LLC v. Employer's Fire Insurance Co. (2012)

MEMORANDUM OF DECISION ON MOTION FOR SUMMARY JUDGMENT

This is an action by Westside Property Management, LLC against Employer's Fire Insurance Co., to recover for the loss of air conditioning units which were removed or stolen from the roof of its property.

The two-count amended complaint alleging breach of contract (count one) and breach of the implied covenant of good faith and fair dealing (count two) alleges the following relevant facts.   On or about July 15, 2007, the plaintiff purchased insurance from the defendant for a commercial property located at 1200 Park Street, Hartford, Connecticut.   The policy's term was from July 15, 2007 through July 15, 2008.   The plaintiff paid the premiums and allegedly complied with all terms and conditions precedent under the policy.   The policy provides replacement cost coverage for damage to property up to $53,272,576.   The policy also covers lost business income due to interruptions in the business due to property damage.   In or about September 2007, an unknown person removed and/or stole the air conditioning units located on top of the property causing damage to the roof.   The plaintiff reported the loss to the defendant and demanded payment of the replacement cost of the units and related damages which the defendant refused, to make.

-I-

The defendant first argues that the insurance contract requires any action to be brought against the insurance company within two years of the physical loss and that the plaintiff has failed to comply with this provision of the insurance contract, because the suit was brought in May 2010 ¹ and the physical loss occurred sometime during September 2007.   The plaintiff claims it did not know about the physical loss when it occurred, but learned of it at a much later date.

[C]onstruction of a contract of insurance presents a question of law for the court ․ It is the function of the court to construe the provisions of the contract of insurance ․ The [i]nterpretation of an insurance policy ․ involves a determination of the intent of the parties as expressed by the language of the policy ․ [including] what coverage the ․ [insured] expected to receive and what the [insurer] was to provide, as disclosed by the provision of the policy ․ [A] contract of insurance must be viewed in its entirety, and the intent of the parties for entering it derived from the four corners of the policy ․ [giving the] words ․ [of the policy] their natural and ordinary meaning ․ [and construing] any ambiguity in the terms ․ in favor of the insured ․

(Internal quotation marks omitted.)  Connecticut Ins. Guaranty Assn. v. Fontaine, 278 Conn. 779, 784–85, 900 A.2d 18 (2006).

The insurance contract in this case sets forth the time period during which the plaintiff must file legal action against the defendant.   The contract states in relevant part:  “Legal Action Against Us:  No one may bring a legal action against us under this Coverage Part unless:  1. There has been full compliance with all of the terms of the coverage part;  and 2. The action is brought within 2 years after:  a. The date on which the direct physical loss or damage occurred, unless b, or c. below apply;  or b. The date you discover the loss, if the loss is covered by the Inland Marine Causes of Loss or your Crime Coverages;  and c. Until 90 days after you have filed proof of loss with us, if the loss is covered by our Crime Coverages.”

There is no dispute between the parties as to when the damage occurred both agreeing that the damage occurred sometime in September 2007.   The parties do, however, dispute when the plaintiff became aware of the loss/damage.   The defendant asserts that the plaintiff was aware of the loss/damage in September 2007.   In support of that argument they submit the deposition of John Santiago and the deposition and errata sheet of Michael Gagne.   The plaintiff counters through the affidavit and deposition of Carlos Mouta that he was the one who had the authority to report the loss/damage to the insurance company and that he was not aware of it until May or June 2008.   There is obviously a dispute as to when the plaintiff learned of the loss/damage.

The defendant argues that it does not matter when the plaintiff became aware of the loss/damage, because the insurance contract states it must be brought “within 2 years after ․ the date on which the direct physical loss or damage occurred.”   The defendant further supports this argument by attempting to demonstrate that this claim is not covered by the the crime coverages exception to the two-year time period.

No evidence has been presented regarding who may have caused the damage to the air conditioning units.   The defendant has failed to meet its burden to prove that the crime coverages do not apply, and, therefore, there is a genuine issue of material fact exists as to the date the plaintiff discovered the loss/damage.

-II-

The defendant's second argument is that the plaintiff failed to comply with the insurance contract because they gave late notice of the theft and a false description of the theft and that it has been unfairly prejudiced by the sixteen-month delay between the loss/damage of the property in September 2007 and the reporting of the incident to the defendant in December 2008.   It claims it did not have the opportunity to conduct an investigation into whether employee, Michael Gagne, falsely reported and then fabricated work orders;  look at the physical evidence;  or develop independent leads.

“ ‘In this state, an insurance policyholder who fails to give an insurer timely notice of an insurable loss does not forfeit his insurance coverage if he can prove that his delay did not prejudice his insurer.’  Tariciani v. Nationwide Mutual Ins. Co., 77 Conn.App. 139, 140, 822 A.2d 341 (2003), citing Aetna Casualty & Surety Co. v. Murphy, 206 Conn. 409, 417–18, 538 A.2d 219 (1988).   In Aetna Casualty & Surety Co. v. Murphy, 206 Conn. 409, 417–18, 538 A.2d 219 (1988), the Supreme Court held that an insured's failure to give prompt notice to the insurer of an insurable claim as required by the insurance policy does not result in an unconditional discharge of an insurer's liability under its insurance contract.

As to notice, the insurance policy states in relevant part:  “Duties in the event of loss or damage:  1. You must see that the following are done in the event of loss covered under this coverage part ․ b. Give us prompt notice of the loss or damage, including a description of the property covered. c. As soon as possible, give us a description of how, when and where the loss or damage occurred.”

There is also a genuine issue of material fact regarding when the plaintiff was aware of the loss/damage and if there was a delay in reporting that to the insurance company.

-III-

The defendant further asserts that the plaintiff failed to comply with the following provision of the insurance contract which requires the police to be notified when a law may have been broken:  “Duties in the event of loss or damage:  1. You must see that the following are done in the event of loss covered under this coverage part:  a. notify the police if a law may have been broken.”   The section of the insurance contract containing this provision begins:  “The special property coverage form and special property plus coverage form are subject to the common policy conditions, and the following conditions.   The breach of any condition of this coverage form at any one or more locations will not affect coverage at any location where, at the time of the loss or damage, the breach of condition does not exist.   The form contains conditions which apply to all coverages under section A. COVERAGES of your coverage form unless noted otherwise.”   The defendant only submitted the “Special Property Plus Coverage Form” which details the building coverages, crime coverages, and inland maritime coverages.   If the plaintiff did not comply with the conditions and duties set forth in the contract it would appear that it is not entitled to recover under the “Special Property Plus Coverage form.”   However, the defendant fails to meet its burden of proving there is no genuine issue of material fact as to whether the plaintiff's claim would be covered under that coverage form and not another provision of the contract.

The defendant itself argues that the loss is not covered by the insurance policy at all, but, more specifically that it is not covered by the crime coverages or inland maritime coverage.   Whether the duty to contact the police, which the plaintiff admittedly did not do, precludes the plaintiff from recovering remains question of fact.

-IV-

The defendant's final argument is that it is entitled to summary judgment on the second count, breach of the implied covenant of good faith and fair dealing, because the defendant had a legitimate reason to deny the claim.

“To constitute a breach of the implied covenant good faith and fair dealing, the act by which the defendant allegedly impedes the plaintiff's right to receive benefits that he or she reasonably expected to receive under the contract must of been taken in bad faith ․ bad faith in general implies both actual and constructive fraud, are designed to mislead or deceive another, or neglect a refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights and duties, but by the end of some interest or a sinister motive ․ bad faith means more than mere negligence, and involves a dishonest purpose.”   Belanger v. Maffucci, Superior Court, judicial district of Hartford, Docket No. CV 05–4013892 (January 26, 2007, Elgo, J.).   Defendant's claim that it had legitimate reason to deny plaintiff's claim is supported by the evidence.

For the foregoing reasons, the defendant's motion for summary judgment is denied as to the first count but granted as to the second count.

Wagner, J.T.R.

FOOTNOTES

FN1. The court notes that the action was commenced on May 18, 2010, when the defendant was served, not May 24, 2010..  FN1. The court notes that the action was commenced on May 18, 2010, when the defendant was served, not May 24, 2010.

Wagner, Jerry, J.T.R.