LP v. Vigilant Insurance Co. (2011)

MEMORANDUM OF DECISION RE MOTIONS FOR SUMMARY JUDGMENT (143.00 in CV 08 5006610 and 123.00 in 09 5012672)

I. Background

In these two actions which are consolidated for trial, the plaintiff, Seven Oaks Partners, L.P. (“Seven Oaks”) in its amended complaints claims it was an insured party on a homeowners insurance policy covering a dwelling at 23 Meeting House Road in Greenwich, Connecticut.   The policy was issued to Cynthia Licata, the owner of the dwelling, and Seven Oaks was insured in its capacity as holder of a mortgage on the property.

On December 23, 2004 pipes in the dwelling froze and burst causing damage to the structure.   Subsequently, Seven Oaks foreclosed on the property and became the owner thereof.   Seven Oaks has sued Vigilant Insurance Company (“Vigilant”) claiming Vigilant's payment under the policy is inadequate.   Previously counts in the amended complaints alleging claims pursuant to the Connecticut Unfair Trade Practices Act, General Statutes §§ 42–110(a) et seq.  (CUTPA) and the Connecticut Unfair Insurance Practices Act, General Statutes §§ 38a–816 et seq.  (CUIPA) were stricken, but the plaintiff's claims for breach of contract and breach of the implied covenant of good faith and fair dealing remain.

Vigilant has now moved for summary judgment in both cases dismissing the remaining claims in the amended complaints, and Seven Oaks has opposed the motions.   Since the amended complaints, the motions and opposing papers are virtually identical, the court will rule on the motions in both cases in this memorandum of decision, an original of which will be filed in both cases.

II. Scope of Review

Practice Book § 17–49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.  “In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party.”  Appleton v. Board of Education, 254 Conn. 205, 209 (2000).   Summary judgment “is appropriate only if a fair and reasonable person could conclude only one way.”  Miller v. United Technologies Corp., 233 Conn. 732, 751 (1985).  “The party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under applicable principles of substantive law, entitle him to judgment as a matter of law.”  Appleton v. Board of Education, supra, 254 Conn. 209.  “A material fact has been defined adequately and simply as a fact which will make a difference in the result of the case.”  (Internal quotation marks omitted.)   United Oil Co. v. Urban Development Commission, 158 Conn. 364, 379 (1969).   The trial court, in the context of summary judgment motion, may not decide issues of material fact, but only determine whether such genuine issues exist.  Nolan v. Borkowski, 206 Conn. 495, 500 (1988).

“Although the party seeking summary judgment has the burden of showing the nonexistence of any material fact [question] ․ a party opposing summary judgment must substantiate its adverse claim by showing that there is a genuine issue of material fact together with the evidence disclosing the existence of such an issue.   It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue.”  Maffucci v. Royal Park Ltd. Partnership, 243 Conn. 552, 554 (1998).  “[T]he party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of genuine issue of material fact.”  Appleton v. Board of Education, supra, 254 Conn. 209.

III. Discussion

The memoranda, affidavits and arguments supporting and opposing summary judgment in these cases generally are focused on three distinct issues.   First, whether Seven Oaks' demand for additional insurance payments is properly based on the condition of the property immediately after the covered incident occurred on December 24, 2004 or whether it includes damages to the dwelling arising in the ensuing years when it was uninhabited.   Second, whether Seven Oaks' law suits are barred by the contractual limitations period in the insurance policy, and third, whether sufficient evidence exists to support the claim of bad faith in connection with the claims process.

A. Whether there are material facts at issue concerning the amount of loss payable under the policy.

The Vigilant policy calls for payment of the reconstruction cost of the property “at the time of loss.”   Vigilant contends that Seven Oaks can offer no evidence concerning the extent of the loss as of the time the water leaks occurred in late 2004.   Vigilant observes that all the individuals identified by Seven Oaks to provide evidence as to the extent of the December 2004 loss did not inspect the property until years later and their evidence effectively includes damages and deterioration which occurred after 2004 during the ensuing years of neglect, and therefore is not pertinent to the cases.

It is not disputed that Vigilant has paid $573,029.29 to Seven Oaks on its claim.   This amount is purportedly based on its appraisal of the loss which Vigilant correctly states is based on the cost to repair or rebuild the property as it stood the day after the burst pipes occurred.   Seven Oaks contends, however, that it is owed considerably more based on the appraisals of three individuals:  Messrs.   Radman, Krysicki and Ruspini.

Vigilant provides significant portions of these three individual's deposition transcripts to support its argument that Seven Oaks has no evidence to support its higher claim.   In his deposition Nikola Radman testified he first visited the subject property in 2009 and that he was not qualified to give an opinion as to its condition in December 2004, nor an opinion as to the cost of reconstruction after the loss occurred in December 2004 and his opinion was based on the cost of replacement of the property in January 2009.   Laurie Affidavit, October 15, 2010, Exhibit 10 (Radman transcript) 28, 34–35.   Similarly, Janusz Krysicki testified he had no knowledge as to the water damages that occurred in December 2004, had no opinion as to the cost to repair or the extent of the loss in 2004 and that his opinion was based only on what he saw during his visit to the property in June 2010.  Id., Exhibit 12 (Krysicki transcript) 16, 30–31.

Finally, Carl Ruspini was deposed by Vigilant on August 18, 2010.   Ruspini is a licensed structural engineer who inspected the premises in June 2010.  Id. Exhibit 13 (Ruspini transcript) 7. He did not inspect the property in 2004 or 2005 and said he had no knowledge about extent of damages to the house in the period 2004–2006.  Id., 14, 24, 35.   On cross-examination by counsel for Seven Oaks Ruspini said the damage he noted was consistent with damage caused by ruptured piping.  Id. 42.   While there was also damage consistent with the house being vacant for a period of years, such as mold, the initial event was a massive water leak and that other damage was secondary to the initial event which had an immediate effect on electrical systems, heating, wall systems and insulation Id., 43–46.

After a careful review of this close question, the court determines that while the evidence of Ruspini is not detailed it does present a sufficient evidentiary basis to require a jury to consider what evidence exists as to the extent of the water damage that occurred in December 2004, even though Ruspini did not have personal knowledge of the extent of the water leak event at the time it occurred.

B. Whether Seven Oaks' suit is barred by the contractual limitations period in the policy.

The policy in question contained the following provision:

You [policy holder, or insured] also agree to bring any action against us [Vigilant] within one year after a loss occurs, but not until after 30 days after proof of loss has been filed and the amount of loss has been determined.

Vigilant contends that Seven Oaks effectively did nothing for a lengthy period of time after it learned of the burst pipes.   Specifically it points out that in October 2005 Seven Oaks asked for an extension of time to file a suit and to file a proof of loss, then filed a proof of claim on October 26, 2005 with no claimed damages, the value of its claim being noted as “TBD” (to be determined).   Sorge Affidavit, October 15, 2010, Exhibit 5. On November 3, 2005, Vigilant responded to Seven Oaks' request for an extension of time to file suit by stating “it would extend the contractual suit limitation period for a period of sixty days from the date which ․ Vigilant ․ renders a decision regarding your client's claim ․” Laurie Affidavit, December 16, 2010, Exhibit 8.

On January 10, 2006 Vigilant wrote Seven Oaks that the policy provided “coverage to Seven Oaks for this loss.”   Sorge Affidavit, Exhibit 6. However, Vigilant went on to state there was an open question whether Seven Oaks had an insurable interest in the premises at 123[sic] Meeting House Road and therefore Vigilant was not obligated “at this time” to make any payments to Seven Oaks. Id. There was no mention of what amount of loss, if any, had been determined.   It is Vigilant's position that this letter was a determination and Seven Oaks had sixty days from that letter (or its receipt) to commence suit.

Seven Oaks counters that no determination of the amount of loss was made at that time and such did not occur until February 12, 2009 when Vigilant wrote Seven Oaks that its concern about the validity of Seven Oaks' mortgage and any doubts about Seven Oaks' insurable interest had been resolved and sent Seven Oaks a check for $573,209.29 in settlement of all claims being based on the reconstruction cost of the property less depreciation.   The letter invited Seven Oaks to provide any further information that might impact the settlement payment.   Chodos Affidavit, November 30, 2010, Exhibit 7.

The interpretation of a contract of insurance is a matter of law.  Wentland v. American Equity Insurance Co., 267 Conn. 592, 600.  “The interpretation of an insurance policy is based on the intent of the parties, that is the coverage that the insured expected to receive coupled with the coverage that the insurer expected to provide, as expressed by the language of the entire policy ․ The words of the policy are given their natural and ordinary meaning, and any ambiguity is resolved in favor of the insured.”  Id., 600–01 (citations omitted).   While there is merit to both parties' positions (in fact, Seven Oaks appears to have done very little for several years to value its claim) the court determines that the January 2006 letter from Vigilant did not determine “the amount of loss” suffered by Seven Oaks;  in fact, the letter did not contain any discussion of amounts.   Rather, that letter discussed that insurance coverage would be afforded and then added a rather substantial and lengthy caveat to that position based on perceived issues concerning Seven Oaks' insurable interest.   On the other hand, the February 2009 letter did in fact determine the amount of loss in Vigilant's eyes and went to some length in discussing how the figure was arrived at.   Therefore the court rules that the contractual limitations period as set forth in the policy does not bar these lawsuits.   While the court determines the policy language requires this result, practical policy considerations also support the same result.   In January 2006 there is no evidence that Vigilant had made any progress computing the loss.   In this litigious age it is not advisable to force a party to sue his or her insurance carrier before the carrier has administratively determined what it believes is the appropriate figure.

C. Whether there is bad faith to support the second count.

Seven Oaks contends that it was a breach of the covenant of good faith and fair dealing by Vigilant not to pay the full amount allegedly due under the policy, to delay processing the claim because of unsubstantiated doubts about whether Seven Oaks had an insurable interest, and concealing the existence of the claim.   The first element of the claimed bad faith is spurious.   Seven Oaks filed a proof of claim without putting a number on its claimed damages.   The fact that Vigilant placed a value on the claim that did not satisfy Seven Oaks when Seven Oaks did not put a value on its own claim until 2010 is not, without more, evidence of bad faith.

Undoubtedly there was a delay in processing the insurance claim.   But the evidence before the court shows the delay was more the result of others' actions than any mischief or malice on the part of Vigilant.   The 23 Meeting Place property was the subject of a foreclosure action commenced in 2002.   One of the defendants in that action was Cynthia Licata.   Summary judgment on the issue of liability was granted the foreclosing plaintiff, Sovereign Bank, which subsequently assigned the mortgage to Seven Oaks in 2003.   After the assignment, Cynthia Licata filed counterclaims and special defenses against Seven Oaks and its claims, one of which the Superior Court characterized as “accord and satisfaction.”   Following trial, Cynthia Licata appealed the judgment of foreclosure and filed a preliminary statement of issues with the Appellate Court which included the issue of whether Seven Oaks had proved ownership of the promissory note and mortgage.   Laurie Affidavit, October 15, 2010, Exhibit 6. The fact that Licata contested Seven Oak's ownership of the mortgage and claimed it was not enforceable by reason of accord and satisfaction led Vigilant to point out the issue surrounding Seven Oaks' insurable interest in the 23 Meeting Place property.   The Licata appeal was dismissed in November 2008.

Seven Oaks complained to the Connecticut Insurance Department about Vigilant's delay in paying the claim, but the Department found Vigilant's position to be correct in February 2006.   Sorge Affidavit, October 15, 2010, Exhibit 7. The Department's decision is not dispositive in this case, but the fact is that Seven Oaks has failed to offer any evidence of bad faith, malice or dishonest motive on the part of Vigilant in handling the claim

To constitute a breach of [the implied covenant of good faith and fair dealing], the acts by which a defendant allegedly impedes the plaintiff's right to receive benefits that he or she reasonably expected to receive under the contract must have been taken in bad faith ․ Bad faith in general implies both actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights or duties, but by some interested or sinister motive.  (Citation omitted).

Landmark Investment Group v. Chung Family Reality, 125 Conn.App. 678, 693 (2010);  see also Buckman v. People Express, Inc., 205 Conn. 166, 177 (1987).   The court finds there is no evidence upon which a jury could find the delay in processing the claim was based on malice, a sinister motive or bad faith.

Finally, there is no evidence that Vigilant “concealed” the loss from Seven Oaks. The record reflects that Vigilant communicated the fact of a December 24, 2004 loss to Seven Oaks in February 2005.   Sorge Affidavit, October 15, 2010, Exhibit 3. Even if there were such concealment, it is not pleaded in the second count of Seven Oaks' amended complaint alleging breach of the covenant of good faith and fair dealing and therefore is not a part of the case.  Beebe v. East Haddam, 48 Conn.App. 60, 70 (1998).

IV. Conclusion

For the reasons stated above summary judgment is granted dismissing the second count of both amended complaints.   Summary judgment is denied as to the first counts of the amended complaints.

TAGGART D. ADAMS

SUPERIOR COURT JUDGE

Adams, Taggart D., J.