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THE SUPREME COURT OF NEW HAMPSHIRE
___________________________
Merrimack
No. 95-659
CONCORD HOSPITAL
v.
NEW HAMPSHIRE MEDICAL MALPRACTICE JOINT UNDERWRITING ASSOCIATION
June 5, 1997
Upton, Sanders & Smith, of Concord (Russell F. Hilliard and David P. Slawsky on the brief, and Mr. Hilliard orally), for the plaintiff.
Morrison, Mahoney & Miller, of Boston, Massachusetts (Michael F. Aylward on the brief and orally), for the defendant.
THAYER, J. The defendant, New Hampshire Medical Malpractice Joint Underwriting Association (JUA), appeals the Superior Court's (Smukler, J.) order requiring JUA to pay the plaintiff, Concord Hospital (hospital), half of the defense costs and settlement amounts associated with certain medical malpractice claims commenced against the hospital. Because we reverse this order, we need not address the hospital's cross-appeal.
The superior court found the following facts. JUA, one of the hospital's liability insurance carriers, declined to defend and indemnify the hospital in three medical malpractice actions. Consequently, the hospital received coverage from its second liability insurance carrier, Conn Med Mutual (Conn Med). Conn Med defended the actions and indemnified the hospital for certain settlements. The hospital incurred a total of $50,000 in deductibles for two of the lawsuits pursuant to its policy with Conn Med.
The hospital then sought a declaratory judgment establishing that the hospital's policy with JUA covered the defense of these lawsuits. Although the superior court determined that the liability policies did not cover the expenses associated with defending the lawsuits, the hospital appealed to this court, and we reversed. Concord Hosp. v. N.H. Medical Malpractice Joint Underwriting Assoc., 137 N.H. 680, 687, 633 A.2d 1384, 1388 (1993). Consequently, JUA reimbursed the hospital $50,000 for the deductibles the hospital had paid.
Thereafter, the hospital sought to recover from JUA the full amount of litigation expenses, attorney's fees, and settlement amounts incurred in association with the malpractice claims. The hospital joined Conn Med as a party plaintiff, but the superior court concluded that Conn Med did not assert any subrogation rights against JUA. The superior court determined that JUA was contractually obligated to the hospital for one half of the defense costs and settlement amounts, and subsequently entered judgment for the hospital for $375,761.42 in addition to interest, fees, and costs.
On appeal, JUA asserts that the trial court erred in awarding the hospital the defense costs and settlement amounts because: (1) the hospital suffered no damages as a consequence of JUA's refusal to defend; (2) the hospital does not have standing to sue JUA as any claim of the hospital vested in Conn Med pursuant to the subrogation clause in the Conn Med policy; and (3) it would be fundamentally unfair to allow the hospital to recover amounts other than the deductibles, as only the deductibles were sought by the hospital in the hospital's original declaratory judgment action.
This case essentially involves a hospital insured by two carriers, each of which owed the hospital a duty of defense and indemnity. One carrier, JUA, breached this obligation, while the other carrier, Conn Med, fulfilled its contractual obligation. The hospital is now attempting to collect the defense costs and the settlement amounts for the claims against the hospital incurred by Conn Med.
The purpose of awarding compensatory damages in breach of contract actions, including insurance contracts, is to place the plaintiff in the position the plaintiff would have occupied absent a breach. A.B.C. Builders v. American Mut. Ins. Co., 139 N.H. 745, 751, 661 A.2d 1187, 1191-92 (1995). When an insurer breaches its duty to defend, the insurer must reimburse the insured for the costs incurred by the insured in defending the claim. Id., 661 A.2d at 1192. Likewise, when an insurer breaches its duty to indemnify, the insurer generally must reimburse the insured for the amount the insured paid to the claimant, subject to the insurance policy's provisions. See A. Windt, Insurance Claims & Disputes