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O'NEILL v. YIELD HOUSE INC.

May 8, 1997

JOHN O'NEILL, Plaintiff, against YIELD HOUSE INC. and STANDEX INTERNATIONAL CORPORATION, Defendants. YIELD HOUSE, INC., Third-Party Plaintiff, -against- CRAFTWOOD PLUS, INC., Third-Party Defendant.


The opinion of the court was delivered by: PARKER

 BARRINGTON D. PARKER, JR., U.S.D.J.

 This products liability action was tried from November 10 to November 22, 1994. The jury returned a verdict against defendant Yield House, Inc., awarding plaintiff John O'Neill compensatory and punitive damages. At the time of the trial, Yield House was insolvent and had filed for bankruptcy pursuant to Chapter 11 of the Bankruptcy Code. See 11 U.S.C. ยง 110 et seq. (1993).

 On September 20, 1995, O'Neill moved, pursuant to Fed. R. Civ. P. 69(a), for a writ of execution against St. Paul Fire and Marine Insurance Co. ("St. Paul"), Yield House's insurance carrier, in connection with its attempts to recover the damages awarded by the jury. Thereafter, St. Paul issued drafts to cover compensatory damages and costs, but not punitive damages.

 On September 9, 1995, this Court, applying New York choice of law principles, denied plaintiff's motion on the ground that New York's public policy prohibited indemnification for punitive damage awards. Our Court of Appeals subsequently vacated the September 9, 1995 order and remanded the matter to receive evidence and make findings on the nature and status of Yield House's insolvency and to consider the motion in light of that new evidence. O'Neill v. Yield House, Inc., 1996 U.S. App. LEXIS 26339, No. 95-9008, slip op. 1 (2d Cir. Oct. 8, 1996).

 FACTS

 On May 19, 1990, John O'Neill fractured his tibial plateau when a stepstool he had purchased through a Yield House catalogue collapsed from underneath him. The catalogue had described the product as "ruggedly built" and "solidly made." As a result of the accident, O'Neill was hospitalized for several months and sustained permanent injuries.

 After a trial before a jury, on February 28, 1995, judgment was entered in favor of plaintiff in the amount of $ 460,750 -- $ 210,750 in compensatory damages and $ 250,000 in punitive damages.

 In February 1995, plaintiff John O'Neill died, and on April 27, 1995, plaintiff's son, Shane O'Neill was appointed Administrator of the estate of John O'Neill. On April 1, 1997, the Court granted plaintiff's unopposed motion to substitute Shane O'Neill.

 On September 20, 1995, Shane O'Neill moved for a writ of execution, pursuant to Fed. R. Civ. P. 69(a), against St. Paul for the recovery of damages awarded in the underlying personal injury action. St. Paul had sold to Yield House a general liability protection insurance policy ("the policy"), effective March 16, 1990 to March 16, 1991. The policy obligated St. Paul to indemnify Yield House for sums that it might become legally obligated to pay as a result of claims arising from Yield House's negligence. The policy did not explicitly exclude coverage for punitive damages. It did, however, exclude coverage for intentional bodily injury or property damage. St. Paul is a Minnesota corporation, with its principal place of business in St. Paul, Minnesota. Yield House was a New Hampshire corporation with its principal place of business in North Conway, New Hampshire. The insurance policy was negotiated by a New Hampshire broker and was delivered in New Hampshire. *fn1"

 On April 1, 1997, the Court heard oral argument on the matter during which additional facts were adduced. In February 1991, before the trial but after the action was commenced, Yield House filed for bankruptcy pursuant to Chapter 11. In January 1992, Yield House filed a Second Amended Plan of Reorganization which contemplated a reorganization of the company and a sale of its assets. Pursuant to the reorganization plan, Yield House sold substantially all of its assets and ceased operations. In July 1992, Yield House was discharged from bankruptcy. According to Mark J. Friedman, Esq., who served as bankruptcy counsel to Yield House during the Chapter 11 proceedings, no assets remain in the bankruptcy estate and Yield House has no assets from which to satisfy the punitive damages award.

 DISCUSSION

 The threshold question is what law applies. St. Paul urges that New York law should apply, while plaintiff maintains that New Hampshire law governs. The difference between the law of these two states is of considerable significance because New York law clearly precludes indemnification for punitive damages, see Zurich, 618 N.Y.S.2d at 613, whereas New Hampshire law apparently permits such indemnification. See American Home Assurance Co. v. Fish, 122 N.H. 711, 451 A.2d 358, 360 (N.H. 1982); see also Weeks v. St. Paul Fire & Marine Ins. Co., 140 N.H. 641, 673 A.2d 772, 775 (N.H. 1996)("Even assuming, without deciding that the claims are ...


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