Superior Court Digest
By Benjamin T. King
Winter 2005



New Hampshire Guaranty Association Laws Bar Employer’s Workers’ Compensation Carrier From Recovering Lien In Employee’s Third Party Action, Where Insurer For Third Party Defendant Becomes Insolvent

Facts:     The plaintiff suffered a work-related slip and fall while working at the Steeplegate Mall, filing a workers’ compensation claim and ultimately receiving indemnity and medical benefits in the amount of $26,543.66.  The plaintiff also filed a third-party negligence action against Interstate Cleaning Corporation (ICC), the company responsible for cleaning the floor at Steeplegate. ICC’s insurer Reliance became insolvent, however, as the negligence lawsuit wended its way through court.  Because ICC was located in Missouri and the plaintiff resided in New Hampshire, Reliance’s insolvency triggered the applicability of Missouri’s and/or New Hampshire’s state insurance guaranty association laws.

The negligence lawsuit eventually mediated, the plaintiff and ICC reaching a conditional settlement of $75,000.00. The settlement made no allocation for reimbursement of the workers’ compensation benefits paid, however. Furthermore, the settlement agreement expressly provided that no part of the settlement fund was to be available to enable any holiday for the workers’ compensation carrier against payment of future workers’ compensation benefits.

The workers’ compensation carrier Royal and SunAlliance (Royal) objected to the settlement, arguing that the third party settlement should not be allowed without accommodating its statutory lien and holiday.

Held:       The Court approved the settlement, holding that the insurance guaranty laws prohibited Royal from recovering any lien or asserting any holiday. The Court explained that both New Hampshire’s and Missouri’s insurance guaranty association statutes prohibit payment to any insurer ‘as subrogation recoveries or otherwise.’” RSA 404-B:5; Mo.Rev.Stat. §375.772, II (2). Because the Court construed the workers’ compensation lien that Royal sought to assert “to be akin to a direct claim for subrogation,” the Court found the claim barred.

Although the Court acknowledged that the New Hampshire Supreme Court had not squarely addressed the issue of whether a statutory lien under workers’ compensation law constitutes a form of subrogation recovery, the Court noted that Missouri courts have specifically held that the judgment in a third party action “must be deemed satisfied for the amount due the compensation carrier by the right of subrogation because [the guaranty fund statute] precludes recovery of the subrogation amount from the tortfeasor.” Garrett v. Overland Garage & Parts, Inc., 882 S.W.2d 188, 193 (Mo.Ct.App. 1994).

Moreover, the Court emphasized as policy support for its holding that “an overarching purpose of each insurance guaranty association statute is to provide…protection to policyholders and claimants when an insurer becomes insolvent, and not to solvent insurers” such as Royal (citing Hunnihan v. Mattatuck Mfg. Co., 705 A.2d 1012, 1019 (Conn. 1997) (“An interpretation of the covered claim definition that excludes claims by insurers is in accord with this legislative purpose to provide protection for policyholders and claimants from insurer insolvency. The exclusion of claims by insurers leaves the risk of insurer insolvency on the insurance industry.”)).

Plaintiff’s Counsel: Joseph F. McDowell, III, Esquire

Intervenor’s Counsel (Royal): J. Kirk Trombley, Esquire

Case Name: Morse v. Interstate Cleaning Corp., Merrimack County Superior Court, Docket No. 01-C-0081

Order Date: September 21, 2004 (Lewis, J.)


Evidence Obtained By Arguably Criminal Conduct In Violation Of Discovery Rules Is Inadmissible To Prove Adultery

Facts: The respondent long harbored suspicions that his wife was engaged in an adulterous affair. Unfortunately for the respondent, he lacked much evidence to prove his belief. Ostensibly missing his children one day while he and his wife were separated, he traveled to his wife’s mother’s home, where his wife temporarily resided with the children. Finding no one home, the respondent entered the home, walked through each room, and searched through a dresser drawer. While the respondent did not locate his children in the dresser drawer or elsewhere, he found a greeting card that he sought to introduce to support his allegations of adultery.

Held: The Court excluded the greeting card because the Court found that the respondent’s conduct was an abuse of the rules of discovery and arguably criminal conduct, given that the respondent lacked any permission, express or implied, to enter the home and search it.

Petitioner’s Counsel: Judith L. Homan, Esquire

Respondent’s Counsel: Philip T. McLaughlin, Esquire

Case Name: In the Matter of Nancy E. Woolsey and Grant E. Woolsey, Grafton County—Family Division at Plymouth, Case No. 2003-M-0181

Order Date: September 21, 2004 (Carbon, J.)


RSA 516:36 Protects Internal Affairs Investigation Documents From Disclosure In A Civil Case, Unless The Litigant Seeking The Documents Proves That They Are Essential To His Case.

Facts:     An off-duty Manchester police officer allegedly shot the plaintiffs’ small dog nine (9) times, killing the dog and prompting the plaintiffs to bring a civil suit for money damages against the City of Manchester, the Manchester Police Department and the officer individually. In the course of pretrial discovery, the plaintiffs sought access to any internal affairs investigation file that the City of Manchester or the Manchester Police Department may have prepared concerning the alleged events. The defendants refused to produce the documents, arguing that they were statutorily privileged pursuant to RSA 516:36, II. The plaintiffs moved to compel, arguing that the subject statute only limits the admission of the materials into evidence and does not proscribe access to the materials for purposes of pretrial discovery.

Held: The Court refused to order the production of the documents at the time of its ruling, stating that “[o]ur Supreme Court has recognized that the public policy of encouraging thorough investigation and discipline of police officers concerning allegations of misconduct is protected by preventing the introduction of internal police investigations in a civil suit” (citing Pivero v. Largy, 143 N.H. 187, 191 (1998); Union Leader Corp. v. Fenniman , 136 N.H. 624, 627 (1993)). The Court acknowledged, however, that “a privilege may be abrogated when information is ‘essential’ to the litigant’s case” (citing In re Grand Jury Subpoena for Medical Records of Payne v. Barka , 150 N.H. 436 (2004)). Accordingly, the Court deferred action on the plaintiffs’ motion, in order to give the plaintiffs the opportunity to prove that the documents were essential and that they contained information unavailable from other sources, such that the plaintiffs had no reasonable alternatives.

Plaintiffs’ Counsel: Charles G. Douglas, III, Esquire

Defendants’ Counsel: Gordon A. Rehnborg, Jr., Esquire, and Robert J. Meagher, Esquire

Case Name:  Arnoldy v. City of Manchester, Hillsborough County Superior Court Northern District, Docket No. 04-C-0516   

Order Date:          November 15, 2004 (Mangones, J.)


Court Holds That RSA 361-A Confers A Private Right Of Action And That Violation Of RSA 361-A May Give Rise To Claim For Breach Of The Covenant Of Good Faith And Fair Dealing

Facts:  When the plaintiffs purchased a used car in 2001, they financed the purchase by entering into a retail installment sales contract that contained charges for sixty (60) months of joint credit life insurance coverage and credit disability insurance coverage on plaintiff John McGowan.  The premiums, which were payable to the insurer, were financed as part of the installment contract and paid out of the loan proceeds.  The installment contract was assigned to the defendant credit union, to which the plaintiffs made their monthly payments.

The plaintiffs paid the loan in full before the loan term expired.  The plaintiffs never received a refund for the unearned premium on the credit insurance, however.  The plaintiffs alleged that the refund was not paid because the defendant failed to notify the insurer of the prepayment of the loan as required by RSA 361-A. 

The plaintiffs therefore commenced suit in an attempt to recover the unused and prepaid premiums, alleging among other things violation of the notice provisions of RSA 361-A and breach of the implied covenant of good faith and fair dealing.  The defendant moved to dismiss each of these counts.    

Held:       The Court denied the motion to dismiss in its entirety.   First of all, the Court rejected the defendant’s argument that the plaintiff could not pursue any claim for premiums under RSA 361-A because the statute authorized no private right of action.  The Court held that, even though the statute did not explicitly confer a private right of action, such a right was implied.  The Court specifically referenced RSA 361-A:2, II-a, which requires entities subject to RSA 361-A to post a surety bond for the use of “any person who may have a cause of action against the principal in the bond,” and which further provides that “recovery against the bond may be made…by any such person who may have obtained a final judgment in a court of competent jurisdiction naming such principal.”  Based on these provisions, the Court held that “the statute contemplates that private plaintiffs have a means of recovery for violations” of RSA 361-A, allowing the plaintiffs’ claim for violation of statutory notice provisions to proceed.

The Court likewise objected the defendant’s argument “that the implied covenant of good faith and fair dealing does not fit within the circumstances of this case.”  The Court explained that the covenant exists to ensure that parties act in a manner consistent with the parties agreed-upon purpose and justified expectations, “in light of the contemplation of the parties at the time they formed the contract.” (quoting Harper v. Healthsource New Hampshire, 140 N.H. 770, 776 (1996)).  The Court further explained that RSA 361-A:7, IV-a requires holders to give notice to an insurer if a loan is paid prior to maturity.  Since parties are entitled to expect that their counterparts will conform their conduct to statutory requirements, the Court held that the defendant’s failure to provide the required notice “may constitute a breach of the implied covenant of good faith and fair dealing.”

Plaintiff’s Counsel:  Jason R.L. Major, Esquire

Defendant’s Counsel:  David P. Eby, Esquire  

Case Name:  McGowan v. Northeast Credit Union, Merrimack County Superior Court, Docket No. 04-C-0283   

Order Date:  December 7, 2004 (McGuire, J.)







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