U.S. District Court – Motion to Dismiss – Negligence and Breach of Fiduciary Duty

In Perry v. Government Employees Insurance Co., the plaintiff sustained serious injuries as a result of a motor vehicle accident with an uninsured motorist.  All available insurance, including uninsured/underinsured coverage, was exhausted and was inadequate to compensate the plaintiff for his injuries.  The plaintiff asserted claims of negligence and breach of fiduciary duty against his insurer, arising out of the advice he received from the insurer’s employee/agent regarding his insurance coverage needs.  The insurer filed a motion to dismiss, arguing that the plaintiff failed to state a claim upon which relief can be granted. Prior decisions from the Connecticut Appellate Court have recognized that an insurer’s agent owes the insured a duty to explain his insurance coverage to him, to recommend the proper amount given his individual circumstances, and to offer that amount to him.  Accordingly, the Court found that the plaintiff’s complaint had indeed alleged facts that would support a negligence claim against the insurer, and denied the motion to dismiss as to that claim.  Regarding the claim for breach of fiduciary duty, the Court observed that historically, Connecticut courts have held as a matter of law that the relationship between an insurer and an insured is commercial in nature.  In the present case, the plaintiff cited no contrary authority suggesting that his relationship with the insurer was anything more than a commercial transaction, nor did he make allegations of a unique degree of trust and confidence between him and the insurer akin to a fiduciary or special relationship.  The allegation that the insurer’s employee/agent assured the plaintiff that she had properly advised him on the suitability and adequacy of his coverages supported a claim of negligence, but was not enough to transform the plaintiff’s commercial relationship with the insurer into a fiduciary one.  Therefore, the motion to dismiss was granted as to the claim for breach of fiduciary duty.

Superior Court – Property Loss – Recoverable Depreciation

In Milton et al v. The Public Adjuster et al, the plaintiffs submitted a claim to their homeowners insurer, Liberty Mutual Fire Insurance Company (“Liberty Mutual”) after their home sustained damages following a tornado or strong winds.  The plaintiffs commenced an action against their public adjuster, seeking an order that the services contract they had with the public adjuster was terminated, and further, and that the public adjuster was not entitled to a fee for services provided to the plaintiffs when assisting them with the processing of the property damage insurance claim.  The plaintiffs later cited in Liberty Mutual as a defendant and asserted claims for breach of contract and violation of the Connecticut Unfair Trade Practices Act and the Connecticut Unfair Insurance Practices Act.  Liberty Mutual filed a motion for summary judgment, arguing that the policy was void due to intentional misrepresentations by the plaintiffs relative to the claim, and that Liberty Mutual had already made payment in full under the policy.  Within a period of several months following the reported loss, Liberty Mutual issued multiple payments on the plaintiffs’ claim, including a payment for recoverable depreciation that was made in reliance on representations of the plaintiffs and their contractor that the roof had been replaced.  The plaintiffs contended that the payment for recoverable depreciation had erroneously included the public adjuster as a payee.  Liberty Mutual declined to issue a new check removing the public adjuster because the public adjuster did not agree to be so removed.  Nearly three years later, the plaintiffs contacted Liberty Mutual to report that there was additional damage to the dwelling.  Upon inspection, Liberty Mutual found that contrary the prior representations of the plaintiffs and their contractor, the roof had not been replaced.  Liberty Mutual then issued a letter refusing to re-issue the check for the recoverable depreciation on the basis that the plaintiffs had misrepresented the status of the repairs to the roof and thereby voided coverage under the policy.  As for Liberty Mutual’s defense based on intentional misrepresentations, the Court recognized that while there was significant evidence of representations by the plaintiffs and their contractor that could easily be interpreted as ones indicating that the repairs to the roof had been completed, the Court also noted other evidence directly refuting that such representations had been made.  Also, while Liberty Mutual largely relied on its own claim notes describing phone conversations with the plaintiffs and their contractor (which were admissible under the business records exception to the hearsay rule), the Court observed that the weight of the evidence may well have been greater had there been affidavits of the individuals directly involved in the communications.  The Court noted that the overall evidence may be insufficient for the plaintiffs to establish their claim by a preponderance of the evidence at the time of trial, but that for purposes of the motion for summary judgment, it could not be said that there was no genuine issue of material fact on the issue of intentional misrepresentations.  On the issue of whether or not Liberty Mutual had already made payment in full under the policy, the Court reviewed evidence of what amounts were paid for specific aspects of the insurance claim.  Ultimately, the Court found discrepancies between the amounts referenced in various sources as recoverable depreciation, including discrepancies within Liberty Mutual’s own documents and supporting affidavit.  Therefore, the Court could not rule that there was no genuine issue of material fact as to whether Liberty Mutual had paid in full the amounts due under the terms of its policy, particularly with respect to its obligations for replacement cost calculations and recoverable depreciation.  Liberty Mutual’s motion for summary judgment was denied in full.

Superior Court – Suit Limitations Period – COVID-19 Executive Order

In French v. Vocasek et al, the plaintiff was injured in a motor vehicle accident and filed suit against the tortfeasor motorist.  After learning that said motorist was uninsured, the plaintiff moved to amend her complaint to add her own insurance company, Allstate Fire & Casualty Insurance Company (“Allstate”) as an additional defendant.  The Allstate policy contained a suit limitations provision indicting that all claims or suits brought under the applicable coverage must be brought within three years of the date of the accident.  In the present case, the action against Allstate was commenced over three and half years from the date of the accident.  Allstate filed a motion for summary judgment on this basis.  The Court’s analysis focused on the impact of the Connecticut Governor’s Executive Order No. 7G, issued on March 19, 2020 relative to the COVID-19 pandemic and which suspended, for the duration of the public health and civil preparedness emergency, unless earlier modified or terminated by the Governor, all time requirements, statutes of limitation or other limitations relating to service of process.  In analyzing Executive Order 7G, the Court found that it suspended periods of limitations contained in private insurance contracts.  Further, the Court explained that Executive Order 7G was not a “law impairing the obligation of contracts” within the meaning of the United States Constitution, Article I, § 10.  The Court noted that the ability of the State to limit restrictions imposed by private contracts in the event of an emergency, such as a pandemic, is particularly strong when the party drafting the contract—here, an insurer—is already subject to state regulatory power.  The Court reasoned that when Allstate drafted its insurance policy contract, it did so with knowledge of the State’s regulatory power.  The issuance of Executive Order 7G was determined to be a reasonable response to the COVID-19 emergency, consistent with the State’s power to protect the health of its citizens during an emergency.  The Court therefore denied Allstate’s motion.

U.S. District Court – COVID-19 Business Losses – Virus Exclusion

In Kennedy Hodges & Associates Ltd., LLP et al v. Twin City Fire Ins. Co., the two plaintiffs were a law firm and the company that owned the real estate out of which the law firm operated.  The plaintiffs submitted an insurance claim to the defendant seeking coverage for interruption of their business arising out of government-issued orders during the COVIC-19 pandemic.  After the defendant denied coverage for the claim, the plaintiffs filed an action, purporting to represent a class of similarly situated individuals.  The defendant filed a motion for judgment on the pleadings, arguing that it was entitled to judgment as a matter of law because (1) there was no physical loss of the covered property, so the policy as a whole was inapplicable to the loss the plaintiffs sustained, (2) there was no physical loss of any other property that would trigger either Dependent Property Coverage or Civil Authority Coverage, and (3) the policy’s Virus Exclusion clearly excluded coverage for the interruption in the plaintiffs’ business caused by the COVID-19 pandemic.  In opposition, the plaintiffs argued that (1) the term “physical loss” should be construed to include the loss of use of a property, such that the plaintiffs’ inability to conduct business at their office while the COVID-19 orders were in effect gave rise to a valid claim against the policy, (2) the defendant failed to carry its burden of showing that the Virus Exclusion applied, and (3) even if the Virus Exclusion applied, a jury must decide whether regulatory estoppel should bar enforcement of the Virus Exclusion.  The Court agreed with the defendant on all points.  The Court rejected the plaintiff’s argument that their losses were not caused by a virus, but by the COVID-19 orders.  The Court also disagreed with the plaintiffs’ contention that the Virus Exclusion was too broad, or at least that the exclusion was ambiguous such that it should be read in a manner more favorable to the plaintiffs.  Further, the Court rejected the argument that the policy’s anti-concurrent causation clause was unenforceable because it contravened the plaintiffs’ reasonable expectations of coverage.  Finally, the Plaintiffs argued that the doctrine of regulatory estoppel should prohibit the defendant’s position based on statements made by insurance industry trade groups in 2006 when lobbying regulators to approve virus exclusions such as the one at issue in this case.  Although the doctrine is accepted by some courts, Connecticut courts have not signaled unqualified approval of the doctrine, particularly where policy language is unambiguous.  However, the Court found that even if regulatory estoppel were accepted, it would not be applicable to the facts of this case because the statements made by insurance industry trade groups were consistent with the present application of virus exclusions.  No misrepresentation was apparent.  The Court granted the defendant’s motion for judgment on the pleadings.