Tuesday, June 16, 2015

A reminder to keep your insurance policies forever

In 2013 Cardigan Mountain School received a demand letter asserting a claim about events that allegedly occurred in the 1967-1968 school year.  (While the parties did not give information to the court about what the allegations were, it's pretty easy to guess.)

The school tendered the defense to New Hampshire Insurance Company as the school's general liability carrier at that time.

New Hampshire rejected the tender of defense on the ground that it was unable to locate any policy for the relevant period of time and thus it was not the school's carrier at the time.

The school filed a declaratory judgment action seeking a decree that New Hampshire was the carrier. 

The United States District Court for the District of New Hampshire granted New Hampshire's motion to dismiss.  The school appealed.

In Cardigan Mountain Sch. v. N.H. Ins. Co., __ F.3d ___, 2015 WL 3393771, the First Circuit reversed. 

In its complaint the school relied on circumstantial evidence for the existence of the policy.  An audit report from September 1971 indicated that the school had a policy with New Hampshire.  One of the principals in the accounting firm that did the audit believes that if the school had changed carriers since the prior school year the auditors would have noted the change in the report. 

The school's business manager from 1967 to 1970 is certain that the school had insurance during his tenure and does not believe it changed carriers during that time. 

The complaint asserted that upon information and belief the insurance brokerage the school used had a close association with New Hampshire and advised most of its commercial clients like the school to place their policies with New Hampshire. 

The court held that the allegations in the complaint are entitled to the presumption of truth at the motion to dismiss stage because they are specific and factual and refer to individuals with relevant knowledge recalling facts plausibly known to them. 

The court then held that the allegations of the complaint make a plausible showing that New Hampshire issued a policy to the school for the 1967-1968 school year.  That was enough at the pleading stage to nudge the claim "across the line from conceivable to plausible." 

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