Allied Sprinkler & Mechanical Systems, Inc. et al. v. Montpelier U.S. Insurance Company et al. (2012)

MEMORANDUM OF DECISION

The issue before the court is whether to grant the defendant's motion to strike counts two and four of the plaintiffs' complaint on the ground that the counts fail to state legally sufficient claims for breach of contract.   The Court holds that the motion to strike is denied.

I

FACTS

On February 8, 2012, the plaintiffs, Allied Sprinkler & Mechanical Systems, Inc. and James D. Williams, filed a five-count complaint.   The complaint alleges that defendant Woodbury Insurance Agency, Inc. (“Woodbury”) was hired by the plaintiffs to procure various insurance policies related to the conduct of the plaintiffs' business, including commercial liability policies and commercial liability umbrella policies.   Woodbury recommended that the plaintiffs purchase a commercial liability policy from defendant Montpelier U.S. Insurance Co. (“Montpelier”) rather than from the carrier that had issued the policy to the plaintiffs in the previous two years.   During the term of the Montpelier policy, a lawsuit was filed against the plaintiffs alleging that they were liable for water damage occurring as a result of a failure in a fire suppression sprinkler system installed, repaired and maintained by the plaintiffs.   Montpelier, however, refused to provide a defense and indemnify the plaintiffs.

Counts two, three, four and five are directed at Woodbury.   Counts three and five allege negligence.   Count two alleges a breach of the agreement to procure appropriate commercial liability insurance for the plaintiffs.   The complaint alleges that, unknown to the plaintiffs, the Montpelier policy contained an endorsement that purports to exclude from coverage claims or suits for damages for property damage arising from work completed before the beginning date of the Montpelier policy.   The previous commercial liability policies procured by Woodbury for the plaintiffs did not contain this exclusion.   Count four also alleges breach of the agreement by failing to procure commercial liability umbrella insurance appropriate to protect the plaintiffs, causing the plaintiffs to suffer damages because they have no insurance to provide a defense and indemnity.

On June 5, 2012, Woodbury filed an amended motion to strike counts two and four on the ground that they are legally insufficient to state claims for breach of contract because the counts are “simply disguised negligence counts.”   On June 19, 2012, the plaintiffs filed a memorandum in opposition to the amended motion to strike.   Woodbury filed a reply memorandum on July 9, 2012.   The matter was heard on the July 9, 2012 short calendar.

II

DISCUSSIONAMotion to Strike Standard

“The purpose of a motion to strike is to contest ․ the legal sufficiency of the allegations of any complaint ․ to state a claim upon which relief can be granted.”  (Internal quotation marks omitted.)  Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).  “[The court takes] the facts to be those alleged in the complaint that has been stricken and we construe the complaint in the manner most favorable to sustaining its legal sufficiency ․ Thus [i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied ․ Moreover ․ [w]hat is necessarily implied [in an allegation] need not be expressly alleged ․ It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted ․ Indeed, pleadings must be construed broadly and realistically, rather than narrowly and technically.”  (Internal quotation marks omitted.)   Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 252–53, 990 A.2d 206 (2010).

B

Analysis

Woodbury asserts that counts two and four are legally insufficient to state claims for breach of contract because both counts actually allege negligence.   According to Woodbury, in order to make out a legally sufficient breach of contract claim in the malpractice context, the plaintiffs must plead that Woodbury promised them a specific outcome in their dealings, which is beyond the agreement to provide competent and professional services.   According to Woodbury, several courts have agreed that breach of contract in the insurance agent/broker context should be treated no differently than in the medical malpractice context.

In opposition, the plaintiffs contend that they have alleged that Woodbury promised a specific outcome beyond its agreement to provide competent and professional services to the plaintiffs, i.e., to provide appropriate insurance to meet the needs of the plaintiffs with coverage comparable to the general liability policy purchased by the plaintiffs in the previous year and to procure an umbrella policy.   In reply, Woodbury contends that requests for appropriate coverage and an appropriate policy have been held to be insufficient to support a breach of contract claim.

“Connecticut recognizes a cause of action against an insurance agent for failure to obtain insurance under a theory of either professional malpractice or breach of contract.”   Erikson Metals Corp. v. McManus, Jr., Superior Court, judicial district of New Haven, Docket No. CV 07 5002467 (March 27, 2008, Gilligan, J.), citing Ursini v. Goldman, 118 Conn. 554, 559–60, 173 A. 789 (1934).  “It is possible for a negligence claim and a contract claim to arise out of the same facts, and a breach of contract claim may be heard in the same case claiming ․ malpractice.”  Rosato v. Mascardo, 82 Conn.App. 396, 410, 844 A.2d 893 (2004).  “Whether the plaintiff's cause of action is one for malpractice depends upon the definition of that word and the allegations of the complaint ․ Malpractice is commonly defined as the failure of one rendering professional services to exercise that degree of skill and learning commonly applied under all the circumstances in the community by the average prudent reputable member of the profession with the result of injury, loss, or damage to the recipient of those services ․ The elements of a breach of contract action are the formation of an agreement, performance by one party, breach of the agreement by the other party and damages.”  (Internal quotation marks omitted.)  Pelletier v. Galske, 105 Conn.App. 77, 81, 936 A.2d 689 (2007), cert. denied, 285 Conn. 921, 943 A.2d 1100 (2008).

In support of its motion to strike, Woodbury analogizes the present case to, primarily, three Superior Court cases.   The first case is Berlin Corp. v. Continental Casualty Co., Superior Court, judicial district of Hartford, Docket No. CV 06 4021653 (November 2, 2006, Wiese, J.) (42 Conn. L. Rptr. 358), in which the plaintiffs brought a multi-count complaint against an insurance company and an insurance broker, alleging various omissions concerning the plaintiffs' purchase of insurance.   The plaintiffs, sellers of alcohol, claimed that the defendants procured an insurance policy that failed to provide liquor liability coverage.  Id. The fifth count of the plaintiffs' complaint alleged that the insurance broker agreed “that it had the ability to recommend the necessary and appropriate insurance coverage to the plaintiffs and that it breached [the] contract by failing to procure liquor liability insurance.”   Id., 360–61.   The court granted the broker's motion to strike the fifth count, concluding that the allegations constituted a professional negligence claim, not breach of contract.  Id., 361.   The court explained that “[a] fair reading of the plaintiffs' amended complaint reveals that the plaintiffs' cause of action hinges not on whether the defendant executed specifically agreed-upon tasks required of it pursuant to a contract, but whether the defendant exercised ordinary care in effectuating the plaintiffs' purchase of insurance.   The complaint states that the defendant contracted that it had the ‘ability to recommend the necessary and appropriate insurance coverage’ not that it contractually guaranteed, as part of the basis of the bargain, to effectuate the purchase of a particular insurance product.   The defendant's statement is merely a recitation that the defendant will exercise the skill and judgment common to practitioners of its trade.”  Id.

Woodbury also relies on DeCrescenzo v. CPM Ins. Services, Inc., Superior Court, judicial district of New Haven, Docket No. CV 07 5010892 (December 19, 2007, Cosgrove, J.) [44 Conn. L. Rptr. 679], in which the plaintiff, a restaurant owner, brought an action against the defendant, an insurance broker and agent, for failure to obtain liquor liability insurance.   The complaint alleged that the defendant met with the plaintiff and “filled out applications for liquor liability insurance and general liability insurance for the business.  [The plaintiff] informed [the defendant] of his anticipated insurance needs, including the need for liquor liability coverage, and [the defendant] agreed to initiate the process by which [the plaintiff] could apply for and obtain the desired insurance.”  Id. Thereafter, the plaintiff was sued and reported the potential claim to the defendant.  Id. “[The plaintiff] then learned that [the defendant] had never obtained liquor liability coverage for the bar.”  Id. The court granted the defendant's motion to strike the breach of contract claim, reasoning that the allegations revealed only that the defendant “agreed to assist [the plaintiff] with the insurance application process;  there is no allegation that [the defendant] guaranteed the provision of insurance or any other specific result.”  Id. In reaching its conclusion, the court relied on Berlin Corp. v. Continental Casualty Co., supra, 42 Conn. L. Rptr. 358.  DeCrescenzo v. CPM Ins. Services, Inc., supra.

Finally, Woodbury cites Savoy Linen Services, Inc. v. USI Ins. Services of Connecticut, Inc., Superior Court, judicial district of Fairfield, Docket No. CV 01 5017161 (February 9, 2010, Tyma, J.), in which the plaintiffs brought a multi-count complaint against the defendant, an insurance agent, alleging that the defendant failed to procure an insurance policy naming the proper insured and having sufficient coverage and limits.   Specifically, the plaintiffs alleged that the defendant agreed to procure appropriate insurance and that the defendant breached the agreement by failing to procure an insurance policy under which they would receive appropriate amounts to compensate them.  Id. The court granted the defendant's motion to strike the breach of contract claim, reasoning that the allegations did not expressly allege, and could not be construed as alleging, that the defendant promised the plaintiff a specific result in obtaining the insurance.  Id. In reaching its conclusion, the court relied on Berlin Corp. v. Continental Casualty Co., supra, 42 Conn. L. Rptr. 358, and DeCrescenzo v. CPM Ins. Services, Inc., supra, Superior Court, Docket No. CV 07 5010892 [44 Conn. L. Rptr. 679].  Savoy Linen Services, Inc. v. USI Ins. Services of Connecticut, Inc., supra.

The present case, however, is distinguishable from the cases relied on by Woodbury, and more analogous to Erikson Metals Corp. v. McManus, Jr., supra, Superior Court, Docket No. CV 07 5002467.   In Erikson Metals, the plaintiff brought a multi-count complaint against the defendants who were the plaintiff's insurance agent, including two counts for breach of contract.   The plaintiff alleged that it “retained the defendants as its insurance agent to procure insurance for its businesses.   The plaintiff provided the defendants with copies of the insurance policies it had in effect immediately prior to retaining the defendants and requested the same insurance coverage.”  Id. Subsequently, the plaintiff submitted a claim to its insurer under the policy procured by the defendants but was informed that the insurer would not pay on the claim because of an exclusion in the policy.  Id. The defendants moved to strike the breach of contract claims because the plaintiff did not allege that the plaintiff “made a specific request for a particular type of coverage and that [the] defendants promised a particular result.”  Id. The court disagreed with the defendants and denied the motion to strike, concluding that the plaintiff had alleged claims for breach of contract.  Id. The court explained that the plaintiff alleged that “it retained the defendants to procure insurance that was the same as it had in force at the time that the defendants were engaged.   That insurance would have included coverage with no pollution exclusion or co-insurance clause since the plaintiff alleges those limitations were not included in its prior policies.  [The breach of contract counts] allege specific requests by the plaintiff for the defendants to obtain a particular result;  namely, the procurement for the plaintiff of the same insurance coverages that it had immediately prior to retaining the defendants.”  Id.

In the present case, the plaintiffs' complaint alleges that prior to May 2009, the plaintiffs had engaged Woodbury to procure various insurance policies related to the conduct of the plaintiffs' business.   Each year, Woodbury procured such insurance policies in consideration for a commission.   Included in those insurance policies procured by Woodbury for the plaintiffs were commercial liability policies and commercial liability umbrella policies, which provided coverage for, among other things, sums that the insured became legally obligated to pay as damages for property damage caused by an occurrence that takes place during the policy period.   In May 2009, the plaintiffs again engaged Woodbury to procure commercial liability policies and commercial liability umbrella policies.   Woodbury recommended that the plaintiffs change carriers and recommended that the plaintiffs purchase policies from Montpelier, as opposed to the carrier that had issued policies to the plaintiffs in the prior two years.   The plaintiffs relied on Woodbury to procure insurance appropriate for their needs, and to protect against liability and provide a defense and indemnity for the plaintiffs.   The previous commercial liability policies procured by Woodbury for the plaintiffs did not exclude coverage for prior completed work.   The Montpelier policy, however, contained an endorsement excluding claims and suits for property damage arising from completed work.   Woodbury breached its agreement with the plaintiff by failing to procure commercial liability insurance appropriate to protect the plaintiffs and by failing to procure commercial liability umbrella insurance.

In contrast to the cases relied on by Woodbury, in the present case, construing the complaint in the light most favorable to maintaining its legal sufficiency, the plaintiffs have alleged that they contracted with Woodbury to obtain a particular result;  namely, the procurement for the plaintiffs of the same insurance coverages that it had in the prior two years during which Woodbury had procured appropriate insurance policies for the plaintiffs.   See Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, supra, 295 Conn. 252–53 (“[w]hat is necessarily implied [in an allegation] need not be expressly alleged ․ It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted ․ Indeed, pleadings must be construed broadly and realistically, rather than narrowly and technically” (internal quotation marks omitted)).   Accordingly, the motion to strike counts two and four of the plaintiffs' complaint is hereby denied.

BY THE COURT,

Roche, J.

Roche, Vincent E., J.