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

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THE SUPREME COURT OF NEW HAMPSHIRE
___________________________
8th Circuit Court-Keene District Division
No. 2021-0156
KEENE AUTO BODY, INC.
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
Argued: October 14, 2021
Opinion Issued: November 15, 2022
Steve Piispanen, non-lawyer representative appearing by approval of the
Supreme Court under Rule 33(2), on the brief and orally, for the plaintiff.
Primmer Piper Eggleston & Cramer PC, of Manchester (Brendan D.
O’Brien on the brief and orally), for the defendant.
Bernstein, Shur, Sawyer & Nelson, P.A., of Manchester (Edward J.
Sackman and Hilary H. Rheaume on the brief, and Edward J. Sackman orally),
for the New Hampshire Automobile Dealers Association, as amicus curiae.
BASSETT, J. The plaintiff, Keene Auto Body, Inc., appeals an order of
the Circuit Court (Gleason, J.) granting a motion to dismiss filed by the
defendant, State Farm Mutual Automobile Insurance Company. Keene Auto
Body — acting as an assignee of Caleb Meagher, who insured his vehicle
through State Farm — sued State Farm for breach of contract for failing to
cover the full cost of repairs to the insured’s vehicle. State Farm moved to
dismiss the suit on the grounds that, because of an anti-assignment clause in
the insured’s policy, the insured’s assignment of his breach of contract claim to
Keene Auto Body was not valid, and that, even if it was, Keene Auto Body did
not sufficiently state a claim for breach of contract. The trial court granted the
motion. We reverse and remand.
The relevant facts follow. The insured owns a vehicle that is insured by
State Farm. His vehicle sustained covered damage, and he brought it to Keene
Auto Body for repairs. State Farm and Keene Auto Body each provided the
insured with an estimate of repair costs; Keene Auto Body’s estimate was
higher, and included costs for some repairs that State Farm did not include.
Keene Auto Body and State Farm did not reach an agreement about the repair
costs. Without obtaining approval from State Farm, the insured instructed
Keene Auto Body to repair his vehicle in accordance with its estimate, and
Keene Auto Body did so. State Farm refused to pay any costs in excess of its
estimate. Without seeking State Farm’s approval, the insured then assigned to
Keene Auto Body his right to sue State Farm for the difference. Keene Auto
Body filed a small claims complaint against State Farm alleging that State
Farm was obligated under the insurance policy to pay an additional $1,093.37
for covered repair costs.
State Farm filed a motion to dismiss. It argued that, because the
insured’s policy contained an anti-assignment clause, the insured’s assignment
of his claim to Keene Auto Body was invalid. State Farm also argued that, even
if the assignment was valid, Keene Auto Body did not state a viable claim
because State Farm was obligated to cover only the costs reflected in its own
estimate. Keene Auto Body objected. The court entered a margin order
granting the motion to dismiss without identifying which of State Farm’s
arguments it found persuasive. This appeal followed.
On appeal, Keene Auto Body argues that the trial court erred. It asserts
that the assignment of the insured’s claim to Keene Auto Body was valid. It
also argues that its complaint alleged sufficient facts to support its breach of
contract claim. State Farm counters that the assignment was prohibited by an
anti-assignment clause and that, even if the assignment was valid, the factual
allegations in Keene Auto Body’s breach of contract complaint are insufficient
to survive a motion to dismiss.
Keene Auto Body appeals the trial court’s ruling on a motion to dismiss.
State Farm first argues that the insured’s assignment of his claim was barred
by the language of the insurance policy. Resolving this issue requires that we
interpret the language of the insurance policy, which is ultimately a question of
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law for this court to decide. See Birch Broad. v. Capitol Broad. Corp., 161 N.H.
192, 196 (2010). Accordingly, we review a trial court’s interpretation of policy
language de novo. See id. In assessing State Farm’s argument that the factual
allegations in Keene Auto Body’s breach of contract claim are insufficient to
survive a motion to dismiss, we assume the facts alleged in Keene Auto Body’s
pleadings are true, construe all reasonable inferences in the light most
favorable to the plaintiff, and assess whether the allegations contained in the
complaint constitute a basis for legal relief. Teatotaller, LLC v. Facebook, Inc.,
173 N.H. 442, 446 (2020).
We first address Keene Auto Body’s argument that the anti-assignment
clause in the insured’s policy did not preclude the insured’s assignment of his
breach of contract claim. “The fundamental goal of interpreting an insurance
policy, as in all contracts, is to carry out the intent of the contracting
parties.” Bartlett v. Commerce Ins. Co., 167 N.H. 521, 530 (2015) (quotation
omitted). To discern the parties’ intent, we first examine the language of the
policy itself and look to the plain and ordinary meaning of the policy’s words in
context. Id. We construe the terms of the policy as would a reasonable person
in the position of the insured based upon more than a casual reading of the
policy as a whole. Id. at 530-31. Policy terms are construed objectively, and
where the terms of a policy are clear and unambiguous, we accord the
language its natural and ordinary meaning. Id. at 531. We need not examine
the parties’ reasonable expectations of coverage when a policy is clear and
unambiguous; absent ambiguity, our search for the parties’ intent is limited to
the words of the policy. Id. The fact that parties may disagree on the
interpretation of policy language does not necessarily create an ambiguity. Id.For an ambiguity to exist, the disagreement must be reasonable. Id.In determining whether an ambiguity exists, we consider the term at
issue in its appropriate context, and construe the words used according to
their plain, ordinary, and popular definitions. Id. If one of the reasonable
meanings of the language favors the policyholder, the ambiguity will be
construed against the insurer in order to honor the insured’s reasonable
expectations. Id. However, when “the policy language is clear, this court will
not perform amazing feats of linguistic gymnastics to find a purported
ambiguity simply to construe the policy against the insurer and create coverage
where it is clear that none was intended.” Id. (quotation omitted).
The policy language at issue reads as follows:
No assignment of benefits or other transfer of rights is binding upon us
unless approved by us.
(Emphases in original.) State Farm argues that the plain language of this
provision prohibits the transfer of legal claims against the insurer that have
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accrued because an insured loss has already occurred, as well as the pre-loss
transfer of policy benefits and rights. Keene Auto Body counters that the
clause should not be read as prohibiting assignment of post-loss claims.
State Farm focuses its argument on the term “benefits,” arguing that we
have “recognized that recovering pursuant to an automobile insurance policy is
a benefit.” However, the cases cited by State Farm stand for the simple
proposition that proceeds owed by an insurance company to an insured for
covered damage are “benefits.” See Langevin v. Travco Ins. Co., 170 N.H. 660,
666 (2018). State Farm does not cite, nor have we found, authority for the
proposition that an accrued legal claim for collection of an amount payable
under the policy is, itself, a benefit. We have, however, previously referred to
an insured’s ability to sue his or her insurer for breach of contract as a “right,”
see Stateline Steel Erectors v. Shields, 150 N.H. 332, 336-37 (2003), often
referred to as a “chose in action.” Pratte v. Balatsos, 102 N.H. 147, 148 (1959);
see also In re Ambassador Ins. Co., Inc., 965 A.2d 486, 490-91 (Vt. 2008). As
State Farm notes, the policy’s broad prohibition on “transfer of rights” does not
include any qualifying language. We are therefore satisfied that State Farm’s
broad reading of the anti-assignment clause is reasonable.
Keene Auto Body’s narrower reading of the anti-assignment clause
requires more extensive analysis to determine whether it is also reasonable. To
decide whether the prohibition on transfer of benefits and rights may be
reasonably read as not applying to assignment of post-loss claims, we must
consider the policy language at issue in context, giving consideration to its
purpose. Exeter Hosp. v. Steadfast Ins. Co., 170 N.H. 170, 179 (2017)
(concluding that the insured’s interpretation of umbrella coverage was
reasonable in light of the purpose of an umbrella policy); Russell v. NGM Ins.
Co., 170 N.H. 424, 435 (2017) (construing an ensuing loss provision so as to
effectuate its purpose to preserve coverage for insured losses that are caused
by an excluded loss). When the context could cause a reasonable insured to
expect narrow application of a policy provision, we will honor that reasonable
expectation in the absence of specific language to the contrary. See Orleans v.
Commercial Union Ins. Co., 133 N.H. 493, 497 (1990).
The purpose of anti-assignment clauses like State Farm’s “is to protect
the insurer from increased liability.” Ambassador Ins. Co., 965 A.2d at 491(quotation omitted); cf. Margolis v. Insurance Company, 100 N.H. 303, 305
(1956) (noting that prior version of statute regulating assignment of insurance,
which had been incorporated into an insurance policy, was “based upon the
idea that the risk and hazard of loss may be increased by a change of
ownership”). A reasonable insured would understand why, in furtherance of
this purpose, an insurer would prohibit assignment of policy benefits and
rights pre-loss, because “some improvident or undesirable assignee” may pose
a greater risk to the insurer by, for example, failing to pay premiums or
4
engaging in behavior more likely to result in loss. National Memorial Serv. v.
Metropolitan Life Ins. Co., 49 A.2d 382, 382 (Pa. 1946); see also Ambassador
Ins. Co., 965 A.2d at 491 (“[T]he identity of the insured determines the risk to
the insurer.”).
By contrast, a reasonable insured would not understand why the anti-
assignment clause should restrict assignment of post-loss claims, because
such a construction would not further the clause’s risk-moderating purpose.
“[O]nce an event occurs that triggers an insurer’s liability, the insurer’s risk
cannot be increased by a change in the insured’s identity.” Ambassador Ins.
Co., 965 A.2d at 491 (quotation omitted). As the Supreme Court of Iowa
explained:
[T]he need to protect the insurer no longer exists after the insured
sustains the loss because the liability of the insurer is essentially fixed
. . . . [O]nce the loss has triggered the liability provisions of the insurance
policy, an assignment is no longer regarded as a transfer of the actual
policy. Instead, it is a transfer of a chose in action under the policy. At
this point, the insurer-insured relationship is more analogous to that of a
debtor and creditor, with the policy serving as evidence of the amount of
debt owed.
Conrad Brothers v. John Deere Ins. Co., 640 N.W.2d 231, 237-38 (Iowa 2001)
(citations omitted). In other words, because assignment of post-loss claims
does not impact the insurer’s risk, “[w]e fail to see why legally it should make
any difference who sues the [insurer] — the insured or the insured’s assignee.”
Stateline Steel, 150 N.H. at 337 (quotation omitted).
State Farm counters that assignment of choses in action does impact its
risk, because such assignment “increases the likelihood that insurers will face
litigation” and assignees’ litigation incentives and abilities may differ from
insureds’. We disagree. No matter the incentive of the litigant, the claims are
“worth what they are worth,” and the plaintiff “must still prove the extent of
loss and the validity of the claims.” Ambassador Ins. Co., 965 A.2d at 492.
Although assignees may be more sophisticated or more well-funded than
insureds, we do not consider the greater possibility that an insurer will have to
pay funds that it is already contractually obligated to pay as an increase in
risk; otherwise, we would “reward the insurer which refuses to honor its
contractual obligations.” St. Paul Fire & Marine Ins. Co. v. Allstate Ins. Co.,
543 P.2d 147, 149 (Ariz. Ct. App. 1975); Conrad Brothers, 640 N.W.2d at 238(“[I]f we permitted an insurer to avoid its contractual obligations by prohibiting
all post-loss assignments, we could be granting the insurer a windfall.”).
State Farm relies on Margolis v. Insurance Company, 100 N.H. 303(1956), to support its argument. That reliance is misplaced. In Margolis, the
5
named insured declared bankruptcy and assigned all of its assets, including
commercial fire insurance policies, to an assignee for the benefit of creditors.
Margolis, 100 N.H. at 304 (preface to opinion). The insurers never consented to
the assignment. Id. at 306. The policies were then purchased by a new entity,
id., which suffered a loss caused by fire and made a claim on the policies, id. at
309. The insurers refused to pay the claim, as the insurance policies
contained an anti-assignment clause that rendered the policies void upon
assignment absent the insurers’ consent. Id. at 305, 309. In holding that the
insurers were not required to pay the claim, we stated the insurers were “not
required” to demonstrate that assignment “actually increased the risk
materially.” Id. at 305. State Farm now relies on Margolis to argue that its
ability to prohibit assignment of choses in action cannot be contingent on it
demonstrating that such assignments increase its risk. However, Margolis is
inapposite, as it concerned assignment of insurance benefits prior to the
occurrence of an insured loss, and therefore has no bearing on the issue of
post-loss claim assignment. Accordingly, we are satisfied that Keene Auto
Body’s reading of the anti-assignment clause is reasonable.
Further support for this conclusion can be found in case law from other
states. The “overwhelming majority” of courts that have addressed this issue
have held that anti-assignment clauses do not prevent assignment of post-loss
claims. Givaudan Fragrances v. Aetna, 151 A.3d 576, 584-90 (N.J. 2017)
(summarizing the “substantial case law around the country”); see Conrad
Brothers, 640 N.W.2d at 237 (collecting cases). But see, e.g., In re Katrina
Canal Breaches Litigation, 63 So. 3d 955, 960-63 (La. 2011) (adopting minority
approach). Several of the courts adopting the majority position have construed
the same anti-assignment clause that is at issue in this case. See Jawad A.
Shah, M.D. v. State Farm Mut., 920 N.W.2d 148, 158-59 (Mich. App. 2018)
(adopting the majority approach on public policy grounds); M.V.B. Collision
Inc. v. State Farm Ins. Co., 72 N.Y.S.3d 407, 409, 412-13 (N.Y. Dist. Ct. 2018)
(same).
This body of authority has “put[] the insurance industry on notice that
an insured could reasonably expect” that assignment of choses in action would
be permissible “unless informed by fairly specific policy language” to the
contrary. See Orleans, 133 N.H. at 496-97; see also Smith v. Liberty Mut. Ins.
Co., 130 N.H. 117, 122 (1987) (noting that insurers are “in a position” to
“assess the probability of reasonable disagreement in applying any given policy
language . . ., and if the insurer foresees such disagreement it may either
change the language, or otherwise clarify the intent of the contracting parties,
or take its chances”). “If [State Farm] had intended to . . . restrict assignments,
the language is not as clear and unambiguous as it should be.” National
Memorial Serv., 49 A.2d at 383.
The foregoing discussion demonstrates a “reasonable disagreement
between the contracting parties leading to at least two interpretations of the
6
policy’s language.” Exeter Hosp., 170 N.H. at 179 (quotation and brackets
omitted); see also M. Mooney Corp. v. U.S. Fidelity & Guaranty Co., 136 N.H.
463, 472 (1992) (finding an insurance policy provision ambiguous “[i]n light of
the parties’ reasonable and contradictory interpretations”). The dissent
suggests that it is unprecedented and inappropriate for our court to find an
insurance policy provision ambiguous absent an argument by the insured that
an ambiguity exists. That is not the case. It is not uncommon for parties to
offer competing and irreconcilable interpretations of a contract term — and not
to argue in the alternative that the policy language is ambiguous. In fact, our
case law establishes that it is our responsibility to determine, as a threshold
matter, whether the competing interpretations are reasonable. If both
proferred interpretations are reasonable, then an ambiguity exists — regardless
of whether either party has argued ambiguity. See, e.g., Exeter Hosp., 170
N.H. at 179; Weaver v. Royal Ins. Co. of America, 140 N.H. 780, 782-83 (1996).
Because we conclude that the anti-assignment clause is ambiguous, we
must construe it against the insurer. Trombly v. Blue Cross/Blue Shield, 120
N.H. 764, 771-72 (1980). We therefore hold that the anti-assignment clause
did not prohibit the insured from assigning his post-loss claim to Keene Auto
Body. We express no opinion as to whether an unambiguous clause
prohibiting assignment of post-loss claims would be enforceable.
Given this holding, and the trial court’s margin order, which lacked
explication, we must decide whether the factual allegations in Keene Auto
Body’s breach of contract claim are sufficient to survive State Farm’s motion to
dismiss. They are.
The pleading requirements in small claim actions are minimal.
Teatotaller, 173 N.H. at 446. A small claim complaint must include “[t]he
business or other relationship between the plaintiff and defendant,” “a
description setting forth with specificity the reason(s) the plaintiff believes that
the defendant owes money to the plaintiff,” and “[t]he amount that the plaintiff
claims that the defendant owes.” Dist. Div. R. 4.1(a)(4)(A)-(B). In ruling on a
motion to dismiss filed in a small claim proceeding, a trial court may consider
factual allegations made by the plaintiff in a motion or objection, in addition to
those made in the complaint. Teatotaller, 173 N.H. at 446. We assume the
facts alleged in the plaintiff’s pleadings to be true and construe all reasonable
inferences in the light most favorable to the plaintiff. Id.
“Under New Hampshire law, a breach of contract occurs when there is a
failure without legal excuse to perform any promise which forms the whole or
part of a contract.” Id. at 447 (quotation omitted). Keene Auto Body alleged
that State Farm refused to pay for $1,093.37 of repair costs, which were
covered by the insured’s policy with State Farm. It further alleged that the
insured assigned his right to these insurance proceeds to Keene Auto Body.
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State Farm argues that these allegations are insufficient to constitute a
breach of contract claim because it has already paid a sum that satisfied the
requirements set forth in RSA 417:4, XX(c) (2015), which provides that insurers
“may limit payment for [repairs] based on the fair and reasonable price in the
area by repair shops or facilities providing similar services.” Additionally, State
Farm argues that Keene Auto Body’s claim is precluded because it “perform[ed]
repairs without an agreement, then demand[ed] its unilaterally-imposed price”
from State Farm, contrary to the procedures required by New Hampshire
Administrative Rule, Ins 1002.17(g). That regulation provides that if the repair
shop and insurer are unable to agree on a price, then the price shall be that of
“any other recognized, competent, and conveniently located” repair shop willing
and able to repair the vehicle in a reasonable time.
In its pleadings, Keene Auto Body alleged facts to show that its repair
costs were “fair and reasonable,” and that the sum State Farm actually paid
was neither reasonable nor calculated in compliance with New Hampshire
Administrative Rule, Ins 1002.17(g). We must, at this stage of the litigation,
assume that the facts alleged by Keene Auto Body are true and construe all
inferences in the light most favorable to Keene Auto Body. Teatotaller, 173
N.H. at 446. Therefore, there is a factual dispute that must be resolved before
the merits of State Farm’s legal arguments can be addressed. We therefore
conclude that the factual allegations in Keene Auto Body’s breach of contract
complaint are sufficient to survive State Farm’s motion to dismiss.
Finally, the dissent protests that our opinion is “contrary to New
Hampshire law” and will “fundamentally alter” the relationship between
policyholders and insurers, as regulated by RSA 417:4, XX(c) and New
Hampshire Administrative Rule, Ins 1002.17. Our holding today does nothing
of the sort: it has absolutely no bearing on the operation of the regulatory and
statutory provisions cited by the dissent, which establish a framework for
resolving disagreements regarding the fair and reasonable cost of vehicle
repairs. We simply explain that, given the language of the anti-assignment
clause, nothing in the policy prevents the insured from assigning his right —
arising post-loss — to a resolution of the dispute with State Farm as to a fair
and reasonable price.1 Any defense available to State Farm in an action filed
by the insured — for example, that the claim cannot be maintained because of
New Hampshire Administrative Rule, Ins 1002.17 — would be available to
State Farm in an action filed by Keene Auto Body.
1 The dissent speculates as to the impact of the court’s opinion on insurance premiums. It
raises the specter that premiums will rise as a consequence of our opinion — although there is no
evidence in the record to support that hypothesis — and suggests that the mere possibility that
premiums could be affected should somehow skew the legal analysis. We disagree. Premium
levels are irrelevant to our analysis.
8
We reverse and remand for further proceedings consistent with this
opinion.
Reversed and remanded.
HICKS and DONOVAN, JJ., concurred; MACDONALD, C.J., and HANTZ
MARCONI, J., dissented.
MACDONALD, C.J., and HANTZ MARCONI, J., dissenting. The most
fundamental principle of contract interpretation is to give effect to the
unambiguous meaning of the words to which the parties agreed. The
unambiguous language at issue requires State Farm to consent to any
assignment. It did not do so. That should end the matter.
The majority takes a different course. Absent any prompting — much
less, developed legal arguments — from Keene Auto Body, the majority employs
novel interpretive principles to discern an ambiguity in the consent-to-
assignment clause. They then construe the ambiguity in favor of Keene Auto
Body. As a result, the judiciary effectively finds itself in a field previously
reserved for legislators and industry regulators. The judiciary does not belong
here, especially because, as State Farm points out, today’s decision may well
result in an increase in risk to insurers, and, thus, premiums paid by New
Hampshire policyholders. Therefore, and for the reasons discussed below, we
respectfully dissent.
I
This is an appeal from a motion to dismiss a small claim complaint. As
we set forth in Teatotaller, LLC v. Facebook, Inc., 173 N.H. 442, 446 (2020), the
standard of review is particularly deferential to a plaintiff’s allegations. In
reviewing a trial court’s decision to grant a motion to dismiss, we examine
whether the allegations in the plaintiff’s pleadings are reasonably susceptible to
a construction that would permit recovery. Id. We do not, however, assume
the truth of statements in the plaintiff’s pleadings that are merely conclusions
of law. Id. We then engage in a threshold inquiry that tests the facts in the
complaint against the applicable law, and if the allegations constitute a basis
for legal relief, we must hold that it was improper to grant the motion to
dismiss. Id.In the context of a small claims proceeding, we have modified the
foregoing in two respects. First, we apply this standard “liberally” because of
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the summary nature of a small claim complaint. Id. Second, a “trial court may
consider factual allegations made by the plaintiff in a motion or objection, in
addition to those in the small claim complaint.” Id.Keene Auto Body’s small claim form complaint sought recovery of
$1,093.37. The plaintiff checked a box indicating that “this is a debt that was
purchased from or assigned by a third party,” and identified Caleb Meagher as
the third party. An attachment to the form stated as follows:
Caleb assigned the insurance proceeds that are owed to him by
State Farm. State Farm failed to indemnify Caleb. [State Farm]
owes Caleb for numerous necessary repair costs to properly repair
his vehicle. Caleb & [State Farm] must agree upon the actual cash
value of the loss. There was a disagreement between [State Farm]
and the insured, [State Farm] should have resolved this
disagreement by appraisal, instead of breaching the contract. A few
examples of costs that [State Farm] denied coverages for were price
increases, one time non reusable parts, safety related repairs,
replacement of damaged parts, Aim radar, Covid precautions.
State Farm moved to dismiss the complaint. Its motion raised two
arguments: first, that the contractual provision prohibiting assignment without
State Farm’s approval applies and State Farm did not approve the assignment;
and second, even if the assignment were valid, Keene Auto Body could not
succeed on its claim. Keene Auto Body objected. State Farm filed a reply, and
Keene Auto Body filed a sur-reply. In its objection, Keene Auto Body stated
that “State Farm took the payment of loss option to pay Caleb the actual cash
value amount of the covered vehicle,” and that “Keene Auto Body took the
contract of assignment of proceeds to collect the remaining actual cash value
balance owed to Caleb from State Farm for indemnification.” To be clear, State
Farm paid on Meagher’s claim. Keene Auto Body contended that State Farm’s
repair estimate did not comply with repair procedures required by the original
manufacturer to return the vehicle to its pre-loss condition. Those omissions
from the manufacturer’s requirements included, for example, technology and
software scans.
In a margin order, the trial court granted the motion.
II
We disagree with the majority that Keene Auto Body offered any
argument that the consent-to-assignment clause’s language is ambiguous. We
also disagree with the majority that Keene Auto Body presented sufficiently
developed legal arguments that the clause’s plain language does not apply to
“post-loss” assignments. Rather, on the subject of the clause’s applicability,
10
Keene Auto Body’s brief simply argues, “Meagher, as the beneficiary of these
proceeds, did not need State Farm’s authority to enter the assignment of
proceeds contract, as State Farm has alleged, as the contract was between
Meagher and Keene Auto Body.” It then notes that in New Hampshire, “‘an
assignee obtains the rights of the assignor at the time of the assignment. The
assignee’s rights are the same as those of the assignor at the time of the
assignment.’” (Quoting Stateline Steel Erectors, Inc. v. Shields, 150 N.H. 332,
336-37 (2003).) Further, Keene Auto Body argues, because “it is clear that New
Hampshire laws override the State Farm policy allowing the beneficiary to
assign these insurance proceeds . . . State Farm’s anti-assignment clause in
the policy [is] invalid.”
Although the majority accurately recites interpretive principles governing
contracts, they then misapply them. Our threshold inquiry focuses on the
language of the policy itself. The plain language of the consent-to-assignment
clause could hardly be more straightforward: “No assignment of benefits or
other transfer of rights is binding upon us unless approved by us.” (Emphases
in original.) And, under our cases, that should end the matter: “Policy terms
are construed objectively, and where the terms of a policy are clear and
unambiguous, we accord the language its natural and ordinary meaning . . . .
[A]bsent ambiguity, our search for the parties’ intent is limited to the words of
the policy.” Bates v. Phenix Mut. Fire Ins. Co., 156 N.H. 719, 722 (2008)
(quotation omitted).
The plain and ordinary meaning of the clause’s language is clear and, in
the usual course, it is our duty to enforce it. Because State Farm did not
consent to the assignment, that concludes our analysis. Today, however, the
majority goes further.
Although we have previously stated that “we will not enforce a contract
or contract term that contravenes public policy,” we did so with the caveat that
“[d]eclaration of public policy with reference to a given subject is regarded as a
matter primarily for legislative action.” Rizzo v. Allstate Ins. Co., 170 N.H. 708,
713 (2018). It is true, as the majority parenthetically observes, that courts in
other jurisdictions have concluded that a policy’s prohibition on post-loss
assignments violates public policy. See, e.g., Jawad A. Shah, M.D. v. State
Farm Mut., 920 N.W.3d 148, 158-59 (Mich. App. 2018); M.V.B. Collision Inc. v.
State Farm Ins. Co., 72 N.Y.S.3d 407, 409 (N.Y. Dist. Ct. 2018). In Shah, the
Michigan Court of Appeals considered an attempt to assign a State Farm policy
and the court interpreted the exact language at issue in this case. Notably, the
court observed that the policy language was “perfectly clear” and
“unambiguous,” but, nevertheless, could not be enforced because it violated
Michigan public policy securing the right to transfer “an accrued cause of
action.” Shah, 920 N.W.3d at 158-59 (emphases added). There may be merit
to such public policy concerns. However, as noted, that is “a matter primarily
for legislative action.”
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Notwithstanding, the majority reaches the same result by following a
problematic course. Absent any argument by Keene Auto Body that the policy
language is ambiguous or any developed legal argument as to why such
clauses should be read as prohibiting assignment of post-loss claims, the
majority nonetheless constructs such arguments. They start by citing Exeter
Hospital v. Steadfast Insurance Co., 170 N.H. 170, 179 (2017), for the
proposition that “we must consider the policy language at issue in context,
giving consideration to its purpose.” At most, Exeter Hospital may be read as
endorsing the proposition that a policy’s purpose may be considered as
supporting a party’s reasonable interpretation of the language at issue. Exeter
Hosp., 170 N.H. at 179. However, it is a novel proposition to use a contract’s
purpose to create an ambiguity in the face of “perfectly clear” and
“unambiguous” language.
We disagree that a “reasonable insured” would not understand the plain
language of this automobile policy, but rather would seek the “risk-moderating
purpose” of the clause in a Vermont Supreme Court decision interpreting an
entirely different policy in the context of a coverage dispute over hundreds of
millions of dollars of asbestos-related liability. In re Ambassador Ins. Co., Inc.,
965 A.2d 486, 490-91 (Vt. 2008). Or, that a “reasonable insured” in New
Hampshire would appreciate that the Iowa Supreme Court has concluded that
the “need to protect the insurer no longer exists after the insured sustains the
loss because the liability of the insurer is essentially fixed.” Conrad Bros. v.
John Deere Ins. Co., 640 N.W.2d 231, 237 (Iowa 2001).
On this point, the majority strays into territory requiring an informed
knowledge of both the insurance industry and the economics of automobile
insurance. We refrain from dabbling in either, especially on this record.
Without any record support, the majority summarily rejects State Farm’s
argument that an assignment such as the one to Keene Auto Body will increase
“‘the likelihood that insurers will face litigation’ and that assignees’ incentives
and abilities may differ from insureds’.” The majority essentially concludes
that the risk is the risk, and the insurers are on the hook for whatever the loss
is after the loss occurs without paying any attention to the contracting parties’
agreement to limit that risk.
Yet, that is contrary to New Hampshire law. RSA 417:4, XX(c) provides
that, in the context of automobile insurance, an “insurer may limit payment for
such work based on the fair and reasonable price in the area by repair shops or
facilities providing similar services.” New Hampshire Insurance Department
Rule 1002.17 provides that if a repair shop and the insurer cannot agree on a
price, then the “price shall be the price available from any other recognized,
competent, and conveniently located independent repair shop or facility that is
willing and able to repair the damaged motor vehicle within a reasonable time.”
N.H. Admin. R., Ins 1002.17.
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The majority would fundamentally alter this arrangement. As one
commentator has noted, an assignment such as the one in this case permits
the repair shop “to both write the bill and collect the check.” Timothy P.
Ososkie, If You Give a Shop a Claim: The Unsustainable Inequity of
Pennsylvania’s Unbridled Post-Loss Assignments, 125 Penn. St. L. Rev. 935,
937 (2021). In an unpublished opinion, the Ohio Court of Appeals concluded
that a similar assignment “would have materially changed [the insurer’s] duty
and materially increased its burden or risk under the contract. . . . [T]he right
to negotiate is markedly different than a third party’s demand for payment in
full.” Mercedes-Benz of West Chester v. American Family Ins., 2010 WL
2029048, at *4 (Ohio Ct. App. May 24, 2010). The potential result is
“burdensome litigation for insurers and . . . consequently rising premiums for
policyholders.” Ososkie, supra at 938.
The majority also points to case law from other states that have
concluded that consent-to-assignment clauses do not prevent assignment of
post-loss claims. We do not dispute other courts have so held, perhaps even
the “overwhelming majority” of them. But, we are unaware of any principle of
contract interpretation adopted by this court supporting the proposition that
cases interpreting other policies between other parties in other states creates
an ambiguity in the policy at issue here. As noted above, Shah, relied upon by
the majority, finds the exact State Farm policy language at issue here to be
“perfectly clear” and “unambiguous.” Shah, 920 N.W.3d at 158-59. Indeed, in
light of Shah, the majority’s observation that “[i]f [State Farm] had intended to
. . . restrict assignments, the language is not as clear and unambiguous as it
should be” is without basis.
In the end, the majority’s analysis does not and cannot unearth an
ambiguity. Because our duty is to enforce texts that are clear and
unambiguous, we would affirm the trial court’s decision. See Bates, 156 N.H.
at 722.
We respectfully dissent.
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