United States District Court, D. Vermont
OPINION AND ORDER ON MOTIONS FOR PARTIAL SUMMARY
JUDGMENT (DOCS. 36, 47)
Geoffrey W. Crawford, Judge United States District Court
case begins in the forests of Vermont's Northeast
Kingdom. Plum Creek Maine Timberlands, LLC ("Plum
Creek"), which owned thousands of acres of forestland,
hired WeLog, Inc., a logging company based in New Hampshire,
to perform logging on several stands of trees on its
property. During inspections that occurred while the
logging was taking place, the State of Vermont informed Plum
Creek that three stands had been over-logged and, as a
consequence, much of Plum Creek's land was no longer
eligible for a current use property tax program. Plum Creek
appealed the administrative determinations to Vermont
Superior Court, which ruled in its favor. The State appealed
to the Vermont Supreme Court which, in September 2016,
reversed the Superior Court's decision and remanded the
case. Plum Creek Maine Timberlands, LLC v. Vt. Dep't
of Forests, Parks, and Recreation, 2016 VT 103, 155 A.3d
694 [hereinafter Plum Creek v. Vermont]. In the
meantime, Plum Creek sued WeLog, alleging that WeLog is
responsible for the over-logging. That case remains pending
in this court. Plum Creek Main Marketing, Inc. v. WeLog,
Inc.), No. 5:16-cv-312 (D. Vt.) [hereinafter Plum
Creek v. WeLog}. Acadia Insurance Company, WeLog's
insurer, has instituted this suit against WeLog, seeking a
declaratory judgment that it is not responsible for defending
or indemnifying WeLog in the lawsuit brought by Plum Creek.
now moves for partial summary judgment, arguing that the laws
of New Hampshire apply in construing the insurance contract
between Acadia and WeLog. (Doc. 36.) Acadia cross-moves for
partial summary judgment, arguing that the laws of Vermont
apply instead. (Doc. 47.) The court heard argument on April
Underlying Dispute and Procedural Background
court draws the following facts from the first amended
complaint (Doc. 61) and, where appropriate, the Vermont
Supreme Court's decision in Plum Creek v.
2007, Plum Creek's predecessor, the Essex Timber Company,
enrolled the land in the current use tax program, known as
the "Use Value Appraisal Program" ("UVA
Program"), pursuant to 32 V.S.A. § 3751 et seq.
Plum Creek v. Vermont, 2016 VT 103 ¶4. (Doc. 61
¶ 12.)Enrollment in this program enables land
owners "who practice long term forest management to have
their land appraised for property taxes based on its value or
use for forestry, rather than its market value, "
resulting in a substantially lower property tax assessment.
(Id. ¶ 14.) If land enrolled in the program is
improperly haivested or developed, the state assesses a
land-use change tax and excludes the entire parcel from
eligibility for the UVA Program for five years, significantly
increasing the owner's property tax liability.
(Id. ¶ 15.)
Creek entered into a logging contract with WeLog in November
2009 and logging commenced shortly thereafter. (Doc. 61
¶ 17.) After several site visits by state and county
foresters in early 2010, the county forester issued an
"adverse-inspection report" identifying violations
of the forest management plan in the three stands of trees in
question. Plum Creek v. Vermont, 2016 VT 103
¶¶ 8-9. The Vermont Department of Forests, Parks,
and Recreation ("FPR") then informed the Division
of Property Valuation and Review ("PVR") (within
the Vermont Department of Taxes) that Plum Creek's
property should "be removed from [the UVA Program] for
harvesting contrary to the [forest] management plan."
Id. ¶ 11. In July 2010, the entire 56, 604-acre
parcel was removed from the UVA Program and the state
assessed a $7, 860.80 land-use change tax against Plum
Creek. 2016 VT 103 ¶ 11. The ineligibility
of the parcel for the UVA Program for five years will
increase Plum Creek's yearly property tax assessment by $
191, 000. (Id. ¶21.) The adverse-inspection
report and the removal of the parcel from the UVA program
were upheld in administrative appeals by both FPR and PVR.
Id. ¶ 15.
Creek sought court review in Vermont Superior Court.
Id. ¶ 16. The Superior Court concluded that FPR
had applied an inappropriate method of measuring
"residual basal area"-"the amount of tree
stock left after cutting"-and that the
adverse-inspection report was therefore not justified.
Id. ¶¶ 6, 19. In September 2016, the
Vermont Supreme Court reversed and remanded. Id.
¶ 47. It concluded that FPR's method of measuring
residual basal area was appropriate and reinstated the
adverse-inspection report. Id. ¶¶ 35, 47.
It remanded for further proceedings to address
"questions raised in Plum Creek's appeal of the PVR
Director's decision removing [the] land from the UVA
program and leveling a tax assessment against Plum
Creek." Id. ¶ 47.
these proceedings were ongoing, Plum Creek sued WeLog in
state court for breach of contract. (Doc. 61 ¶ 22; Doc.
61-1.) Plum Creek subsequently dismissed that suit without
prejudice while the State's appeal in the Vermont Supreme
Court was pending. (Doc. 61 ¶ 31.) In November 2016,
after the Supreme Court ruled, Plum Creek refiled its suit
against WeLog, this time in federal court. Plum Creek v.
WeLog, No. 5:16-cv-312 (D. Vt).
lawsuit, Acadia seeks a declaratory judgment that WeLog's
insurance policy with Acadia "provides no liability
coverage to WeLog, Inc. for the breach of contract claim
asserted against it by Plum Creek" and that "Acadia
has no duty to defend or indemnify WeLog, Inc. for the breach
of contract claim asserted against it by Plum Creek."
(Doc. 61 at 10.) It also seeks a declaratory judgment that
Vermont law applies in the coverage dispute. (Id.)
and WeLog have both filed motions for partial summary
judgment, contesting whether Vermont or New Hampshire law
should apply in interpreting the insurance policy. According
to the parties, the choice of law is significant because
under New Hampshire law, an insurer must seek a declaratory
judgment that it has no duty to defend or indemnify its
insured within six months of the filing of the suit which
gives rise to the question, N.H. Rev. Stat. §
491:22(III), while Vermont law imposes no such
requirement. (Doc. 54 at 2.)
Facts at Summary Judgment
facts at summary judgment are almost entirely undisputed.
WeLog introduces the following uncontested facts: WeLog is a
New Hampshire corporation with its principal place of
business in New Hampshire; Acadia issued the insurance policy
from its office in New Hampshire; and WeLog purchased the
policy through an insurance broker located in New Hampshire.
(Doc. 36-1 ¶¶ 1, 4, 5.) The insurance policy does
not include a choice-of-law provision, but its policy number
does contain the letters "NH" which establishes
that the policy was issued by the New Hampshire office.
(Id. ¶¶ 3, 6.) Finally, it asserts that
WeLog "had a reasonable expectation New Hampshire law
would govern the relationship with Acadia Insurance."
(Id. ¶ 7.) Acadia disputes this last fact,
arguing that the facts it has asserted in support of its
motion show otherwise. (Doc. 46-2.)
support of its motion, Acadia introduces additional facts,
all of which are also undisputed unless noted. WeLog has been
registered to do business in Vermont since 1991 and in 2009
through 2010 had a registered agent for service of process in
Barre, Vermont. (Doc. 46-1 ¶¶ 5-6.) WeLog
"grosses approximately $2, 000, 000 in annual revenue
and carries about 10 employees" harvesting and hauling
timber and performing "construction work for roads and
trails and some house lots." (Id. ¶¶
8-10.) In Vermont, WeLog performs both "small jobs"
and "winter jobs, " which take an entire season to
complete. (Id. ¶ 18.) In 2008-2009, $39, 911 of
WeLog's payroll "was attributable to its logging
operations" in Vermont. (Id. ¶¶
13-14.) In 2009-2010, $39, 147 was attributable to logging
work in Vermont and an additional $8, 050 to street and road
work in the state. (Id. ¶¶ 15-16.)
regard to the insurance policy itself, Acadia states that the
policy "covered WeLog, Inc.'s business activities in
Massachusetts, New York, Vermont and New Hampshire, "
and that the policy "contemplated, assessed a premium,
and covered  risk exposure for logging practices in the
State of Vermont." (Id. ¶¶ 35, 38.)
The insurance policy, which assessed "premium
bases" calculated on the basis of payroll data for
different insured activities, assessed a premium basis of
$170, 814 for logging and lumbering operations in New
Hampshire, $153, 347 for road construction in New Hampshire,
$26, 800 for forestry service products in New Hampshire, $86,
306 for maintenance or storage of equipment or material in
New Hampshire, and $106, 073 for subcontracted work "in
connection with construction, reconstruction, [or] repair in
New Hampshire." (Doc. 36-2 at 47-48; Doc. 46-4 at 1.)
The listed premium basis for logging and lumbering in
Vermont, the only category explicitly listed for that state,
is "if any." (Doc. 36-2 at 48.) And finally, when
Malcom Washburn, president of WeLog, received the policy, he
did not read it and likely just placed it in a desk drawer,
though he "understood that the policy covered risks in
the State of Vermont." (Doc. 46-1 ¶¶ 33,
also introduces undisputed facts concerning WeLog's
logging on Plum Creek's land. WeLog worked on Plum
Creek's land in Vermont from November 2009 through
February 2010. (Doc. 46-1 ¶¶ 19-20.) It logged on
approximately 115-120 acres. (Id. ¶20.) In
November, two WeLog employees began work on the project, but
by January, a "full crew of eight" was working on
it. (Id. ¶¶ 21-22.) Mr. Washburn, was
"on site in Vermont almost every day."
(Id. ¶ 22.) At the time of the project, Mr.
Washburn knew that the land was enrolled in the UVA Program,
that WeLog had to "conduct its logging operations in
accordance with all applicable Vermont laws."
(Id. ¶¶ 25-26.) He was familiar with
Vermont forestry, logging, and water quality laws, and kept a
small reference book in his pocket. (Id.