Authored by: Joe Ciollo

Appellate Court – Duty to Defend – Property Damage

In Westchester Modular Homes of Fairfield County, Inc. v. Arbella Protection Insurance Company, the plaintiff Westchester Modular Homes of Fairfield County, Inc. (“Westchester”) appealed from the summary judgment rendered in favor of the defendant Arbella.  On appeal, Westchester claimed that the trial court improperly concluded that, pursuant to a commercial general liability policy, Arbella had no duty to defend Westchester against a counterclaim filed by a third party in an underlying action arising out of a contract for the construction of a modular home.  The underlying action involved disputes that arose between Westchester and the defendant homeowners.  Westchester has filed a mechanic’s lien on the subject property and then commenced an action to foreclose on the lien.  The homeowners filed a counterclaim against Westchester and alleged a variety of deficiencies in Westchester’s work.  The evidence in the underlying cases demonstrated that certain work done by Westchester could potentially lead to infiltration of water into the home.  The underlying action was resolved through arbitration and an award in Westchester’s favor.  In the present action, Westchester argued that it incurred in excess of $500,000 in the form of defense costs as result of Arbella’s refusal to defend against the homeowners’ counterclaim.  Arbella filed a motion for summary judgment and argued that it had no duty to defend.  The trial court determined that the pleadings in the underlying litigation did not allege property damage.  In addition, as to the extrinsic documents submitted to Arbella by Westchester, the trial court determined that such evidence established only the existence of possible defective work that could lead to future property damage if not remedied but that it did not demonstrate the existence of current property damage.  The Appellate Court agreed with the trial court that the homeowner’s counterclaim alleged construction defects and did not allege damage that the defects caused to other, nondefective property.  Regarding the significance of extrinsic evidence offered by Westchester, the Appellate Court acknowledged that damage to nondefective property in the form of rot or mold caused by water intrusion would be property damage within the terms of the policy language.  However, the specific question addressed by the Appellate Court was whether the extrinsic evidence suggesting that water was being directed between two foam insulation layers and collecting in the soffit areas constituted property damage.  In other words, the issue was whether the notification to Arbella of the mere presence of water was sufficient to trigger a duty to defend.  The Appellate Court found that Westchester did not present any case law holding that the presence of water, in the absence of actual damage, amounted to covered physical damage.  The Appellate Court concluded that the notification of the mere presence of water, without some corresponding physical damage, did not provide Arbella with actual knowledge of facts establishing a reasonable possibility of coverage.  Accordingly, the Appellate Court  held that Arbella did not have a duty to defend Westchester in the underlying action, and affirmed the entry of summary judgment in favor of Arbella.

Appellate Court – Underinsured Motorist Benefits – Liability Coverage Limits

In Bouchard et al v. Wheeler et al, defendant Safeco Insurance Company (“Safeco”) insured the plaintiffs’ vehicle for Underinsured Motorist (“UIM”) coverage with limits of $100,000 / $300,000 per person / accident.  Three individuals claimed personal injuries after a motor vehicle accident caused by the tortfeasor, whose vehicle was insured by State Farm Mutual Insurance Company (“State Farm”) which provided liability coverage of $100,000 / $300,000 per person / accident.  Although the trial court acknowledged the precedent of the Connecticut Supreme Court holding that a motor vehicle is not underinsured where the liability limits in the tortfeasor’s policy are equal to or greater than the underinsured benefits in the claimant’s policy, the trial court concluded that a 2014 amendment to the UIM statute, C.G.S. § 38a-336(b) legislatively overruled that Supreme Court precedent, holding that “the comparison must be between the amount of liability insurance actually available to the plaintiff under the tortfeasor’s liability insurance policy, after other claimants under that policy are paid, with the amount of the plaintiff’s underinsured motorist coverage.” (Emphasis in original.)  After the trial court denied Safeco’s motion for summary judgment, the parties entered into a stipulated judgment that reserved Safeco’s right to appeal the propriety of the court’s denial of the motion.  On appeal, the Appellate Court undertook a comprehensive review of past decisions of both the Appellate Court and Supreme Court, and also analyzed the legislative history of the amendment to C.G.S. § 38a-336(b).  Following this review and analysis, the Appellate Court conclude that the legislature, in enacting the amendment, did not intend to alter the definition of an “underinsured motor vehicle” found in C.G.S. § 38a-336(e) or to overrule the precedent of the Supreme Court.  The definition states: “For the purposes of this section, an ‘underinsured motor vehicle’ means a motor vehicle with respect to which the sum of the limits of liability under all bodily injury liability bonds and insurance policies applicable at the time of the accident is less than the applicable limits of liability under the uninsured motorist portion of the policy against which claim is made under subsection (b) of this section.”  According to the Appellate Court, nothing in the legislative history suggested that the legislature intended to alter that definition.  The Appellate Court noted that if the legislature wanted to amend that statutory definition, it certainly knew how to do so.  The Appellate Court observed that there may be cases in which an inequity results from the application of Connecticut’s UIM laws when an accident involves multiple claimants.  However, as the Supreme Court has previously noted, redress from any such unfairness must be sought from the legislature, not from the courts.  The Appellate Court reversed the judgment of the trial court and remanded the case with direction to enter judgment for Safeco.

Appellate Court – Connecticut Unauthorized Insurers Act

In Travinski et al v. General Insurance Company of America et al, the plaintiff homeowners discovered that the French doors leading to the back porch of their home were not closing properly and they hired a contractor who discovered that the floor joists under the doors were rotted and moldy. The plaintiffs filed an insurance claim under their homeowners insurance policy, which was denied following a claim investigation on the basis that the terms of the policy did not cover loss due to rot caused by water damage.  The plaintiffs then filed suit alleging breach of contract and various extracontractual claims.  The defendants, General Insurance Company of America, Safeco Corporation, Liberty Mutual Insurance Company, and Liberty Mutual Holding Company, Inc., filed a motion for summary judgment as to all counts of the complaint, arguing that the action was time barred, that the policy did not provide coverage for the plaintiffs’ insurance claim, and that the extracontractual claims were unfounded.  The trial court granted the defendants’ motion on all counts of the complaint.  On appeal, the plaintiffs did not challenge the trial court’s determination that their breach of contract claim was barred by the two-year suit limitation provision in the policy.  Rather, the plaintiffs contended that the trial court improperly determined that no genuine issue of material fact existed that the policy that was the subject of the breach of contract claim was the homeowners insurance policy that was issued to the plaintiffs by General Insurance Company of America and appended to the defendants’ motion for summary judgment.  The plaintiffs argued that they never dealt with General Insurance Company of America and that all of their dealings were with Safeco Insurance.  The plaintiffs alleged that Safeco Corporation, Liberty Mutual Insurance Company, and Liberty Mutual Holding Company, Inc., conducted an unlicensed insurance business as Safeco Insurance in the state of Connecticut in violation of the Connecticut Unauthorized Insurers Act (“CUIA”).  The Appellate Court found that the trial court properly determined that no genuine issue of material fact existed that the plaintiffs’ policy was issued by General Insurance Company of America, which is a licensed insurer in Connecticut.  The Appellate Court also found that the trial court properly determined that no genuine issue of material fact existed that none of the defendants named in CUIA count of the complaint issued the policy.  The Appellate Court affirmed the entry of summary judgment for the defendants.