Seven Bridges Foundation v. Wilson Agency, Inc. (2013)

MEMORANDUM OF DECISION

On May 25, 2011, the plaintiff, Seven Bridges Foundation, Inc., commenced this action seeking recovery for damages it suffered as a result of insufficient builders' risk insurance when a building it owned was destroyed by fire.   On October 31, 2011, the plaintiff filed an amended four-count complaint for (1) negligence by the defendant, Wilson Agency, Inc., (2) negligence by the defendant, Charles J. Wilson, Jr., (3) breach of fiduciary duty by Wilson Agency, Inc., and (4) breach of fiduciary duty by Charles J. Wilson, Jr.

The plaintiff's operative complaint makes the following allegations.   The defendants served as the plaintiff's insurance broker for many years, “handling all of their insurance needs during that time, and [the plaintiff] relied exclusively upon [the defendants'] advice and recommendations regarding insurance issues.”   The defendants knew that the plaintiff “was not knowledgeable about insurance and relied exclusively upon [the defendants'] stated expertise in providing [the plaintiff] with insurance products to fulfill its insurance needs as [the defendants] always assured [the plaintiff] that it could rely on [the defendants'] advice.”

The plaintiff had entered a construction contract to build a new building located at 71 North Porchuk Road in Greenwich.   The plaintiff approached the defendants to obtain builders' risk insurance as required by the construction contract.   The plaintiff explained the nature of the construction project and relied on the defendants to “obtain appropriate insurance to cover its risks for the construction of the premises and to cover its obligations in the [construction] contract.”   The defendants never requested a copy of the construction contract and they never requested any additional information regarding appropriate insurance coverage for the project.   The defendants then procured a $6.5 million builders' risk insurance policy from Travelers Insurance Company.

Around January 2009, when “certain aspects of the construction project had been completed,” the plaintiff contacted the defendants to request a reduction in the amount of insurance coverage commensurate with the completed work.   The defendants complied, reducing the insurance coverage from $6.5 million to $3 million.   The defendants never requested a copy of the construction contract or the insurance requirements for the project.   The defendants never explained the risks or benefits, which would accompany the proposed reduction in coverage under the terms of the policy issued by Travelers Insurance Company, and an applicable builders' risk insurance principle known as coinsurance.

The principle of coinsurance states that when a building is insured for less than its full value, and is damaged by risk covered by the policy, the insurance company is only responsible for the portion of the loss which bears the same relationship as the full value of the building bears to the policy limits.   The plaintiff claims that it was unaware of the existence and implications of coinsurance.   Following the reduction in coverage requested by the plaintiff, the building suffered severe fire damage requiring $5.2 million in repairs.   The reduction in insurance coverage and the application of the coinsurance principle led Travelers Insurance Company to pay only $2.1 million to plaintiff for the loss.   As a result the plaintiff had to bear the remaining $3.1 million of the loss.   The plaintiff claims that had it been advised of the risks associated with lowering the level of insurance coverage, and the concept of coinsurance, the plaintiff would not have reduced its level of insurance coverage and would not have suffered the loss.   The plaintiff claims that the defendants had a fiduciary duty to provide “sound advice and appropriate insurance recommendations and policies for [the plaintiff's] insurance needs” and the defendants' failure to provide such advice constituted a breach of that fiduciary duty.

By memorandum of decision dated March 2, 2012, this court granted the defendants' motion to strike as to counts three and four of the plaintiff's amended complaint, as well as the prayer for relief for interest, disbursements and attorneys fees [53 Conn. L. Rptr. 584].   The plaintiff failed to file a substitute pleading within fifteen days of the court's ruling, as permitted by Practice Book § 10–44.   On April 3, 2012, the defendants filed an answer and special defenses in response to the remaining counts of the plaintiff's complaint and a claim for the jury list.   On April 18, 2012, the plaintiff filed a reply to the special defenses.

Eleven months later, on March 15, 2013, the plaintiff filed a request to amend its complaint to reassert a cause of action for breach of fiduciary duty against each of the defendants.   On April 24, 2013, the court (Karazin, J.T.R.) overruled the defendants' objection to the plaintiff's request for leave to again amend its complaint.   Thereafter, on April 29, 2013, the plaintiff filed a second amended revised complaint, which became the operative complaint.

On May 9, 2013, the defendants filed a motion to strike the operative complaint, specifically as to the breach of fiduciary duty claims and the prayers for relief for interest, disbursements and attorneys fees.   In that motion the defendants claimed that third and fourth counts of the second amended revised complaint still did not adequately allege breaches of fiduciary duties and that the complaint “does not conform to the law of the case and is untimely.”   The motion was accompanied by a memorandum of law.   On May 30, 2013, the plaintiff filed a memorandum of law in opposition.   On July 11, 2013, the defendants filed a reply memorandum of law.   The matter was heard at the short calendar on July 15, 2013.

DISCUSSION

“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 (2003).  “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 (2010).  “The proper method to challenge the legal sufficiency of a complaint is to make a motion to strike prior to trial.”  Gulack v. Gulack, 30 Conn.App. 305, 309 (1993).   “Practice Book ․ § 10–39, allows for a claim for relief to be stricken only if the relief sought could not be legally awarded.”  Pamela B. v. Ment, 244 Conn. 296, 325 (1998).  “In ruling on a motion to strike, the court is limited to the facts alleged in the complaint.”  (Internal quotation marks omitted.)  Faulkner v. United Technologies Corp., 240 Conn. 576, 580 (1997).

The defendant's primary argument is that the court should strike the third and fourth counts of the plaintiff's second amended revised complaint because the plaintiff has failed to allege facts sufficient to establish a breach of the duty of loyalty and honesty.¹

“A fiduciary or confidential relationship is characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interests of the other.   The superior position of the fiduciary or dominant party affords him great opportunity for abuse of the confidence reposed in him.”  (Citations omitted.)  Dunham v. Dunham, 204 Conn. 303, 322 (1987), overruled on other grounds by Santopietro v. New Haven, 239 Conn. 207, 213 (1996).   “Professional negligence alone, however, does not give rise automatically to a claim for breach of fiduciary duty.”  Beverly Hills Concepts, Inc. v. Schatz and Schatz, Ribicoff and Kotkin, 247 Conn. 48, 56 (1998).  “Professional negligence implicates a duty of care, while breach of a fiduciary duty implicates a duty of loyalty and honesty.”  Id., 57.   The application of traditional principles of fiduciary duty have not been expressly limited to cases involving only fraud, self-dealing or conflict of interest, though those types of cases are the most common.   See Murphy v. Wakelee, 247 Conn. 396, 400 (1998).  “[T]o survive a motion to strike framed as a breach of fiduciary duty, a pleader must allege facts which implicate the morality of [the defendant's] conduct.”   J.S.T. Development Corp. v. Vitrano, Superior Court, judicial district of New Britain, Docket No. CV–03–0521186–S (June 2, 2004, McWeeny, J.) (37 Conn. L. Rptr. 590, 592).

“To successfully allege a breach of fiduciary duty, the plaintiff must allege facts establishing two separate elements:  (1) the existence of a fiduciary duty, and (2) a breach of that duty, specifically, a breach of the duty of loyalty and honesty.   If allegations establishing either element are absent, the claim for breach of fiduciary duty will not survive a motion to strike.”   Seven Bridges Foundation, Inc. v. Wilson Agency, Inc., Superior Court, judicial district of Stamford–Norwalk at Stamford, Docket No. CV–11–6009707–S (March 2, 2012, Tobin, J.T.R.) (53 Conn. L. Rptr. 584, 586).

By memorandum of decision dated March 2, 2012, this court previously determined that while the plaintiff had sufficiently pleaded the existence of a fiduciary duty, a breach of that duty had not been sufficiently alleged.²  The court must now determine whether the second amended revised complaint sufficiently alleges a claim of breach of fiduciary duty.

The factual bases of both of the plaintiff's breach of fiduciary duty claims, which were stricken by the court on March 2, 2012, have been repleaded and are presently before the court, are identical.   The plaintiff approached their regular insurance agent seeking an adjustment to their current builders insurance policy to reflect the fact that certain aspects of their current construction project had been completed.   The insurance agent defendants procured for the plaintiff a policy with lower premiums.   The defendants failed to explain, however, that by virtue of the concept of coinsurance, the chosen policy would yield significantly lower coverage according to the current value of the structure.

The chief allegation that has been added to the plaintiff's breach of fiduciary duty claims is that the defendants were “disloyal and dishonest towards the plaintiff” in procuring the requested adjustment to its policy without fully explaining the increased exposure to liability in an “attemp[t] to curry favor and/or enhance [its] image and reputation with the [p]laintiff, so as to further secure business opportunities by giving the plaintiff the false impression that [it] had lowered the [p]laintiff's insurance premiums and thus effected a putative savings to the [p]laintiff, without increasing the [p]laintiff's risk or decreasing its coverage below $3,000,000.00.”

These allegations may sufficiently plead conduct amounting to professional negligence.   Nevertheless, not every claim of professional negligence gives rise to a claim for breach of fiduciary duty.   In this case, the court finds that even with the additional allegations included in the plaintiff's second amended revised complaint, the plaintiff had not sufficiently alleged a cause of action against either defendant for breach of fiduciary duty.   The allegation that the defendants were attempting to “curry favor” with the plaintiff does not support a claim of fraudulent or dishonest conduct.   It is illogical to view the defendants' failure to explain the concept of coinsurance to the plaintiff as implicating the morality of the defendants' conduct.   Merely pleading the words “dishonest” and “disloyal,” without alleging facts suggesting fraud, self-dealing, conflict of interest, or other immorality on the defendants' part, fails to state a legally sufficient claim for breach of a fiduciary duty.   Because the plaintiff has failed to allege sufficient facts to support a claim for breach of a fiduciary duty, the court grants the defendant's motion to strike counts three and four together with the prayers for relief for interest, disbursements and attorneys fees associated with those counts.

David R. Tobin, J.T.R.

FOOTNOTES

FN1. The defendants also argue that the plaintiff filed its amended complaint untimely and violates the law of the case doctrine Specifically, the defendants argue, the plaintiff violated Practice Book § 10–44 by filing its amended complaint more than fifteen days after the court ruled on the previous motion to strike.   Those issues were effectively disposed of when the court, (Karazin, J.T.R.) overruled the defendant's objections to the plaintiff's motion for leave to amend.   The court's decision was consistent with that of at least one other Superior Court which held that the court may, in its discretion and the interests of justice, permit a party to replead more than fifteen days after the granting of a motion to strike.   See Stone v. Pattis, Superior Court, judicial district of Stamford–Norwalk at Stamford, Docket No. CV–09–5011515–S (May 28, 2013, Brazzel–Massaro, J.), affirmed 144 Conn.App. 79 (2013) (relying on the principles of Practice Book § 1–8).   In any event, the court finds that it need not engage in a more detailed analysis of any claimed irregularities in the plaintiff's pleading given the conclusions reached herein regarding the insufficiency of plaintiff's allegations of breach of fiduciary duty..  FN1. The defendants also argue that the plaintiff filed its amended complaint untimely and violates the law of the case doctrine Specifically, the defendants argue, the plaintiff violated Practice Book § 10–44 by filing its amended complaint more than fifteen days after the court ruled on the previous motion to strike.   Those issues were effectively disposed of when the court, (Karazin, J.T.R.) overruled the defendant's objections to the plaintiff's motion for leave to amend.   The court's decision was consistent with that of at least one other Superior Court which held that the court may, in its discretion and the interests of justice, permit a party to replead more than fifteen days after the granting of a motion to strike.   See Stone v. Pattis, Superior Court, judicial district of Stamford–Norwalk at Stamford, Docket No. CV–09–5011515–S (May 28, 2013, Brazzel–Massaro, J.), affirmed 144 Conn.App. 79 (2013) (relying on the principles of Practice Book § 1–8).   In any event, the court finds that it need not engage in a more detailed analysis of any claimed irregularities in the plaintiff's pleading given the conclusions reached herein regarding the insufficiency of plaintiff's allegations of breach of fiduciary duty.

FN2. Specifically, this court stated “[T]he complaint alleges that the defendants have been the plaintiff's only insurance agents for many years.   The plaintiff also alleges that the defendants knew that [the plaintiff] was not knowledgeable about insurance and relied exclusively upon [the] defendants' stated expertise ․ as [the defendants] always assured [the plaintiff] that it could rely on [the defendants'] advice.   Taken together these allegations are sufficient to allege the existence of a fiduciary duty between the defendants ․ and the plaintiff ․” (Internal quotation marks omitted.)   Seven Bridges Foundation, Inc. v. Wilson Agency, Inc., Superior Court, judicial district of Stamford–Norwalk at Stamford, Docket No CV–11–6009707–S (March 2, 2012, Tobin, J.T.R.) (53 Conn. L. Rptr. 584, 587)..  FN2. Specifically, this court stated “[T]he complaint alleges that the defendants have been the plaintiff's only insurance agents for many years.   The plaintiff also alleges that the defendants knew that [the plaintiff] was not knowledgeable about insurance and relied exclusively upon [the] defendants' stated expertise ․ as [the defendants] always assured [the plaintiff] that it could rely on [the defendants'] advice.   Taken together these allegations are sufficient to allege the existence of a fiduciary duty between the defendants ․ and the plaintiff ․” (Internal quotation marks omitted.)   Seven Bridges Foundation, Inc. v. Wilson Agency, Inc., Superior Court, judicial district of Stamford–Norwalk at Stamford, Docket No CV–11–6009707–S (March 2, 2012, Tobin, J.T.R.) (53 Conn. L. Rptr. 584, 587).

Tobin, David R., J.T.R.