2021-0156, Keene Auto Body, Inc. v. State Farm Mutual Automobile Insurance Company

defendant, State Farm Mutual Auto mobile Insurance Company. Keene Auto the Circuit Court (Gleason, J.) granting a motion to dismiss filed by the BASSETT, J. The plaintiff, Keene Auto Body, Inc., appeals an order of

for the New Hampshire Automobile Dealers Association, as amicus curiae. Sackman an d Hilary H. Rheaume on the brief, and Edward J. Sackman orally), Bernstein, Shur, Sawyer & Nelson, P.A., of Manchester (Edward J.

O’Brien on the brief and orally), for the defendant. Primmer Piper Eggleston & Cramer PC, of Manchester (Brendan D.

Supreme Court under Rule 33(2), on the brief and orally, for the plaintiff. Steve Piispanen, non - lawyer representative appearing by approval of the

No. 2021 - 0156 8th Circuit Court - Keene District Division

page is: https://www.courts.nh.gov/our - courts/supreme - court a.m. on the morning of their release. The direct address of the court’s home reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00 to press. Errors may be reported by email at the following address: editorial errors in order that corrections may be made before the opinion goes Hampshire, One Charles Doe Drive, Concor d, New Hampshire 03301, of any Readers are requested to notify the Reporter, Supreme Court of New well as formal revision before publication in the New Hampshire Reports. NOTICE: This opinion is subject to motions for rehearing under Rule p. 2 22 as 2

interpret the language of the insurance policy, which is ultimately a question of by th e language of the insurance policy. Resolving this issue requires that we State Farm first argues that the insured’s assignment of his claim was barred Keene Auto Body appeals the trial court’s ruling on a motion to dismiss.

to survive a motion to dismiss. allegations in Keene Auto Body’s breach of contract complaint are insufficient anti - assignment clause a nd that, even if the assignment was valid, the factual contract claim. State Farm counters that the assignment was prohibited by an also argues that it s complaint alleged sufficient facts to support its breach of that the assignment of the insured ’s claim to Keene Auto Body was valid. It On appeal, Keene Auto Body argues that the trial court erred. It asserts

arguments it found persuasive. This appeal followed. granting the motion to dismiss with out identifying which of State Farm’s estimate. Keene Auto Body objected. The court entered a margin order because State F arm was obligated to cover only the costs reflected in its own if the assignment was valid, Keene Auto Body did not state a viable claim of his claim to Keene Auto Body was invalid. State Farm also argued that, even insured’s policy contained an anti - assignment clause, the insured’s assignment State Farm filed a motion to dismiss. It argued that, because the

for covered rep air costs. Farm was obligated under the insurance policy to pay an additional $1, 093.37 Body filed a small claims complaint against State Farm alleging that State Keene Auto Body his right to sue State Farm for the difference. Keene Auto estimate. Without seeking State Farm’s approval, the insured then assigned to Keene Auto Body did so. State Farm refused to pay any costs in excess of its Keene Auto Body to repair his vehicle in accordance with its estimate, and costs. Without obtaining approval from State Farm, t he insured instru cted Keene Auto Body and State Farm did not reach an agreement about the repair higher, and included costs for some repairs that State Farm did not include. insured with an estimate of repair costs; Keene Auto Body’s estimate was Auto Body for repairs. State Farm and Keene Auto Body each provided the State Farm. His vehicle sustained covered damage, and he brought it to Keene The relevant facts follow. The insured owns a vehicle t hat is insured by

motion. We reverse and remand. not sufficiently state a claim for breach of contract. The trial court granted the Keene Auto Body was not valid, and that, even if it was, Keene Auto Body did the insured’s policy, the insured’s assignment of his breach of contract claim to dismiss the suit on the grounds that, because of an anti - assignment clause in cover t he full cost of repairs to the insured’s vehicle. State Farm moved to through State Farm — sued State Farm for breach of contract for failing to Body — acting as an assignee of Caleb Meagher, who insured his vehicle p. 3 3

provision prohibits the transfer of legal claims against the insurer that have (Emphas e s in original.) State Farm argues that the plain language of this

unless approved by us. No assignment of benefits or other transfer of rights is binding upon us

The policy language at issue reads as follows:

where it is clear that none was intended.” Id. (quotation omitted). ambiguity simply to construe the policy against the insurer and create coverage not perform amazing feats of linguistic gymnastics to find a purported expectations. Id. H owever, w hen “the policy language is clear, this court will construed against the insurer in order to honor the insured ’ s reasonable meanings of the language favors the policyholder, the ambiguity will be their plain, ordinary, and popular definitions. Id. If one of the reasonable issue in its appropriate context, and construe the words used according to In determining whether an ambiguity exists, we consider the term at

F or an ambiguity to exist, the disagreement must be reasonable. Id. interpretation of policy language does not n ecessarily create an ambiguity. Id. the words of the policy. Id. The f act that parties may disagree on the unambiguous; absent ambiguity, our search for the parties’ intent is limited to the parties’ reasonable expectations of coverage when a policy is clear and language its natural and ordinary meaning. Id. at 5 p. 3 31. We need not examine where the terms of a policy are clear and unambiguous, we accord the policy as a whole. Id. at 530 - 31. Policy terms are construed objectively, and in the position of the insured based upon more than a casual reading of the context. Id. We construe the terms of the policy as would a reasonable person policy itself and look to the plain and ordinary meaning of the policy’s words in omitted). To discern the parties’ intent, we first examine the language o f the parties.” Bartlett v. Commerce Ins. Co., 167 N.H. 521, 530 (2015) (quotation policy, as in all contracts, is to carry out the intent of the contracting breach of contract claim. “The fundamental goal of interpreting an insurance clause in the insured’s policy did not preclude the insured’s assignment of his We first address Keene Auto Body’s argument that the anti - assignment

17 p. 3 3 N.H. p. 4 442, 446 (2020). complaint constitute a basis for legal relief. Teatotalle r, LLC v. Facebook, Inc., favorable to the plaintiff, and assess whether the allegations contained in the pleadings are true, construe all reasonable inferences in the light most survive a motion to dismiss, we a ssume the facts alleged in Keene Auto Body’s allegations in Keene Auto Body’s breach of contract claim are insufficient to language de novo. See i d. In assessing State Farm’s argument that the factual 192, 196 (2010). Accordingly, we review a trial court’s interpretation of policy law for this court to decide. See Birch Broad. v. Capitol Broad. Corp., 161 N.H. 4

a greater risk to the insurer by, for exa mple, failing to pay premiums or rights pre - loss, because “some improvident or undesirable assignee” may pose this purpose, an insurer would prohibit assignment of policy benefits and ownership”). A reasonable insured would understand why, in furtherance of idea that the risk and hazard of loss may be increased by a change of which had been incorporated into an insurance policy, was “based upon the (1956) (noting that prior version of statute regulating assignment of insurance, (quotation omitted); cf. Margolis v. Insurance Company, 100 N.H. 303, 305 the insurer from increased liability.” Ambassador Ins. Co., 965 A.2d at p. 4 491 The purpose of anti - assignment clauses like State Farm’s “is to protect

C ommercial Union Ins. Co., 133 N.H. p. 4 493, 497 (1990). expectation in the absence of specific language to the contrary. See Orleans v. expect narrow application of a policy provision, we will honor that reasonable by an excluded loss). When the context could cause a reasonable insured to effectuate its purpose to preserve coverage for insured loss es that are caused Co., 170 N.H. 424, 435 (2017) (construing an ensuing loss provision so as to reasonable in light of the purpose of an umbrella policy); Russell v. NGM Ins. (concluding that the insured’s interpretation of umbrella coverage was purpose. Exeter Hosp. v. Steadfast Ins. Co., 170 N.H. 170, 179 (2017) consider the policy language at issue in context, giving consideration to its reasonably read as not apply ing to assignment of post - loss claims, w e must decide whether the prohibition on transfer of benefit s and rights may be requires more extensive analysis to determine whether it is also reasonable. To Keene Auto Body’s narrower reading of the anti - assignment clause

broad reading of the anti - assig nment clause is reasonable. include any qualifying language. We are therefore satisfied that State Farm’s State Farm notes, the policy’s broad prohibition on “transfer of rights” does not see also In re Ambassador Ins. Co., Inc., 965 A.2d p. 4 486, 490 - 91 (Vt. 2008). A s referred to as a “chose in action.” Pratte v. Balatsos, 102 N.H. 147, 148 (1959); see Stateline Steel Erectors v. Shields, 150 N.H. 332, 336 - 37 (2003), often an insured ’s ability to sue his or her insurer for breach of contract as a “right,” under the policy is, itself, a benefit. We have, however, previously referred to proposition that a n accrued legal claim for collection of an amount payable 666 (2018). State Farm does not cite, nor have we found, authority for the covered damage are “benefits.” S ee Langevin v. Travco Ins. Co., 170 N.H. 660, proposition that proceeds owed by an insurance company to an insured for a benefit.” However, the case s cited by State Farm stand for the simple have “recognized that recovering pursuant to an automobile insurance policy is State Farm focuses its argument on the term “benefits,” arguing that we

clause should not be read as prohibiting assignment of post - loss claims. transfer of policy benefits and rights. Keene Auto Body counters that the accrued because an insured loss has already occurred, as well as the pre - loss p. 5 5

(19 p. 5 56), to support its argument. That reliance is misplaced. In Margolis, the State Farm relies on Margolis v. Insurance Company, 100 N.H. 303

all post - loss assignments, we could be granting the insurer a windfall.”). (“[I]f we permitted an insurer to avoid its contractual obligations by prohibiting p. 5 543 P.2d 147, 149 (Ariz. Ct. App. 1975); Conr ad Brothers, 640 N.W.2d at 238 contractual obligations.” St. Paul Fire & Marine Ins. Co. v. Allstate Ins. Co., risk; otherwise, we would “reward the insurer which refuses to honor its pay funds that it is already contractually obligated to pay as an increase in insureds, we do not consider the greater possibility that an insurer will have to Although assignees may be more sophisticated or more well - funded than loss and the validity of the claims.” Ambassador Ins. Co., 965 A.2d at 492. “worth what they are worth,” and the plaintiff “must still prove the extent of insureds’. We disagree. No matter the incentive of the litigant, the claims are litigation” and assignees’ litigation incentives and abilities may differ from risk, because such assignment “increases the likelihood that insurers will face State Farm counters that assignment of choses in action does impact its

Stateline Steel, 1 p. 5 50 N.H. at 337 (quotation omitted). any difference who sues the [insurer] — the insured or the insured’s assignee.” does not impact the insurer’s risk, “[w] e fail to see why legally it should make (citations omitted). In other words, because assignment of post - loss claims Conrad Brothers v. John Deere Ins. Co., 640 N.W.2d 231, 237 - 38 (Iowa 2001)

debt owed. debtor and creditor, with the policy serving as evid ence of the amount of this point, the insurer - insured relationship is more analogous to that of a policy. Instead, it is a transfer of a chose in action under the policy. At policy, an assignment is no longer regarded as a transfer of the actual . . . . [O]nce the loss has triggered the liability provisions of the insurance sustains the loss because the liability of the insurer is essentially fixed [T]he need to pro tect the insurer no longer exists after the insured

explained: Co., 96 p. 5 5 A.2d at 491 (quotation omitted). As the S upreme Court of Iowa cannot be increased by a change in the insured’s identity.” Ambassador Ins. “[O]nce an event occurs that triggers an insurer’s liability, the insurer’s risk such a construction would not further the clause’s risk - moderating purpose. assignment clause should restrict assignment of post - loss claims, because By contrast, a reasonable insured would not understand why the anti -

the insurer.”). Ins. Co., 9 p. 6 6 p. 5 5 A.2d at 491 (“[T]he identity of the insured determin es the risk to Metropolitan Life Ins. Co., 49 A.2d 382, 382 (Pa. 1946); see also Ambassador engaging in behavior more likely to result in loss. National Memorial Serv. v. 6

between the contracting parties leading to a t le ast two interpretations of the The foregoing discussion demonstrates a “reasonable disagreement

Memorial Serv., 49 A.2d at 383. the language is not as clear and unambiguous as it should be.” National or take its chances”). “If [State Farm] had intended to . . . restrict assignments, change the language, or otherwise clarify the intent of the contracting parties, language . . ., and if the insurer f oresees such disagreement it may either “assess the probability of reasonable disagreement in applying any given policy Co., 130 N.H. 117, 122 (1987) (noting that insurers are “in a position” to contrary. See Orleans, 133 N.H. at 49 p. 6 6 - 97; see also Smith v. Liberty Mut. Ins. be permissible “unless informed by fairly specific policy language” to the an insured could reasonably expect” that assignment of choses in action would This body of authority has “put[] the insurance industry on notice that

(same). Inc. v. State Farm Ins. Co., 72 N.Y.S.3d 407, 409, 412 - 13 (N.Y. Dist. Ct. 2018) (adopting the majority approach on public policy grounds); M.V.B. Collision Shah, M.D. v. State Farm Mut., 920 N.W.2d 148, 15 8 - 5 9 (Mich. App. 2018) the same anti - assignment clause that is at issue in this case. See Jawad A. approach). Several of the courts adopt ing the majority position have construed Canal Breaches Litigation, p. 6 63 So. 3d 955, 960 - 63 (La. 2011) (adopting minority Brothers, 640 N.W.2d at 237 (c ollecting cases). B ut see, e.g., In re Katrina (summarizing the “substantial case law around the country”); see Conrad claims. Givaudan Fragrances v. Aetna, 151 A.3d 576, 584 - 90 (N.J. 2017) have held that anti - assignment clauses do not prevent assignment of post - loss states. The “overwhelming majority” of courts that have addressed this is sue Further support for this conclusion can be found in case law from other

Body’s reading of the anti - assignment clause is reasonable. post - loss claim assignment. Accordingly, we are satisfied that Keene Auto occurrence of an insured loss, and therefore has no bearing on the issue of inapposite, as it concerned assignment of insurance benefits prior to the demonstra ting that such assignments increase its risk. However, Margolis is ability to prohibit assignment of choses in action cannot be contingent on it materially.” Id. at 305. State Farm now relies on Margolis to argue that its required” to demonstrate that assignment “actuall y increased the risk insurers were not required to pay the claim, we stated the insurers were “not assignment absent the insurers’ consent. Id. at 305, 309. In holding that the contained an anti - assignment clause that rendered the policies void upon 3 09. The insurers refused to pay the claim, as the insurance policies id., which suffered a loss caused by fire and made a claim on the policies, id. at the assignment. Id. at 30 p. 6 6. The policies were then purchased by a new entity, Margolis, 100 N.H. at 304 (preface to opinion). The insurers never consented to commercial fire insurance policies, to an assignee for the benefit of creditors. named insured declared bankruptcy and assigned all of its assets, including p. 7 7

insured assigned his right to these insurance proceeds to Keene Auto Body. covered by the insured’s policy with State Farm. It further alleged that the that State Farm refused to pay for $1,093.3 p. 7 7 of repair costs, which were part of a contract.” Id. at 447 (quotation omitted). K eene Auto Body alleged failure without legal excuse to perform any promise which forms the whole or “Under New Hampshire law, a breach of contract occurs when there is a

inferences in the light most favorable to the pl aintiff. Id. facts alleged in the plaintiff’ s pleadings to be true and construe all reasonable those made in the complaint. Teatotaller, 1 p. 7 73 N.H. at 446. We assume the factual allegations made by the plaintiff in a motion or objection, in addition to motion to dismiss filed in a small claim proceeding, a trial court may consider claims that the defendant owes.” Dist. Div. R. 4.1 (a) (4)(A) - (B). In ruling on a the defendant owes money to the plaintiff,” and “[t]he amount that the plaintiff description setting forth with specificity the reason(s) the plaintiff believes that business or other relationship between the plaintiff and defendant,” “a T eatotaller, 173 N.H. at 446. A small claim complaint must include “[t]he The pleading requirements in small claim actions are minimal.

dismiss. They are. Body’s breach of contract claim are sufficient to survive State Farm’s motion to explication, we must decide whether the factual allegations in Keene Auto Given this holding, and the trial court ’s margin order, which lacked

prohibiting assignment of post - loss claims would be enforceable. Body. We express no opinion as to whether an unambiguous clause did not prohibit the insured from assigning his post - loss claim to Keene Auto N.H. p. 7 764, 771 - 72 (1980). We therefore hold that the anti - assignment clause must construe it against the insurer. Trombly v. Blue Cross /Blue Shield, 120 Because we conclude that the anti - assignment clause is ambiguous, we

N.H. at 1 p. 7 79; Weaver v. Royal Ins. Co. of Am erica, 140 N.H. 7 p. 8 80, 78 2 - 8 3 (1996). of whether either party has argued ambiguity. See, e.g., Exeter Hosp., 170 proferred interpretations are reasonable, then an ambiguity exists — regardless matter, whether the competing interpret ations are reasonable. If both case law establishes that it is our responsibility to determine, as a threshold to argue in the alternative that the policy language is ambiguous. In fact, our offer competing and irre concilable interpretations of a contract term — and not an ambiguity exists. That is not the case. It is not uncommon for parties to insurance policy provision ambiguous absent an argument by the insured that suggests that it is unprecedented and inappropriate for our court to find an the parties’ reasonable and contradictory interpretations”). The dissent 463, 472 (1992) (finding an insurance policy provision ambiguous “[i]n light of omitted); see also M. Mooney Corp. v. U.S. Fidelity & Guaranty Co., 136 N.H. policy’s language.” Exeter Hosp., 170 N.H. at 179 (quo tation and brackets 8

levels are irrelevant to our analysis. premiums could be affected should somehow skew the legal analysis. We disagree. Premium evidence in the record to s upport that hypothesis — and s uggests that the mere possibility that raises the specter that prem iums will rise as a consequence of our opinion — a lthough there is no The dissent speculates as to the impact of the court’s opinion on insurance premiums. It 1

State Farm in an action filed by Keene Auto Body. New Hampshire Administrative Rule, Ins 1002. 1 7 — would be available to by the insured — for example, that the claim cannot be maintained because of and reasonable price. Any defense available to State Farm in an action filed 1 arising post - loss — to a resolution of the dispute with State Farm as to a fair clause, nothi ng in the policy prevents the insured from assigning his right — repairs. We simply explain that, given t he language of the anti - assignment resolving disagreements regarding the fair and reasonable cost of vehicle statutory provisions cited by the dissent, which establish a framework for of the sort: it has absolutely no bearing on the operation of the regulatory and Hampshire Administrative Rule, Ins 1002.17. Our holding today does nothing policyholders and insurers, as regulated by RSA 417:4, XX(c) and New Hampshire law” and will “fundamentally alter” the relation ship between Finally, t he dissent protests that our opinion is “contrary to New

complaint are sufficient to survive State Farm’s motion to dismiss. conclude that the factual allegations in Keene Auto Body’s breach of contract the merits of State Farm’s legal argument s can be addressed. W e therefore N.H. at 446. Therefore, there is a factual dispute that must be resolved before inferences in the light most favorable to Keene Auto Body. Teatotaller, 173 assume that the facts alleged by Keene Auto Body are true and construe all Administrative Rule, Ins 1002.17(g). We must, at this stage of the litigation, was neither reasonable nor calculated in compliance with New Hampshire costs were “fair and reasonable,” an d that the sum State Farm actually paid In its pleadings, Keene Auto Body alleged facts to show that its repair

and able to repair the vehicle in a reasonable time. “any other recognized, competent, and conveniently located” repair shop willing shop and insurer are unable to agree on a price, then the price shall be tha t of Administrative Rule, Ins 1002.17 (g). That regulation provides that if the repair from State F arm, contrary to the procedures required by New Hampshire repairs without an agreement, then demand[ed] its unilaterally - imposed price” Farm argues that Keene Auto Body’s claim is precluded because it “perform[ed] area by repair shops or facilities providing similar services.” Additionally, State “may limit payment for [repairs] based on the fai r and reasonable price in the requirements set forth in RSA 417:4, XX(c) (2015), which provides that insurers breach of contract claim because it has already paid a sum that satisfied the State Farm argues that th ese allegations are insufficient to constitute a p. 9 9

foregoing in two respects. First, we apply this standard “liberally” because of In the context of a small claims proceeding, we have modified the

dismiss. Id. for legal relief, we must hold that it was improper to grant the motion to complaint against the applicable law, and if the allegations constitute a basis of law. Id. We then engage in a threshold inquiry that tests the facts in the the truth of stateme nts in the plaintiff’s pleadings that are merely conclusions a construction that would permit recovery. Id. We do not, however, assume whether the allegations in the plaintiff’s pleadings are reasonably susceptible to reviewing a trial court’s decision to grant a motion to dismiss, we examine standard of review is particularly deferential to a plaintiff’s allegations. In we set forth in Teatotaller, LLC v. Facebook, Inc., 173 N.H. 442, 44 6 (2020), the This is an appeal from a mot ion to dismiss a small claim complaint. As

respectfully dissent. Hampshire policyholders. Therefore, and for the reasons discussed be low, we result in an increase in risk to insurers, and, thus, premiums paid by New here, especially because, as St ate Farm points out, today’s decision may well reserved for legislators and industry regulators. The judiciary does not belong Body. As a result, the judiciary effectively finds itself in a field previously assignment cl ause. They then construe the ambiguity in favor of Keene Auto novel interpretive principles to discern an ambiguity in the consent - to less, developed legal arguments — from Keene Auto Body, the majority employs The majority takes a different course. Absent any prompting — much

assignment. It did not do so. That s hould end the matter. unambiguous language at issue requires State Farm to consent to any unambiguous meaning of the words to which the parties agreed. The fundamental principle of contract interpretation is to give effect to the M AC DONALD, C.J., and HANTZ MARCONI, J., dissenting. The most

MARCONI, J.