Exeter Hospital, Inc. v. Steadfast Insurance Company, 166 A.3d 1073

Background

Exeter Hospital faced numerous Hepatitis C suits after a technician allegedly infected patients; claims were paid through its Self-Insurance Trust (SIT) with $1M per-incident / $4M annual aggregate limits.
Exeter also had an umbrella policy from Steadfast with a $20M limit and a $100,000 “Retained Limit” listed in the declarations.
Coverage A provided Steadfast would pay sums in excess of “the Retained Limit … or … the applicable underlying limit, whichever is greater.” “Applicable underlying limit” was defined to include underlying insurance plus “any alternative insurance” (i.e., the SIT).
After Exeter exhausted the $4M SIT aggregate, Steadfast accepted defense but said it would pay only amounts in excess of $100,000 per medical incident (i.e., Retained Limit). Exeter sued for a declaration that Steadfast’s coverage was triggered once Exeter exhausted the SIT (so no $100k per-claim retention post-exhaustion).
The superior court denied Exeter’s partial summary judgment, concluding the applicable underlying limit became zero after exhaustion, making the $100k Retained Limit the trigger. The Supreme Court reversed, finding Coverage A ambiguous and construing it for the insured.

Issues

Issue	Exeter’s Argument	Steadfast’s Argument	Held
Whether, after Exeter exhausts its $4M SIT, Steadfast’s Coverage A is triggered without a $100k per-claim retained payment	Once the SIT aggregate is exhausted, the SIT (as listed alternative insurance) satisfies the applicable underlying limit requirement, so Steadfast must cover remaining claims without a $100k per-claim retention	The SIT aggregate is an "available" underlying limit only until exhausted; after exhaustion the applicable underlying limit is zero, so Steadfast’s liability is excess of the $100k Retained Limit per claim	The policy is reasonably susceptible to both interpretations; ambiguity is construed for the insured — coverage may be triggered post-exhaustion without requiring $100k per claim (reversed and remanded)
Meaning of “applicable underlying limit” and whether it is fixed or reduces with payments from alternative insurance	“Applicable underlying limit” should be read as the fixed limit (e.g., $4M SIT) listed in the schedule and not reduced for paid claims when comparing "whichever is greater."	“Available” modifies limits generally; where SIT has an aggregate it is eroded/exhausted by payments, so the applicable underlying limit is a variable that can be reduced to zero	Reasonable disagreement exists; both readings are plausible. Court found ambiguity favoring insured because one reasonable reading supports first-dollar (post-exhaustion) coverage under the umbrella
Whether policy language across provisions is consistent or creates ambiguity about when the retained limit applies	The policy’s other provisions do not clearly show that alternative insurance is subject to exhaustion for the "whichever is greater" comparison; reasonable insured would expect trigger after exhausting SIT	Other provisions (erosion/exhaustion clauses, maintenance obligations, appeal provisions, and Coverage B language) indicate limits can be reduced/exhausted and support Steadfast’s reading	Conflicting provisions and reasonable alternative constructions create ambiguity; ambiguity resolved against insurer in favor of Exeter’s interpretation

Key Cases Cited

Rivera v. Liberty Mut. Fire Ins. Co., 163 N.H. 603 (standards for reviewing summary judgment)
Amica Mut. Ins. Co. v. Mutrie, 167 N.H. 108 (summary judgment and entitlement to judgment as matter of law)
Cogswell Farm Condo. Ass’n v. Tower Group, Inc., 167 N.H. 245 (burden of proof on insurer in declaratory judgment coverage action)
Bartlett v. Commerce Ins. Co., 167 N.H. 521 (insurance policy interpretation; objective reasonable insured standard)
Great Am. Dining v. Philadelphia Indem. Ins. Co., 164 N.H. 612 (contextual construction of policy language)
State Farm Mut. Ins. Co. v. Pitman, 148 N.H. 499 (ambiguities construed against insurer)
Newell v. Markel Corp., 169 N.H. 193 (recognizing reasonable disagreement and multiple interpretations)
Great Am. Ins. Co. v. Christy, 164 N.H. 196 (ambiguity resolved in favor of insured to honor reasonable expectations)
CNA Ins. Co. v. Hartford Ins. Co., 129 N.H. 243 (purpose of umbrella coverage: picks up where primary coverage ends)
Kelly v. Prudential Prop. & Cas. Ins. Co., 147 N.H. 642 (when policy provisions conflict, resolve ambiguity for insured)