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First Circuit Holds That School’s Complaint Sufficiently Alleged The Existence Of A Lost Policy

Blogs, Insurance Coverage

The First Circuit recently held that Cardigan Mountain School’s (“Cardigan”) complaint sufficiently pleaded the existence of an insurance policy issued by New Hampshire Insurance Company (“NHIC”) to survive a motion to dismiss. Specifically, the Court held that allegations setting forth the recollections/opinions of two employees were not conclusory, and were sufficient to plausibly allege that NHIC issued the lost policy. Cardigan Mountain School v. New Hampshire Ins. Co., No. 14-2182, 2015 WL 3393771 (1st Cir. May 27, 2015).

In the spring of 2013, Cardigan, an independent all-boys boarding school, received notice of a potential claim arising from events that allegedly took place during the 1967-1968 school-years. Cardigan unsuccessfully attempted to locate the insurance policy that it believed was in place at the time of the alleged incident. However, Cardigan assembled certain circumstantial evidence that it contended was sufficient to demonstrate that NHIC insured Cardigan during the relevant period of time. 

Cardigan contacted NHIC’s parent company, American International Group (“AIG”) to inquire whether AIG had any relevant records. AIG was unable to find any evidence of applicable policy and refused to provide coverage for the potential claim. 

Cardigan bolstered its position by including in its Complaint allegations that:

  • Mr. Cornelius Bakker, Cardigan’s business manager from 1967 to 1970, did not believe that Cardigan changed insurance carriers during his tenure.
  • Mr. Bakker worked with A.B. Gile, Inc., a local insurance broker who, “upon information and belief,” had a close association at the time with NHIC; and,
  • Mr. Phillip Wheeler, one of the two principals at the auditing firm that prepared the 1971 financial report, recalled that, in preparing the 1971 report, auditors had compared the 1970 to 1971 financials to the 1969 to 1970 financials and that the auditors would have noted a change in insurance providers between those two periods had one occurred. 

NHIC moved to dismiss the complaint about the failure to state a claim and the District Court, applying New Hampshire law, granted the motion. Cardigan then appealed. Cardigan Mountain School v. New Hampshire Ins. Co., No. 14-CV-116-LM, 2014 WL 4979855, (D.N.H. Oct. 2, 2014).

The only issue before the First Circuit on appeal was the existence of the policy. Cardigan argued that the District Court improperly disregarded the above allegations. The First Circuit agreed, holding that the allegations were specific and factual. The Court also found that the allegations were grounded in the recollections/opinions of individuals with relevant knowledge and did not amount to bare legal conclusions. Since the allegations were not conclusory they deserved the presumption of truth on a motion to dismiss. Consequently, the First Circuit found that the Complaint contained sufficient factual allegations to render the claim plausible.

In so holding, the First Circuit acknowledged that the Complaint was based on circumstantial evidence but ultimately held that fact alone was insufficient to justify dismissal of the Complaint. The Court noted that Cardigan carefully checked their records to determine their insurance company and did not pick an insurance company at random, thus the Complaint provided a plausible basis that NHIC issued the policy.

Consequently, the First Circuit reversed and remanded the case back to the District Court for the District of New Hampshire.