Originally published in Portsmouth Herald
It will take years and cost millions of dollars for businesses
in New England that have been damaged by Hurricane Irene to
recover. Many of those businesses will seek assistance from
insurers. Even now, notices of claims are being given, insurance
policy terms and exclusions are being analyzed, damage assessments
are being made, and business interruption losses are being
calculated. Once these tasks have been completed, an insurance
policyholder is in a position to start the process of settling on
an insurance payment.
New Hampshire businesses will find themselves in a stronger
position to resolve their insurance coverage claims because of a
unique provision of New Hampshire's insurance declaratory
judgment law. That law, known as "RSA 491:22-a," is a
powerful tool that benefits New Hampshire's policyholders. Any
business in New Hampshire that has suffered insured damage needs to
be aware of this law, and carefully follow its requirements.
Properly used, RSA 491:22-a forces the insurance company to
disprove coverage. If required to litigate, and if the policyholder
"prevails," the insurance company must reimburse the
policyholder for its attorney's fees under the provisions of
this law; an unusual provision in American law.
The State's declaratory judgment statute includes one simple
sentence that dramatically improves the ability of a policyholder
to obtain coverage from a recalcitrant insurance company. it reads:
"In any petition under RSA 491:22 to determine the coverage of
a liability insurance policy, the burden of proof concerning the
coverage shall be upon the insurer whether he institutes the
petition or whether the claimant asserting the coverage institutes
the petition". In the language of the law, this is termed a
"burden-shifting statute." Where in the normal case, the
plaintiff has the burden to prove his or her insurance contract
covers the loss, in a claim under RSA 491:22-a, the burden shifts
to the insurance company to prove its coverage does not apply. The
importance of this shifted burden in the courtroom cannot be
understated.
As importantly, if a New Hampshire policyholder is required to
file a declaratory judgment action in court under RSA 491:22-a, the
costs of the litigation if and when that policyholder
"prevails" on its claim are assessed to the insurer. The
language of the law is clear:
In any action to determine coverage of an insurance policy pursuant
to RSA 491:22, if the Policyholder prevails in such action, he
shall receive court costs and reasonable attorneys' fees from
the insurer.
The purpose of this unusual provision is to compel insurers to
make early decisions to agree to defend and/or indemnify
policyholders. When the law was being reviewed by the Senate
Judiciary Committee, a key Senator explained that:
It has been a serious problem for insurance companies to try to get
out of defending their clients when they have been sued. They then
ask for a declaratory judgment action which delays the case and a
large percentage of the time the Policyholder wins. This is to get
the expenses for the policyholders and it may [deter] the insurance
companies from refusing to defend their clients.
In fact, the author of this article has been involved in a
recent case involving seven-figure losses, in which one
recalcitrant insurance company was hit with an attorney's fees
award that was significantly higher than the amount of loss at
issue against that carrier.
There is a balance in the law that works to the benefit of the
insurance company, and which the policyholder must keep firmly in
mind. If the policyholder is sued by a third party claiming
property damage or bodily injury, the policyholder has only 6
months from the date of the writ, complaint or other pleading to
file its declaratory judgment action. If that deadline is missed
without a valid and excusable reason, the burden shifting and
attorneys fees benefits are forfeited. This is a potential trap
that the unwary may innocently find themselves falling into. There
is no penalty for filing a claim early, and the penalty for being a
day late is loss of the benefit of the statute.
The details of an effective strategy for obtaining the maximum
insurance recovery are beyond the scope of this article, as are the
details of national flood insurance. Ambiguity of policy terms, the
role of experts, principles of economic analysis and valuing what
may be long-term costs, are all issues of great importance. The
ultimate value of each of these other issues, however, is
diminished if a Policyholder fails to understand and take full
advantage of RSA 491:22-a.
Michael Quinn is a member of the McLane Law Firm's Insurance
Recovery Group, with his Partners Bruce W. Felmly and Barry
Needleman.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.