Lydia Foti v. United Service Automobile Association (2013)

MEMORANDUM OF DECISION RE PLAINTIFF'S AND DEFENDANT'S MOTIONS FOR SUMMARY JUDGMENT (104.00 114.00)

I. Background Facts

In September 2006 the plaintiff Lydia Foti, through a conservator, commenced an action against John Thorson alleging that Thorson, a Licensed Professional Counselor providing counseling, therapy and psychotherapy services, and Personal Counseling Associates (PCA) of which he was member and employee, committed professional negligence in providing services to Foti. Foti also alleged Thorson negligently inflicted emotional harm upon her.   Hamilton, Conservator v. Thorson et al., Superior Court, judicial district of Danbury, CV 06 5001461.¹

Based in part on an August 15, 2005 statement given by Foti to the Bethel, Connecticut police department (Def. Memo, Ex. K, found at Dkt. Entry 107.00) Thorson was arrested, charged, and pleaded guilty to three violations of General Statutes § 53a–71(a) sexual assault in the second degree, specifically § 53a–71(a)(6)(A) (sexual intercourse between psychotherapist and a patient during a psychotherapy session).   Thorson was sentenced to twenty years incarceration, suspended after three and a half years.  Id., Ex L. Thorson sent a copy of the Hamilton complaint to the insurance company that had issued a homeowners insurance policy to him, the defendant in this action United Services Automobile Association (USAA).   Shortly thereafter USAA wrote Thorson a letter declining coverage, and declining to provide a defense to Thorson or PCA (which was not an insured party).   The letter stated this decision was based “solely on the Plaintiff's Complaint as pled.”   Def. Memo (Dkt. Entry 105.00) Ex. B (found at Dkt. Entry 106.00).

In 2010 Thorson, represented by counsel, stipulated to a judgment against him individually in the amount of $750,000 in the Hamilton case and assigned to Foti (no longer represented by a conservator) all tort and contract claims he had against USAA, and Foti agreed to pursue collection and satisfaction of this judgment amount plus applicable interest “solely” through these rights and waived any right to enforce the judgment against Thorson, his wife or PCA. Def. Memo. Ex. C;  Pl. Memo. Ex. 2.

This action was commenced in 2011.   In her complaint Foti essentially reiterated the nature of her claims against Thorson, alleged that the judgment had not been satisfied, and claimed she had a direct cause of action against Thorson's insurer under General Statutes § 38a–321 for the amount of the stipulated judgment, plus postjudgment interest.  Section 38a–321 provides a judgment creditor with a direct action against a defendant's insurer if the defendant “was insured against such loss or damage” when the right of action arose and the judgment is not satisfied.   In accordance with the above statute, the judgment creditor is subrogated to all the rights of the defendant and has the same rights the defendant had against the insurer.

USAA's answer denied the Hamilton complaint, alleged the negligence of Thorson, admitted the existence of certain insurance policies, admitted it disclaimed any duty to defend Thorson and essentially took no position as to the bulk of the material allegations in the complaint directed at Thorson's purported negligence, noting it was not a party to that lawsuit.   USAA also pleaded a number of special defenses alleging inter alia that an “occurrence,” as defined in the USAA policy had not taken place;  that the incident set forth in Foti's original complaint was included in several policy exclusions such as a “business” carried on by Thorson, or out of rendering or failure to render professional services;  that the policy did not cover damages arising out of Thorson's intentional or purposeful acts, and that there was no responsibility to indemnify Foti for Thorson's sexual misconduct or harassment.

USAA has moved for summary judgment asserting that based on its policy provisions it had no duty to defend Thorson, who was not insured for Foti's claims, and cannot be held liable pursuant to Section 38a–321.   Foti opposes that motion and has filed a cross motion for summary judgment contending that, on the basis of the underlying complaint against Thorson, USAA owed him a duty to defend and, having violated that duty, is liable to Foti for the settlement amount.   The two motions, and the opposition thereto, were argued before the court on August 8, 2013.   The motion papers and oral arguments by both counsel were of very high quality.   Essentially, Foti has the unenviable task of establishing that an ordinary homeowners policy insures against damages arising from a professional therapist's sexual relationship with a patient, subsequently found to be criminal in nature, and USAA has the difficult task of proving it had the legal right to deny a defense to its insured upon receipt of the Hamilton complaint.

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, 242 Conn. 552, 554 (1998).  “[T]he party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact.”  Appleton v. Board of Education, supra, 254 Conn. 209.   See generally Mott v. Wal–Mart Stores East L.P., 139 Conn.App. 618, 624–25 (2012).

III. Discussion

The USAA insurance policies in question are:  a homeowners policy (HO 9R (04–93) modified by a Connecticut Amendatory Endorsement HO CT (08–00) and HO 199CT (11–99) (Incidental Business Occupancies—Psychologist) insuring Thorson.   There was also an Umbrella Policy, PU–CT insuring Thorson.   There is no dispute that these policies were in effect at the times relevant to this case.   Neill Affidavit, ¶¶ 5–8 attached as Ex. J to Def. Memo. (found at Dkt. Entry 107.00).   Some of the critical provisions in the above policies are drawn from the declination letter dated September 27, 2006 sent to Thorson by USAA (including bolding and capitalization) and set forth below.   Def. Memo., 10–13 and Ex. B.

HO–CT (08–00) provides as follows:

“SECTION II LIABILITY COVERAGES

Coverage E—Personal Liability is deleted and replaced by the following:

If a claim is made or suit is brought against an insured for damages because of bodily injury or property damage caused by an occurrence to which this coverage applies, we will:

1.  Pay up to our limit of liability for the damages for which the insured is legally liable;  and

2. provide a defense at our expense by counsel of our choice, even if the suit is groundless, false or fraudulent.   We may investigate and settle any claim or Suit that we decide is appropriate.   Our duty to settle or defend ends when the amount we pay or tender for damages resulting from an occurrence equals our limit of liability.   This coverage does not provide defense to any insured for criminal prosecution or proceedings.

We will not pay for punitive damages or exemplary damages, fines or penalties.

DEFINITIONS

1. “Bodily injury” means bodily harm, sickness or disease, including required care, loss of services and death that results.

2. “Business” includes trade, profession or occupation.

3. “Insured” means:

a.  You;  and

b. Residents of your household.

Occurrence is defined in the policy:

5. “Occurrence” means:

An accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period, in:

a. bodily injury;  or

b. property damage.

* * * * * * * * * * * * *

SECTION II of the amendatory endorsement section of the policy includes the following exclusions (HO–CT (08–00)):

1. Coverage E–Personal Liability and Coverage F— Medical Payments to Others.   Paragraph a. is deleted and replaced by the following:

a. caused by the intentional or purposeful acts of the insured, including conduct that would reasonably be expected to result in bodily injury to any person or property damage to any property.

The following exclusions are added to item 1. Coverage E—Personal Liability and Coverage F—Medical Payments to Others (HO–CT (08–00)):

3. arising out of the commission or attempting to flee from, or avoiding apprehension for a criminal act for which intent is a necessary element.”

* * * * * * * *

Under the Incidental Business Occupancies (HO–199 CT (11–99)):  (Incidental Business Occupancies—Psychologist) section of the policy, there is the following exclusion:

“Exclusion 1.c is deleted and replaced by the following:

c. Arising out of the rendering or failure to render professional services.   This includes but is not limited to:

(4) medical, surgical, dental, x-ray or nursing services, treatment, advice, or instruction;

(5) any health or therapeutic service, treatment, advice or instruction. (11) any error, omission, defeat or deficiency in any test performed, or an evaluation, a consultation or advice given by or on behalf of any insured or the reporting of or reliance upon any such test, evaluation, consultation or advice;  ․”

The Personal Umbrella policy states in relevant part:

LIABILITY COVERAGE (PU–1900–3)

We will pay for damages an insured becomes legally obligated to pay in excess of the retained limit.   This obligation must arise from an occurrence not excluded by this policy.   We will not pay for punitive or exemplary damage, fines or penalties.

DEFINITIONS

2. “Bodily injury” means bodily harm sickness, or disease, including required care, Loss of services and death that results.

3. “Business” means any full or part-time activity arising out of or related to any trade, profession or occupation of any insured.

5. “Occurrence” means:

a.  An accident, including continuous or repeated exposure to substantially the same general harmful conditions which results during the policy period, in bodily injury or property damage.

b. an event or series of events, including injurious exposure to conditions proximately caused by an act or omission of any insured, which results, during [t]he policy period, in personal injury, neither expected not intended from the standpoint of the insured.”

Under the PU–CT edition, 6/99 there are the following additional definitions:

DEFINITIONS

Definition 9. ‘Personal injury’ is deleted in its entirely and replaced with the following:

9. “Personal injury” means:

a.  Libel, slander, defamation of character, humiliation, malicious prosecution, invasion of rights or privacy.

b. False arrest, false imprisonment, wrongful detention.

c. Wrongful eviction, wrongful entry.

d. Assault and battery if committed by an insured or at his direction to protect persons or property.   This applies only when the conduct is not criminal.

The Personal Umbrella Policy also states:

EXCLUSIONS

This insurance does not apply to

7. Liability arising out of any business or business property of any insured.

This exclusion does not apply to the extent that liability coverage is provided by underlying insurance and is not excluded in this policy.

8. Liability arising out of the rendering of or failure to render professional services.

The PU–CT alters the following exclusion to read:

“9. Bodily injury or property damage caused by the intentional or purposeful acts of an insured, including the conduct that would reasonably be expected to result in bodily injury to any person or property damage to any property.

10. Bodily injury, personal injury or property damage that results from an insured's actions or efforts to willfully cause injury, harm or damage to any person or property.

24. Bodily injury, personal injury or property damage arising out of the commission of, attempting to flee from, or avoiding apprehension for a criminal act for which intent is a necessary element.”

The Personal Umbrella (PU–1900–3) continues with the following exclusions:

“20. Liability arising out of any actual, alleged or threatened.

a. Sexual misconduct;

b. Sexual harassment;

c. sexual molestation, or

d. Physical or mental abuse.”

USAA's summary judgment motion makes several arguments.   First, it claims that “all” the allegations of the Hamilton complaint are based on professional negligence and “all” stem from a therapist/patient relationship.   Def. Memo., 21;  see also Id., 23, 25 and Def. Reply Memo., 3. Second, it claims the allegations do not constitute “an occurrence” or a “bodily injury.”   Third, it argues that a specific provision excludes coverage for Thorson's rendering or not rendering professional services such as therapy or counseling, and there are exclusions for business pursuits and intentional and criminal acts, pointing out that Thorson pleaded guilty to sexual assault in the second degree.

The thrust of Foti's opposition to USAA's motion for summary judgment and in support of her own summary judgment motion, is her argument that the underlying Hamilton complaint contained allegations of simple negligence in addition to professional negligence and such simple negligence claims were, or possibly were, claims that were covered by the USAA policy.   Therefore, Foti argues that USAA owed Thorson at least a duty to defend and, failing to do so, became liable pursuant to Section 38a–321.   Foti also contends that the various definitions and exclusions cited by USAA as precluding any coverage of Thorson's alleged actions do not, in fact, bar that coverage.

The court first turns to the issue of USAA's duty to defend where the law in Connecticut is quite clear that an insurer's duty to defend an insured is significantly broader than its duty to indemnify.   In DaCruz v. State Farm Fire & Casualty Co., 268 Conn. 675 (2004) a case involving a claim against an insurance company pursuant to Section 38a–321, the Connecticut Supreme Court stated:

the duty to defend is considerably broader than the duty to indemnify ․' [A]n insurer's duty to defend, being much broader in scope and application than its duty to indemnify, is determined by reference to the allegations contained in the [underlying] complaint.

Id., 687 [citations omitted and quoting Security Ins. Co. of Hartford v. Lumbermens Mutual Casualty Co, 264 Conn. 688, 711 (2003) ].

The scope of the duty to defend, as emphasized by the DaCruz court, arises “[i]f an allegation of the complaint [against the insured] falls even possibly within the coverage, then the insurance company must defend the insured.”   DaCruz, supra, 268 Conn. 688 [quoting Moore v. Continental Casualty Co., 252 Conn. 405, 409 (2002) (emphasis added in DaCruz opinion) ].  “Thus, the duty to defend is triggered whether a complaint alleges facts that potentially could fall within the scope of coverage.”  Id. (emphasis in original).   The DaCruz decision accurately reflected the Connecticut Supreme Court's earlier decisions on the same subject.   See Schilberg Integrated Metals Corp. v. Continental Casualty Co., 263 Conn. 245, 256–57 (2003);  QSP, Inc. v. Aetna Casualty & Surety Co., 256 Conn. 343, 354 (2001);  see also Wentland v. American Equity Ins. Co., 267 Conn. 592, 600 (2004) (an insurer's duty to defend its insured is triggered without regard to the merits of its duty to indemnify).

The parties and the court agree that an insurer's decision to deny an insured a defense must be based solely on the allegations contained in the underlying complaint.   See Pl. Memo. 2;  Def. Memo. (Dkt. Entry 105.00) 25.   Thus information outside the “four corners” of the complaint may not be employed to disclaim a duty to defend.  QSP, Inc. v. Aetna Casualty & Surety Co., supra, 256 Conn. 352.  “[I]t is irrelevant that an insurer may get information from the insured, or anyone else, which indicates, or even demonstrates, that the injury is not in fact covered.”  Hartford Casualty Ins., Co. v. Litchfield Mutual Fire Ins., Co., 274 Conn. 457, 464 (2005).   This limitation was apparently recoguized by USAA which noted that its decision to decline a defense was based “solely” on the Hamilton complaint.   However, a significant part of USAA's motion and reply papers rely on information outside the complaint.   In this regard, USAA repeatedly contends, and Foti consistently disagrees, that all the allegations in the underlying complaint flow from the therapist/patient relationship between Foti and Thorson.   See e.g. Def. Memo., 23, 25, and Pl. Memo. 13–14.   A careful review of these allegations is in order.

The Hamilton complaint alleges professional malpractice against Thorson and PCA. Indeed, the First and Second Counts, claims directed at Thorson and PCA respectively, are entitled “Professional Negligence.”   To the extent the allegations support a claim of professional negligence, there is no doubt, and Foti concedes, they fall outside the coverage afforded by USAA's policies.

The Third count is entitled “Negligent Infliction of Emotional Distress” and is directed at Thorson.   All three counts incorporate the factual allegations contained in Paragraphs 1 through 26 of the First Count and, therefore, the bulk of the allegations made by Foti in each count are the same.   Paragraph 27 of the First Count alleges compliance with General Statutes § 52–190a, indicating it is a professional malpractice claim.   The Second Count incorporates Paragraph 27 and adds two additional paragraphs to the effect that Thorson was an employee or agent of PCA, and PCA was liable to Foti for Thorson's negligence.   The Third Count, significantly, does not incorporate Paragraph 27 of the earlier counts, but sets forth its own Paragraphs 27 and 28 to the effect that Thorson's conduct was “extreme and outrageous” and Thorson should have realized it involved an unreasonable risk of causing Foti emotional distress that might result in illness or bodily harm.

Foti has placed emphasis on certain allegations that Thorson established a “personal” relationship with her that included providing her with a personal telephone number and personal e-mail address, and encouraging her to contact him at any time at home or on vacation with his wife and friends, which she did.   Hamilton complaint, ¶¶ 12–15 (incorporated into Third Count).   Paragraphs 16i, 17 and 18 allege a personal relationship between Foti and Thorson that led to Foti's reliance on and vulnerability to Thorson, and eventual consensual relations with him.   Whereas Paragraph 16 expressly relates instances of professional negligence by Thorson, Foti points out that Paragraphs 17 through 26 refer only to “negligence” and generally relate to injuries and damages that could be related to a negligent infliction of emotional distress claim.

USAA emphasizes that the introductory three paragraphs of the Hamilton complaint state that “At all relevant times” Thorson was a licensed professional counselor engaged in the practice of counseling, therapy and psychotherapy through PCA and Foti “was and is” a patient of Thorson.   USAA contends that the allegations in the complaint are inextricably tied to the professional services rendered by Thorson to Foti. In its reply memorandum USAA discusses in detail why most of the paragraphs in the Hamilton complaint leave no doubt that they seek to establish Thorson's professional negligence.   It is true that the paragraphs specifically referenced do, in fact, state predicates for professional negligence.   But USAA omits any reference to Paragraphs 12–15 and 17 in this discussion, and Paragraphs 18–26 are, as mentioned, just as amenable to ordinary negligent infliction of emotional distress claims as a professional negligence claim.   It is worth noting that an insurer “is not excused from its duty to defend merely because the underlying complaint does not specify the connection between the stated cause of action and the policy coverage.”  Hartford Casualty Ins. Co. v. Litchfield Mutual Fire Ins. Co., supra, 274 Conn. 464.

USAA cites several times to the Connecticut Supreme Court case, Imperial Casualty & Indemnity Co. v. State of Connecticut, 246 Conn. 313 (1998) primarily relying on a footnote which largely quotes from a California case:

“In determining the duty to defend, ‘courts do not examine only the pleaded word but the potential liability created by the suit ․ To restrict the defense obligation of the insurer to the precise language of the pleading ․ would create an anomaly for the insured ․ [because] the complainant in the third party action drafts his complaint in the broadest terms ․ In light of the likely overstatement of the complaint and of the plasticity of modern pleading, we should hardly designate the third party as the arbiter of the policy's coverage.”  (Citations omitted.)  Gray v. Zurich Ins. Co., 65 Cal.2d 263, 276, 419 P.2d 168 (1966).

Id., 332 n.8. In the abstract, the above quotation might have applicability to USAA's argument.   In context, however, the Imperial court held, as explained in the remainder of that footnote, that an insurer had a duty to defend when a complaint against an insured sought monetary relief along with an injunctive and class action relief even though the policy excluded coverage for injunctive or class action relief.   In fact, Imperial Casualty squarely held if the complaint alleges a claim excluded by the policy it does not excuse the insurer from defending the insured “where other counts of the claim fall within the provisions of the policy.”  Id., 332 (quoting from 7C J. Appleman, Insurance Law and Practice (1979) § 4684.]

Foti contends that Thorson's sexual misconduct, as alleged, did not, as a matter of law, constitute professional negligence.   USAA takes an absolutely contrary position.   In her support Foti cites O'Connell v. Salon Shahin, Superior Court, judicial district of Stamford–Norwalk at Stamford, CV 10 6003571 (October 18, 2010, Tobin, D., J.) [50 Conn. L. Rptr. 679], where the court found no appellate authority on point, but concluded that a claim of digital penetration of the plaintiff's vagina by a massage therapist did not involve professional malpractice.   In Cerrato v. American Home Ins. Co. (D.Conn. April 2, 2001) (2001 WL 1911768) the United States District Court for the District of Connecticut held that a lawyer's sexual assault of a client while preparing her to testify did not fall within the parameters of professional services.   Similarly, in Northfield Insurance Co. v. Derma Clinic, Inc. (D.Conn. March 11, 2004), 3:02–CV–945 (EBB), rejected the argument that sexual assault was any part of rendering professional services by a massage therapist.

Connecticut Superior Court cases focus on whether the actions of a professional involve professional diagnosis, treatment or the exercise of professional treatment.   Heaford v. Danbury Hospital, Superior Court, judicial district of Danbury, CV 03 034399 (Dec. 3, 2003, Moraghan, J.T.R.) [36 Conn. L. Rptr. 138], citing Gold v. Greenwich Hospital Association, 262 Conn. 248 (2002), and Trimel v. Lawrence & Memorial Hospital Rehabilitation Center, 61 Conn.App. 353 (2001), stated a “general rule” that “a health care provider's sexual relationship with a patient is not substantially related to medical diagnosis or treatment, and therefore is not actionable as malpractice.”   2003 WL 22962909 *4

In response, USAA contends that the general rule does not apply for two reasons.   First, it cites two cases including the Connecticut Supreme Court case of St. Paul Fire & Marine Ins. Co. v. Shernow, 222 Conn. 823 (1992), which held that because a dentist had negligently administered anesthesia which reduced the patient's lung capacity by 35–40 percent in order to sexually molest her, the molestation was directly tied to his medical treatment of her and constituted professional liability.  Id., 829–30.   The second case is Smith v. Christoforo, Superior Court, judicial district of New Haven, CV 99 0425766 (July 25, 2000, Alander, J.), where the complaint alleged the defendant Christoforo prescribed to the plaintiff excessive prescription medication, encouraged her misuse of sample prescriptions, and inappropriately massaged and fondled the plaintiff for the purpose of treating the plaintiff's anxiety disorder.   The court, on a motion to strike, held that the plaintiff was entitled to try to prove that these actions were a misguided attempt at medical treatment.   This court finds both cases clearly alleged that the sexual conduct of the treater was tied to the treatment of the patient, and such allegations are not clearly present in the underlying complaint.

The second argument of USAA on this point involves the theory that Thorson's sexual conduct was professional misconduct because of the therapist's mishandling of the “so called ‘transference phenomenon.’  “ Def. Reply Memo., 11, In Heaford v. Danbury Hospital, supra, n.1, Judge Moraghan quoted a much used description of the term “transference” appearing in Simmons v. United States, 805 F.2d 1363, 1364–65 (9th Cir.1986).

Transference is the term used by psychiatrists and psychologists to denote a patient's emotional reaction to a therapist and is generally applied to the projection of feelings, thoughts and wishes onto the analyst, who has come to represent some person from the patient's past ․ What the notion of transference assumes is that as therapy develops, and if therapy is working, the client comes to either consciously or unconsciously, or both, regard the therapist as a child might regard the parent ․ What happens when therapy is working ․ is that this transference relationship grows so that the client comes to experience the therapist as a powerful, benevolent parent figure ․ Transference is crucial to the therapeutic process because the patient unconsciously attributes to the psychiatrist or analyst those feelings which he may have repressed towards his own parents ․ It is through the creation, experiencing and resolution of these feelings that [the patient] becomes well ․ Understanding of transference forms a basic part of the psychoanalytic technique.   The proper therapeutic response is countertransference, a reaction which avoids emotional involvement and assists the patient in overcoming problems ․ Courts have uniformly regarded mishandling of transference as a malpractice or gross negligence.

USAA cites a number of cases from other states where the transference issue has been held to put sexual relations between a psychiatrist or mental health therapist and a patient into the realm of professional negligence.   No such decisions have appeared to occur in Connecticut, and the allegations pleaded in the underlying complaint do not necessarily support that professional negligence is the only negligence pleaded in this case.

Foti contends that her third count, claiming negligent infliction of emotional damage, makes clear that it was certainly possible that the USAA policies might cover this claim of ordinary negligence.   USAA is correct in pointing out that the title of a specific claim does not determine its true nature and that the underlying complaint's negligent infliction claim is based solely on the facts that appear to support the professional negligence claims in the preceding two counts.   It cites to several Connecticut Superior Court cases holding that a cause of action for negligent infliction of emotional distress may arise in the context of a professional malpractice action.   In Vrzivoli v. Women's Health Associates, Superior Court, judicial district of Fairfield at Bridgeport, CV 08 5014640, (March 7, 2011, Levin, J.), the court allowed a negligent infliction claim coupled with a medical malpractice claim involving treatment before and during birth.   The court noted the “experience by which a mother gives birth to a child is a sui generis condition.”   The Vrzivoli court relied on Burgess v. Superior Court, 2 Cal.4th 1064 (1992), which made a similar observation, “during pregnancy mother and child are a unique physical unit.”  Id., 1080.   Other cases cited by USAA all involve negligent infliction claims by the mother arising out of alleged medical malpractice during child birth.   The court agrees with Foti that cases allowing a negligent infliction cause of action coupled with a clear professional negligence claim in Connecticut have been limited to the narrow realm of cases where a mother makes such a claim based on medical treatment afforded her and her child while the latter is in utero or during childbirth.   This is not such a case.   Therefore, even though Foti made professional negligence claims in this case, it was entirely possible on the face of the complaint that her third count was based on ordinary negligence.

The court concludes, based on the allegations in Foti's complaint that do not allege professional negligence and the existence of the separate negligent infliction of emotional distress count, there was more than just a possibility that there was coverage under the USAA policies because Foti was claiming Thorson was negligent in the ordinary sense as well as professionally negligent.   Therefore, Thorson, at least at the initial stages of the litigation, was entitled to a defense from USAA. He sought that defense, and the request was wrongfully denied.

Having found that USAA breached its duty to defend Thorson and the consequences of that breach having been transferred to Foti by reason of the stipulated judgment, the court turns to the claim by Foti in her summary judgment motion that she is entitled to the full amount of the $750,000 judgment entered against Thorson.   Connecticut law is quite clear on this issue.   Over 45 years ago the Connecticut Supreme Court held that “reason dictates” that a defendant insurance company, having waived the opportunity open to it to defend the plaintiff insured under a reservation of rights to contest the obligation to indemnify the plaintiff, “the defendant should reimburse the plaintiff for the full amount of the obligation reasonably incurred by the plaintiff.”  Missionaries of Mary, Inc. v. Aetna Casualty and Surety Co., 155 Conn. 104, 113–14 (1967).   This holding was expanded slightly in Keithan v. Massachusetts Bonding & Ins. Co., 159 Conn. 128 (1970):

Where an insurer is guilty of a breach of its contract to defend, it is liable to pay to the insured not only his reasonable expenses in conducting his own defense but, in the absence of fraud or collusion, the amount of a judgment obtained against the insured up to the limit of liability fixed by its policy.

Id., 139.   Therefore, an insurer who has breached the duty to defend is liable for the fees and costs of a settlement as well as the settlement amount.  Alderman v. Hanover Ins. Co., 169 Conn. 603, 612 (1975).   More recently, the Connecticut Supreme Court reaffirmed the Keithan holding by quoting the above language and citing a later version of the same authority, 7C J. Appleman, Insurance Law and Practice (1979) §§ 4689–90.  Hartford Casualty Ins. Co. v. Litchfield Mutual Fire Ins. Co., supra, 274 Conn. 470.

In a case involving a stipulated judgment in which an insured party assigned any claims he had against his insurer in exchange for the injured party's agreement to seek satisfaction of the judgment solely against the insurer, which had refused to defend the insured party, the plaintiff (the injured party) sued the insurer pursuant to General Statutes § 38–321.   The Connecticut Supreme Court in upholding a jury verdict for the plaintiff against the insurer for the amount of the insurance policy in question, held the insurer was under a duty to pay the judgment, citing Alderman, supra, and Schurgast v. Schlemann, 156 Conn. 471 (1968).  Black v. Goodwin, Loomis & Britton, Inc., 239 Conn. 144 (1996).

Based on the above case, the court finds that its determination that USAA breached its duty to defend Thorson makes consideration of USAA's many arguments that Thorson was not covered by the homeowners or umbrella policies issued to him due to various definitions and exclusion provisions to be moot.   Having not fulfilled its initial duty to defend, at least with a reservation of rights to contest coverage, USAA's arguments regarding the scope of coverage offered to Thorson are no longer at issue.   Counsel for USAA conceded this point at oral argument.   Transcript, 8–8–2013, pp. 10–11.   See Missionaries of Mary, Inc. v. Aetna Casualty & Surety Co., supra, 155 Conn. 14;  Black v. Goodwin, etc., supra, 239 Conn. 156 [quoting Red Giant Oil Co. v. Lawlor, 528 N.W.2d 524, 532 (Iowa, 1995) (“An insurer may not hide behind the language of the policy after the insurer abandons its insured and the insured settles the claim by agreement”) ].

As the Connecticut Supreme Court decisions cited above make clear, for a settlement or stipulated judgment between an insured and an injured party to pass muster as an appropriate measure of damages in these types of cases, the settlement or judgment must not be tainted by fraud or collusion, and it must be reasonable.   USAA contends that the stipulated judgment against Thorson should be voided because it has “the appearance of potential impropriety” and is unreasonable.   As to the issue of fraud or collusion USAA carries the burden of proof of clear and convincing evidence.  Black v. Goodwin, etc., supra, 239 Conn. 163–64.   On that score, USAA offered scant evidence making only the arguments that Thorson had an incentive to sign the stipulated judgment since it protected him and his wife from further liability.   The court finds that USAA has failed to offer any, let alone sufficient, proof of collusion or fraud.   As to the issue of reasonableness, Foti has the normal burden of proof.   She points to the Offer of Judgment she made on March 18, 2008 in the underlying action of $1.5 million from which an inference can be made that she had some expectation of receiving a higher amount of damages at trial.   Pl. Memo., Ex. 3. She also notes that Thorson represented he made the stipulation in light of the potential size and probability of a verdict against him.   Id., Ex. 4. The court is aware that this evidence could be viewed with a degree of suspicion as to motive, at least as to Thorson.   Nevertheless, in the absence of other evidence showing unreasonableness it is found that Foti has carried her burden.

VI. Conclusion

For the reasons set forth above, the plaintiff's motion for summary judgment is granted, and the defendant's motion for summary judgment is denied.   Judgment is entered in favor of the plaintiff against the defendant for $750,000.   Post-judgment interest is set at five percent per annum.

TAGGART D. ADAMS

JUDGE TRIAL REFEREE

FOOTNOTES

FN1. A copy of the Hamilton complaint, sometimes referred to as the “underlying” complaint, is found at Def. Memo., Ex. A (found in Dkt. Entry 106.00) and Pl. Memo., Ex. 1 (Dkt. Entry 115.00)..  FN1. A copy of the Hamilton complaint, sometimes referred to as the “underlying” complaint, is found at Def. Memo., Ex. A (found in Dkt. Entry 106.00) and Pl. Memo., Ex. 1 (Dkt. Entry 115.00).

Adams, Taggart D., J.T.R.