Old Republic Insurance Co. v. Stratford Insurance Company
777 F.3d 74
1st Cir.2015Background
- On April 7, 2010, a Ryder-owned tractor (leased to DAM Express) crashed, causing injuries; Ryder had primary liability insurance with Old Republic; DAM had a separate policy with Stratford.
- Ryder–DAM lease required Ryder to furnish primary liability insurance for leased tractors and gave Ryder control over claims handling.
- Stratford’s policy covered three categories of "autos": specifically described autos, hired autos, and nonowned autos; the definition of "hired ‘autos’" would, on its face, include the Ryder tractor.
- Stratford’s declarations estimated annual hired-auto cost at $5,000 (consistent with small vans DAM rented), while Ryder tractors cost about $240,000/year — a substantial discrepancy the court treated as evidence of intent.
- After the accident Old Republic defended; Stratford later issued a retroactive endorsement making coverage for Ryder-leased autos excess and refused to contribute to defense costs; Old Republic sued for declaratory relief.
- The district court held Stratford’s original policy did not provide primary coverage for the Ryder tractor and, because Stratford conceded excess coverage, ordered Stratford to share equally in defense costs; the First Circuit affirmed the coverage holding and certified the duty-to-defend question to the New Hampshire Supreme Court.
Issues
| Issue | Plaintiff's Argument (Old Republic) | Defendant's Argument (Stratford) | Held |
|---|---|---|---|
| Whether Stratford's policy was co‑primary for the Ryder tractor | Policy language ("hired ‘autos’") plainly covers Ryder tractor; Stratford intended primary coverage and endorsement is invalid | Policy read as a whole plus extrinsic evidence (hire-cost estimate, policy descriptions, Ryder–DAM lease) shows parties never intended primary coverage for Ryder tractors | Stratford's policy never intended to provide co‑primary coverage for the Ryder tractor; Stratford is excess insurer (affirmed) |
| Whether objective extrinsic evidence may be used to resolve internal policy inconsistencies | Limit consideration to the four corners; definition is controlling | Where policy is internally inconsistent, objective extrinsic evidence (e.g., lease) may conclusively resolve intent | Court may consider the policy as a whole and objective extrinsic evidence to resolve inconsistencies; did so here |
| Validity/effect of Stratford’s post‑loss retroactive endorsement (making coverage excess) | Endorsement is invalid and unenforceable as post‑claim underwriting | Endorsement reflects parties’ agreement to make coverage excess; valid compromise | Majority: unnecessary to decide because policy never intended primary coverage; concurrence: original policy covered tractor but endorsement valid to convert coverage to excess |
| Allocation/timing of duty to defend between primary and excess insurers | Excess must share defense costs (district court split costs equally) | Excess insurer’s duty to defend is triggered only after primary limits are exhausted; should not pay pro rata defense costs while primary remains liable | Question unsettled under New Hampshire law; First Circuit certified to New Hampshire Supreme Court whether and when an excess insurer’s duty to defend is triggered and how defense costs are allocated |
Key Cases Cited
- Bates v. Phenix Mut. Fire Ins. Co., 943 A.2d 750 (N.H. 2008) (policy interpretation focuses on parties’ intent and plain language)
- Tech-Built 153, Inc. v. Va. Sur. Co., 898 A.2d 1007 (N.H. 2006) (when policy is internally inconsistent, court may use objective extrinsic evidence to resolve intent)
- White v. Vt. Mut. Ins. Co., 106 A.3d 1159 (N.H. 2014) (policy terms are construed as a whole and extrinsic evidence is generally limited to ambiguous terms)
- Universal Underwriters Ins. Co. v. Allstate Ins. Co., 592 A.2d 515 (N.H. 1991) (discussed duty-to-defend allocation; court split defense costs equally between two carriers in that factual context)
- Progressive Northern Ins. Co. v. Argonaut Ins. Co., 20 A.3d 977 (N.H. 2011) (New Hampshire court recognized it had not squarely addressed allocation of defense costs between primary and excess carriers)
- Zurich Ins. Co. v. New Amsterdam Cas. Co., 160 S.E.2d 603 (Ga. Ct. App. 1968) (excess insurer’s duty to defend may arise in some circumstances; cited in Universal Underwriters)