school’s allegations set forth above are entitled to the presumption of truth at the motion to dismiss stage,” the U.S. Court of Appeals stated. “In our view, although the question is close, the school’s allegations, and the ‘reasonable inferences’ we must draw from them, do make a plausible showing that New Hampshire Insurance Co. issued an insurance policy to the school for the 1967-1968 school year.”

The U.S. Court of Appeals stated that the school has alleged specific facts concerning an audit report that showed that the school had an insurance policy from New Hampshire Insurance Co. as of 1971. The school then linked that to the recollections of specific individuals involved in relevant events who expressed the view that the school had a general liability policy in the preceding years, including the 1967-1968 school year, and that there had been no change in carrier during that period.

“We thus reverse the District Court’s dismissal of this action for failure to state a claim, and we remand the case for further proceedings consistent with this opinion,” the Court of Appeals stated.

However, the Court of Appeals also noted that whether the school can provide the evidence that will be required to make the more demanding showing the school will need to make as the lawsuit moves forward is, “of course, a different question that we need not address in this appeal.”

The case is Cardigan Mountain School, Plaintiff, Appellant, v. New Hampshire Insurance Company, Defendant, Appellee, No. 14-2182, May 27, 2015, U.S. Court of Appeals for the First Circuit.