Policyholders may assume that if they do not have the actual insurance policy, then they cannot make a claim for insurance coverage. The First Circuit’s decision in Cardigan Mountain School v. New Hampshire Ins. Co. proves that is not always the case.
In Cardigan, the school received a demand letter for an event that occurred during the 1967-1968 school year. The school tendered the demand letter to New Hampshire Insurance. However, the insurer rejected the request, as it had been unable to find a copy of the policy for the relevant time period. The school proceeded to file a declaratory judgment action against the insurer seeking an order that the school was a policyholder under the policy issued by the insurer.
In its complaint, the school did not assert direct allegations that the policy existed. Rather, the school asserted circumstantial evidence that it had an insurance policy with New Hampshire Insurance. The circumstantial evidence included: (1) an audit report from the school’s accounting firm stating that the school had a multi-peril insurance policy with general liability coverage for 1970-1971; (2) one of the principals in the accounting firm believed that if the school had changed carriers for the 1970-1971 school year, then the audit report would have noted that change; (3) the school’s business manager at the time was certain that the school had insurance during the relevant time period; (4) the school’s insurance broker at the time believed that the school did not change carriers during the relevant time period; and (5) upon information and belief, the insurance broker had a close relationship with New Hampshire Insurance and placed most of its commercial clients with New Hampshire Insurance. New Hampshire moved to dismiss the complaint, arguing that the complaint simply contained speculation and conjecture. The district court agreed and granted the motion to dismiss.
On appeal, the First Circuit reversed. The First Circuit concluded that the above allegations were factual and specific (e.g., the complaint identified specific individuals with knowledge of the factual allegations) and not conclusory. Although the complaint provided at best circumstantial evidence, it was sufficient to support a reasonable inference that the insurance policy existed, and therefore, enough to survive a motion to dismiss. The First Circuit would not speculate as to whether the school’s circumstantial evidence would be enough to survive summary judgment.
This opinion, and a few cases cited in the opinion, should provide policyholders with proof that it can at least assert a claim for coverage even without a copy of the policy; assuming that there are circumstantial facts to support the claim. The policyholder should research its records and interview its personnel and broker to determine if there are sufficient facts to assert a claim. In addition, there are companies that specialize in insurance archeology that can assist policyholders in finding or recreating the applicable policy. Policyholders, however, should take note that they will probably need more than circumstantial evidence to survive a summary judgment motion and be successful at trial.
Insurers also should take caution that just because there is no policy does not mean they are off the hook for coverage. The insurer should do its due diligence as well and be prepared to respond as to why there was no policy.
A copy of the opinion can be read here.