USCA1 Opinion

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT
____________________
No. 94-1106
TOWN OF ALLENSTOWN,
Plaintiff, Appellant,
v.
NATIONAL CASUALTY COMPANY,
Defendant, Appellee.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Paul J. Barbadoro, U.S. District Judge]
___________________
____________________
Before
Torruella, Circuit Judge,
_____________
Campbell, Senior Circuit Judge,
____________________
and Boudin, Circuit Judge.
_____________
____________________
Glenn R. Milner with
________________
appellant.

whom Cook & Molan, P.A. was on

____________________

brief

John A. Lassey with whom Wadleigh, Starr, Peters, Dunn & Chi
_______________
_____________________________________
was on brief for appellee.
____________________
September 30, 1994
____________________

BOUDIN, Circuit Judge.

_____________
Allenstown,

New Hampshire,

Cutting for a number

was acquitted of

Police Department

of traffic offenses.

all charges.

Cutting and his wife

of Selectmen

In May 1986, an officer

In April

At

arrested Paul
trial Cutting

1988, counsel

wrote a letter to the

advising that his

of the

for

Allenstown Board

clients were making

a claim

for damages against the town, arising from the arrest.

At that time the National Casualty Company
a comprehensive

law enforcement liability

policy protecting

Allenstown and its employees against claims

by

the Cuttings.

National

had in force

Casualty opened

of the kind made

a file

on the

incident

and

obtained

from

documents relating to the

Cuttings brought a
the arresting

the

town

copies

Cutting arrest.

various

In June

civil rights action against

officer in the

of

1988 the

the town and

federal district court

in New

Hampshire.
When
copies

the federal

of

National

suit was

their summons

filed, the

and complaint

Cuttings served

on

the town.

The

Casualty policy provided if a claim is made or suit

brought against

the insured, the insured

"shall immediately

forward to the Company every demand, notice, summons or other

process" received by the
with

this

against

requirement a

National

mailed the

insured; the policy made compliance

condition

Casualty.

precedent

Allenstown

summons and complaint to

to any

contends

suit

that it

National Casualty about

-2-2-

eight

days after

it received

that it never received

mailed.

them; National

Casualty says

the papers and denies that

they were

Neither the

town

nor

National

Casualty

appeared

to

defend against the Cuttings' suit, and a default judgment was

entered.
March

After a

1989 entered judgment for

Cuttings,
and

hearing on damages, the district

including

60, the Cuttings

$424,909.88 in favor of the

compensatory damages,

attorneys' fees.

punitive damages

After a year's wait,

Fed. R. Civ. P.

obtained a writ of execution in April 1990.

Allenstown then

moved for relief from

In August 1990,

the district

appeal this

court in

court affirmed.

the default judgment.

court denied the

Cutting v.
_______

motion.

On

Town of Allenstown,
__________________

936 F.2d 18 (1st Cir. 1991).

In May

1990, after the

writ of

National Casualty learned--assertedly,

that the

Cuttings

filed their

afterwards, Allenstown wrote

it to provide
judgment

coverage for

they had obtained.

declined to do

execution had

issued,

for the first

threatened suit.

time--

Not

long

to National Casualty requesting

the Cuttings' law

suit and

the

In June 1990, National Casualty

so on the ground that the

town had failed to

notify National Casualty of the law suit's filing in a timely

fashion and had failed immediately to forward the summons and
complaint as required by the policy.

-3-3-

Allenstown then sued National Casualty

state court

seeking a

Stat. Ann.
provide

in New Hampshire

declaratory judgment under

491:22 that

coverage for

National Casualty was

the

Cuttings' suit.

N.H. Rev.
required to

Section

491:22

permits declaratory actions to determine

insurance coverage,

if

six

such

an

underlying
insured.

action is
suit

brought

that

seeks

within

to

impose

Section 491:22-a provides

section 491:22, "the burden

grounds

complaint to

because
another,

of

include claims for

and finally

of

to

the

New Hampshire

on

town amended

its

breach of contract

Casualty.

reassignment

under

491:22-b.

court in

Thereafter,

faith against National

the

the town's declaratory action

district

of diversity.

on

There is also a provision

N.H. Rev. Stat. Ann.

to federal

the

of proof concerning the coverage

National Casualty removed

against it

liability

that in an action

shall be upon the insurer . . . ."

for attorneys' fees.

months of

the

a third,

After
case
the

and bad

a number of
from one

delays

judge

to

trial commenced

on

November 30, 1993.

At trial,

the town

presented testimony of

police officers that he had

in the

one of

its

mailed the summons and complaint

Cuttings' suit to National Casualty

within two weeks

after

they had

been

National Casualty

served on

the

town.

testified that no such

A witness

for

documents had been

received and that the company had no record that the suit had

-4-4-

been

filed.

There

evidence that might

have

mailed

was

but

not

conclusive,

suggest that the officer who

the summons

misaddressed it.

also some,

Under

and

complaint

claimed to

might have

these circumstances, the

partly

burden of

proof has assumed some importance.

Well before trial, in July 1993, the district
ruled that section 491:22,
and

and its ancillary burden shifting

attorney's fee provisions,

The court ruled that

action

under section

court had

did not apply

in this case.

under New Hampshire law, a

491:22 could

declaratory

be brought

to determine

insurance coverage only where the underlying action to impose

__________
liability on

the insured had

state

court.

where

the

The district

statute

did

been brought in
court also

not apply,

the

New Hampshire

took the
burden

view that
under

New

Hampshire law was upon the insured to establish coverage.

After the

close of

all of

the evidence, the

court submitted the town's contract

found

in favor

treated

of National

district

claim to the jury

Casualty.1

The

which

district court

the request for declaratory relief as a matter to be

determined by the court.

But, following the jury's lead, the

trial judge ruled in favor of National Casualty, holding that

the

town "did

not,

by

preponderance of

the

evidence,

____________________
1The bad faith claim was not submitted to the jury
because the district court ruled, after the close of the
town's evidence, that as a matter of law judgment on this
claim should be entered in favor of National Casualty.
-5-5-

establish that the suit papers in

forwarded."2

this case were immediately

The town now appeals to this court.

The principal

issue on

court's decision that

appeal stems from

section 491:22, including

shifting provision, did not apply in this case.

the district
its burdenAt all times

pertinent here, section 491:22 allowed a declaratory judgment

action if sought within

six months "after the filing

of the

writ which gives rise to the question," i.e., the writ in the
____
underlying
Because New

liability action--here,

Hampshire state-court actions

the filing of a writ

complaint, the New
that "[t]he

the Cuttings'

law suit.

are commenced

and federal actions by the filing

Hampshire Supreme Court had

plain language

clearly applies only

of the statute

to State actions."

by
of a

held in 1985

[section 491:22]
Jackson v. Federal
_______
_______

Ins. Co., 498 A.2d 757, 759 (N.H. 1985).

_______
Jackson involved
_______
where

the

action

had

under section

as in Jackson, the
_______

been brought

suit

in state

in

court

been brought

year later, this court applied

a declaratory

federal court;
_______
had

declaratory action

underlying liability

federal court.
bar

in

Jackson to
_______

491:22 brought

in

underlying liability suit

federal court.

Volpe v.
_____

Prudential
__________

Property & Casualty Ins. Co., 802 F.2d 1 (1st Cir. 1986).
___________________________

It

____________________
2The district court had, of course, already ruled the
declaratory relief was not available under section 491:22;
but it considered declaratory relief to be available under
the federal Declaratory Judgment Act, 28 U.S.C.
2201.
-6-6-

might

have

been enough

in Volpe
_____

to

say that

the federal

action was barred because (as in Jackson) the underlying suit

_______
had
went

been brought in federal

even

further and

court, but this

held

that section

available to litigants proceeding in

court in Volpe
_____
491:22

was "not

federal court."

Id. at
___

5.
The
would not

implication of
entertain

Volpe
_____

a section

underlying liability suit was

was that
491:22

the federal
action even

if

brought in state court.

conclusion was not a careless extension of Jackson.

_______
Jackson's plain
_______

court

language argument

rested

on the

the
This

Although
statute's

reference to a "writ"--focusing attention on the forum of the

underlying suit--Jackson had also described section 491:22 as
_______
a "court cleaning

bill," saying that the

to expedite procedures

in the

bill was "intended

State courts."

498 A.2d

at

759.
Following

Jackson and
_______

Volpe,
_____

the New

Hampshire state

legislature

amended

the

declaratory

judgment

statute

by

adding section 491:22-c, which provides:

The remedy of declaratory judgment to
determine the coverage of a liability
insurance policy under RSA 491:22, 22-a,
and 22-b shall also be available in the
United States district court for the
district of New Hampshire when the court
may properly adjudicate the matter under
the laws of the United States.
This

amendment, in force at the time that Allenstown brought

its declaratory judgment

against National

Casualty, is

the

-7-7-

focus

of

the present

amendment meant that

appeal.

The

town asserts

a section 491:22 action can

that the
be brought

in federal court, regardless whether the underlying liability

suit

was

brought

in

state

or

federal

court.

National

Casualty, by contrast, claims that the amendment merely makes

the

section 491:22

remedy

precisely the same extent

Hampshire

state

available in

federal courts

that it would be available

courts--that

is,

when

the

to

in New

underlying

liability suit was brought in a New Hampshire state court.

The

district

reading, and
section

court

agreed

we take the

491:22-c

is

with

National

same view.

not

The bare

conclusive.

It

Casualty's
language of

is

perfectly

consistent with National Casualty's reading; but arguably the

language is general enough so that it is also consistent with
the

town's

reading.

whatever the

bare

The

problem

for

the

of the

new

section,

language

town is

that

the

New

Hampshire Supreme Court in 1992 held "that RSA 491:22 applies

only

to

underlying

suits

brought in

Scully's Auto-Marine Upholstery, Inc.

____________________________________

our

State

courts."

v. Peerless Ins. Co.,

_________________

611 A.2d 635, 636 (N.H. 1992).

Scully
______
Hampshire
both

a declaratory

state court

in federal

Although
Scully
______

was

made

no

brought

involving underlying

district court

decided after

action

section

reference

to

-8-8-

and in

New

liability suits

Maine state

491:22-c became
the

in the

amendment

court.

effective,
but

simply

reiterated the court's earlier reasoning in Jackson.

_______
have, therefore,

is a

does

unless

not

brought

apply
in

New

Peterborough v.
____________
1107

(D.N.H.

flat declaration that

the underlying

Hampshire

state

section 491:22

liability

court.

Unfortunately

suit

Accord
______

Hartford Fire Ins. Co., 824 F.

______________________
1993).

What we

for

is

Town of
_______

Supp. 1102,

the

town,

the

Cuttings' suit was brought in federal court.

Allenstown
history

urges

of section

permit a section
the underlying
The legislative

in

its

brief that

491:22-c shows

491:22 action in

the

legislative

that it was

intended to

federal court even

liability suit was brought

history is

something of

expansion of section 491:22

where

in federal court.
a tangle;

a broad

was originally proposed, but the

version enacted was a narrower one supported by the insurance

industry.

But

even

if the

legislative history

were more

clearly favorable to Allenstown than it appears to be, Scully

______
is

a holding of

New

Hampshire

determination.

New Hampshire's highest

statute.

We

are

E.g., Della Grotta v.

____ ____________

bound

court construing a
by

that

court's

Rhode Island, 781 F.2d

____________

343, 347 (1st Cir. 1986).3

____________________
3In April 1994, the state legislature again amended
section 491:22, effective January 1, 1995, to say that a
section 491:22 action can be brought "even though the action
giving rise to the coverage question is brought in a federal
court or another [non New Hampshire] state court." R.S.A.

491:22, as amended by 1994 N.H. Laws ch. 37.

No one claims
that the amendment itself applies retroactively to the
present case.
-9-9-

We turn now
The

town

to the town's

argues

that,

second assignment of

even if

shifting provision did not apply

section

491:22's

error.
burden-

in this case, New Hampshire

common law still places the burden of proof on the insurer to

prove that

the insured provided

Here,

of course,

proof

on the insured

contract

the

claim and

a required notice

district judge
both when he

when he

placed the

of suit.
burden of

charged the jury

decided the

on the

declaratory action

himself.
There

is

some

dispute

preserved its common-law

argument.

the charge on this issue, as

and

such failures

point on appeal.
made

the same

merely
not

On the

whether

the

It made no

town

has

objection to

required by Fed. R. Civ. P. 51,

to object

ruling

about

normally preclude

arguing the

other hand, the district court also

on the

the obverse of the

declaratory action,

contract claim, and

govern legal objections in bench trials.

which is

Rule 51 does
Here, the town

certainly made

its position clear

to the district

court in

advance of its decision on declaratory relief.

Accordingly,

we think

common-law

arguments on

reject it.

Section

Co. v.
___

it best

to consider

the merits,

but on

the town's

the merits

we

491:22 aside, Lumbermens Mutual Casualty

__________________________

Oliver, 335 A.2d

______

666 (N.H. 1975),

explicitly places

the burden of showing notice upon the insured where notice is

a

condition

in

the policy.

If

New

Hampshire law

were

-10-10-

otherwise, it is
have

had to

shifting the

difficult to

enact a

separate provision

burden to

In all events,

the insurer in

Lumbermens is explicit:
__________

the burden of showing

[to the insurer]

see why

New Hampshire

(section 491:22-b)
declaratory actions.
"The insured

that notice of the accident

as soon

would

as reasonably possible."

bears

was given
Id.
___

at

668; accord Sutton Mutual Ins. Co. v. Notre Dame Arena, 237
______ ______________________
_________________

A.2d 676, 679 (N.H. 1968).

The town's
upon

argument to

the contrary is

White Mountain
Construction Co.
__________________________________

Insurance Co., 631 A.2d 907 (N.H. 1993).

_____________
question

based entirely
v.

Transamerica
____________

White involved the

_____

whether a duty to defend arose when the insurer had

notice of a suit or only when it had notice and a request for

___
assistance.

The burden of proof

as to notice was

explicitly discussed in White, apparently

_____
evident from the
attempt

facts.

See

not even

because notice was

631 A.2d at

484.

The

town's

to extend White, because it cited cases from a state

_____

where the burden of disproving notice may lie on the insurer,

is inventive but not persuasive.
The third

issue

raised

concerns its bad faith claim,

that the

district court

here

different types
is

the precept

of

the

on

its

appeal

from the

jury after

the

Under New Hampshire law, there

good faith

that a

town

an independent cause of action

withdrew

close of the town's evidence.

are

by

good

-11-11-

requirements; pertinent
faith obligation

may be

inferred where a contract

discretion in

performance tantamount

the plaintiff of a
value."

allows "the defendant a

to a power

degree of
to deprive

substantial proportion of the agreement's

Centronics Corp. v. Genicom Corp., 562 A.2d 187, 193

_______________
____________

(N.H. 1989).4

Under

this rubric, the town sought

to submit

to the jury a set of interrelated arguments.

To

summarize,

requirement
Casualty
to

town

had not been

urged

that

met in this

the

good

faith

case because National

had notice of a threatened law suit and failed ever

contact

likelihood

the

the Cuttings'
that the suit

not instruct the

lawyer,

in spite

would be brought;

town as to what

of

the strong

the company did

to do in the event

that a

complaint was served; the company never told the town that it
had previously

been sent a letter

(the Cuttings' attorney's

letter threatening suit) which had been improperly addressed;

and

the company closed its

Cuttings

file without ever contacting the

or their lawyer.

there was enough

in this

On appeal, the
cluster of charges

town argues that

to submit

the

matter to the jury.

To enter judgment on this claim for National Casualty as
a matter of law, the district

judge had to and did find that

____________________
4See also Seaward Constr. Co. v. City of Rochester,

383

___ ____ __________________

_________________
A.2d 707 (N.H. 1978) (city under duty to seek federal funding
where such funding is a
condition of payment to the
contractor); Lawton v. Great Southwest Fire Insurance Co.,
______
___________________________________
392 A.2d 576 (N.H. 1978) (insurer's discretion to determine
the time of payment limited to a commercially reasonable
time).
-12-12-

no reasonable

jury could find

in favor of

the town

on the

evidence presented, and we review this determination de novo.

_______
See Peckham
___ _______
830

v. Continental Casualty Insurance Co., 895 F.2d

__________________________________

(1st Cir.

1990).

literally, there

If

the "good

is no evidence

faith" label

is taken

whatever from which

a jury

could

infer that National Casualty acted in bad faith in the

sense

of conscious

wrongdoing or

reckless disregard.

town's only hope lies in diluting the

to

one

of

reasonableness.

Centronics does refer

__________

at one point

"the defendant's exercise

of reasonableness."

It

The

good faith requirement

must

be

admitted

to the question

of discretion exceeded

that

whether

the limits

562 A.2d at 193.

Reading Centronics as a whole and taking account of

the

__________
other

cited

New

requirements

Hampshire

in contract

claim does not fit

decisions

cases,

on

we think

good

faith

that the

town's

the cubby hole described by

these cases.

The notice provisions of

the town's policy do not

the

any

insurance

company

latitude

situation for which the pertinent good

have

been

crafted.

Centronics
__________

appears

defendant

takes, or

discretionary

The
to

be

discretion,

the

faith duty appears to

reasonableness
an adjunct

declines

authority,

or

confer on

reference

concept;

to take,

where

the

action pursuant

commercial

reasonableness

in

to
may

measure how far the defendant can go.

-13-13-

Finally, we think the town's reading

create a

highly

Here, the most

been

improbable untethered
one can say is that if

of the cases would

obligation of

care.

National Casualty had

a little more aggressive and alert, it might have saved

the town the

consequences of

explicit

obligation

National

Casualty

to

the town's own

forward

could in

some

"negligent" in this respect--a

breach of

the pleadings.
measure

its

Even

if

be described

as

point we need not decide--the

policy imposed nosuch generalduty of careon NationalCasualty.

Contracts are,
specific

steps to

commitments

are

responsibility.
imposed

after all, specific

accomplish particular results,

the

central

measure

With diffidence,

ancillary

requirements or

agreements to

obligations

of

take

and those

each

party's

the courts have implied or

(such

implied warranties) in

as

good

faith

discrete situations.

But the unlimited implication of new, free-floating duties is

a matter in which
undo

the

courts have to be very careful,

bargain struck

by the

parties.

lest they

Here,

the town

failed to perform an important, expressly stated condition of

coverage.

This is one risk that the policy did not cover.

The fourth and last

district

court erred

meaning

of

the

in

instructing

policy's

"immediately" forward
district

claim made by the town

requirement

the suit papers

court softened

the

this

jury as
that

the

to

the

insured

to the insurer.

requirement

-14-14-

is that the

considerably

The
in

explaining

that

under

New

Hampshire

law

the

term

"immediately" was not to be given its literal meaning.

Instead, the law provides that an insured
has fulfilled its duty to immediately
forward
suit papers if it used due
diligence under the circumstances of the
case in forwarding the suit papers, and
the
papers
were
forwarded
without
unnecessary
or
unreasonable
delay.
Whether the insured forwarded the suit
papers with due diligence and without
unnecessary or unreasonable delay must be
determined by considering the totality of
the surrounding facts and circumstances.
The town objected to the use of the term "due diligence"
prior

to the

district court's

judge rejected the

objection
Civ.

objection.

after the charge

P. 51

requires such

The town did

was given,
a further

preserve the point on appeal.

parties at

instructions, but

the pre-charge

not renew

even though

its

Fed. R.

objection in

order to

Here, the trial judge told the

conference that their

would be preserved without renewal

directed the

the trial

objections

of the charge and further

parties not to renew the

same objections after

the charge was given.

We

have

district

court

said that
and

Rule 51

that

cannot

be altered

"[o]bjections

cannot

forward" even where the trial judge assures

objections

raised

at

preserved.

McGrath v.
_______

the

pre-charge

by the

be carried

the parties that

conference

Spirito, 733 F.2d 967, 969

_______

will

be

(1st Cir.

1984); see also Carillo v. Westbulk, 514 F.2d 1214, 1219 (1st
___ ____ _______
________
Cir.), cert. denied,
____________

423 U.S.

1014 (1975).

In this

case,

-15-15-

however, the district court not only assured the parties that
their objections

were preserved

raise the objections again after

be

harsh, indeed, to punish

but also told

them not

the instructions.

the town for

to

It would

obeying the trial

judge.
But

on

the merits,

town's argument.

to the very question

immediate notice

is little

which, while elderly, is

directed

of what constitutes "immediate" notice.

900 (N.H.

due diligence is merely an

and unfairly emphasizes the

insured rather than

to the

phrase actually comes

Maryland Casualty Co., 51 A.

_____________________

The town objects that

seems to us

there

The "due diligence"

from a New Hampshire case

See Ward v.
___ ____

we think

the totality of

1902).

example of

conduct of the

the circumstances.

that the conduct of the insured

It

is normally the

precise

question posed

by

a requirement

that the

insured

provide immediate notice.

One
insured
law

can probably

imagine

the unusual

case where

the

did not exercise due diligence in giving notice of a

suit while

at

the same

received (e.g., from other

____

time

this notice

sources).

was

In this case,

alternative source of knowledge is alleged.

timely
no such

Further, we have

no reason to think that the jury was confused in this case by

any

hypothetical

difference

"reasonableness under

between

"due

all the circumstances."

diligence"

and

In short, as

-16-16-

to the instruction on timeliness, we

error nor prejudice.
Affirmed.
________

think there was neither

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