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Stateline Steel Erectors12/9/2003
er an insured could validly assign to the injured party his right to recover an excess judgment against his insurer even though the insured had not paid and was unable to pay the excess judgment. We rejected the rule we had adopted in 1942 that an outstanding judgment, which may never be paid, is not a legal injury. Id. at 45-46. We reasoned that our old rule requiring pecuniary loss was "based upon the fallacy that damaged credit and financial ruin are not injuries." Id. at 45. We held that "a plaintiff may maintain an action against an insurer for negligent failure to settle a case without prior payment of or proof of ability to pay the excess judgment." Id. at 46.
In Allstate, 116 N.H. at 807, we considered whether an insurance company providing excess coverage to its insured had a cause of action against the primary carrier for its negligent failure to settle. We held that the insured had assigned its right to proceed against the primary carrier to the excess insurer. Id. at 808. We rejected the primary carrier's argument that the assignment was ineffective because the insured suffered no financial loss. Id. Reaffirming Dumas, we upheld the assignment. Id.
In this case, as in Dumas and Allstate, the insured has been damaged, even if, because of the settlement agreement, the stipulated judgment was never levied against it. Stateline must still endure the adversity of litigation and might suffer diminishment of its credit rating, among other intangible harms. See Kobbeman, 574 N.W.2d at 636.
The defendants argue that Dumas and Allstate are not controlling, in part, because the excess judgment was not entered after complete litigation of the contractors' claims. Although we are mindful of the risk of collusion when an insured agrees both to a judgment in excess of its policy and to be protected from liability for that judgment, "we are reluctant to foreclose the possibility of settlement" like that entered into by Stateline and the contractors. Campione, 661 N.E.2d at 662. The settlement benefits Stateline by freeing it from liability for amounts beyond its insurance limits. It benefits the contractors because it requires Stateline to cooperate in litigation against the defendants. We believe that requiring the contractors, the assignees, to prove their assigned claims "in full reduces the risk of collusion, and justifies giving effect to the assignment." Id. at 663.
The defendants argue that Stateline was protected by a full release, not merely a covenant not to execute. Thus, they assert, even under the majority rule, Stateline had no viable cause of action to assign to the contractors. We disagree.
Contrary to the defendants' assertions, the agreement did not include a full release. Although the trial court did not reach this issue, the proper interpretation of a contract is a question of law for this court to decide. Lawyers Title Ins. Corp. v. Groff, 148 N.H. 333, 336 (2002). To interpret the agreement, we give the language the parties used its reasonable meaning, considering the circumstances and context in which it was negotiated, and reading the agreement as a whole. Id. at 336-37. Absent ambiguity, we interpret the parties' intent from the plain meaning of the agreement's language. Id. at 337.
A covenant not to sue or a covenant not to execute is distinguishable from a release. 9 R. McNamara, New Hampshire Practice, Personal Injury, Tort and Insurance Practice ยง 23.03, at 23-3 (3d ed. 2003). "Unlike a release, a covenant not to sue does not relinquish a right or claim, or extinguish a cause of action." Id. "A covenant not to sue recognizes the continuation of the obligation or liability; the party making the covenant not to sue agre
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