Amica Mutual Ins. Co. v. Jeremy Paradis (2013)

MEMORANDUM OF DECISION RE MOTION TO DISMISS

This declaratory judgment action arises out of an underlying lawsuit involving a residential real estate transaction in the town of Simsbury.   The plaintiff-buyers in that action, Jessie and Donald Van Dyke (the Van Dykes), sued the seller of the property, Jeremy Paradis, among others also involved in the transaction.   In counts eleven, twelve, and thirteen of the underlying complaint, the Van Dykes allege that with respect to the sale of the home, Paradis engaged in fraud/intentional misrepresentation, negligent misrepresentation, and violations of General Statutes § 20–327b.   The Van Dykes seek compensatory damages, punitive damages, and attorneys fees.

On April 14 and April 15, 2013, the plaintiff, Amica Mutual Insurance Company (Amica) initiated the present action by service of process on Paradis and the Van Dykes, respectively.   Amica's complaint for declaratory judgment, dated April 24, 2013, seeks a declaration, pursuant to the homeowner's insurance policy it issued to Paradis, which was in effect during the underlying transaction, that Amica does not owe Paradis the duty to defend nor the duty to indemnify him in the underlying action.   This is so, Amica alleges, because while the policy provides personal liability coverage to Paradis for “property damage” caused by an “occurrence,” the losses and damage claimed by the Van Dykes in the underlying action are not “property damage,” nor were they the result of an “occurrence,” as those terms are defined by the policy.   Amica additionally alleges that the policy does not provide coverage for the underlying action because the claimed losses and damage were expected or intended by Paradis.   Finally, Amica alleges that the policy does not provide coverage for punitive or exemplary damages.

On August 15, 2013, Paradis filed a motion to dismiss Amica's complaint for declaratory judgment on the ground that the court lacks subject matter jurisdiction.   Paradis filed a memorandum of law in support of the motion, accompanied by a copy of the underlying complaint, a letter from Paradis' counsel to Amica dated December 13, 2012;  a reservation of rights letter from Amica to Paradis, dated February 7, 2013, attached to which are relevant portions of the homeowner's insurance policy in question;  and a letter to Amica from Paradis' counsel, dated March 12, 2013.   On August 30, 2013, Amica filed an objection to the motion.   The matter was heard at short calendar on September 16, 2013.

MOTION TO DISMISS

“[A] motion to dismiss ․ properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court.”  (Internal quotation marks omitted.)  Santorso v. Bristol Hospital, 308 Conn. 338, 350, 63 A.3d 940 (2013).  “The grounds which may be asserted in [a motion to dismiss include] ․ lack of jurisdiction over the subject matter.”  Zizka v. Water Pollution Control Authority, 195 Conn. 682, 687, 490 A.2d 509 (1985), citing Practice Book § 143, which is now § 10–31.

“Trial courts addressing motions to dismiss for lack of subject matter jurisdiction pursuant to § 10–31(a)(1) may encounter different situations, depending on the status of the record in the case ․ [L]ack of subject matter jurisdiction may be found in any one of three instances:  (1) the complaint alone;  (2) the complaint supplemented by undisputed facts evidenced in the record;  or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts ․ Different rules and procedures will apply, depending on the state of the record at the time the motion is filed.”   (Citation omitted;  footnote omitted;  internal quotation marks omitted.)   Conboy v. State, 292 Conn. 642, 650–51, 974 A.2d 669 (2009).  “When a trial court decides a jurisdictional question raised by a pretrial motion to dismiss on the basis of the complaint alone, it must consider the allegations of the complaint in their most favorable light ․ In this regard, a court must take the facts to be those alleged in the complaint, including those facts necessarily implied from the allegations, construing them in a manner most favorable to the pleader.”  (Internal quotation marks omitted.)  Id., 651.   “In contrast, if the complaint is supplemented by undisputed facts established by affidavits submitted in support of the motion to dismiss ․ other types of undisputed evidence ․ and/or public records of which judicial notice may be taken ․ the trial court, in determining the jurisdictional issue, may consider these supplementary undisputed facts and need not conclusively presume the validity of the allegations of the complaint ․ Rather, those allegations are tempered by the light shed on them by the [supplementary undisputed facts] ․ If affidavits and/or other evidence submitted in support of a defendant's motion to dismiss conclusively establish that jurisdiction is lacking, and the plaintiff fails to undermine this conclusion with counteraffidavits ․ or other evidence, the trial court may dismiss the action without further proceedings ․ If, however, the defendant submits either no proof to rebut the plaintiff's jurisdictional allegations ․ or only evidence that fails to call those allegations into question ․ the plaintiff need not supply counteraffidavits or other evidence to support the complaint, but may rest on the jurisdictional allegations therein.”  (Citations omitted;  emphasis in original;  footnote omitted, internal quotation marks omitted.)  Id., 651–52.

In its complaint for declaratory judgment, Amica seeks two declarations:  first, that it has no duty to defend Paradis in the underlying action, and second, that it has no duty to indemnify Paradis in the underlying action.   In his motion to dismiss, Paradis attacks both declarations on the ground that they present nonjusticiable issues.  “A case that is nonjusticiable must be dismissed for lack of subject matter jurisdiction.”  (Internal quotation marks omitted.)  Chapman Lumber, Inc. v. Tager, 288 Conn. 69, 86, 952 A.2d 1 (2008).  “Justiciability involves the authority of the court to resolve actual controversies ․ Because courts are established to resolve actual controversies, before a claimed controversy is entitled to a resolution on the merits it must be justiciable ․ Justiciability requires (1) that there be an actual controversy between or among the parties to the dispute ․ (2) that the interests of the parties be adverse ․ (3) that the matter in controversy be capable of being adjudicated by judicial power ․ and (4) that the determination of the controversy will result in practical relief to the complainant ․ As we have recognized, justiciability comprises several related doctrines, [including] ripeness [and] mootness “ (Citations omitted, emphasis in original;  internal quotations omitted.)  Statewide Grievance Committee v. Burton, 282 Conn. 1, 7, 917 A.2d 966 (2007).

I

DUTY TO DEFEND

Paradis first attacks the issue of Amica's duty to defend, arguing that it is moot because Amica has already agreed to provide him a defense in the underlying action.   For its part, Amica argues that while it did agree to defend Paradis, it did so under a reservation of rights.   In support of its argument, Amica points to its reservation of rights letter, which states that Amica will provide a defense, but reserves the right to enforce the exclusions, conditions, or limitations in coverage stated within the policy.   The letter also states that Amica's investigation of the claim in the underlying action should not be construed as a waiver of its right to deny coverage.   In sum, Amica argues that because the allegations against Paradis in the underlying complaint fall outside of the scope of the policy's coverage, pursuant to its reservation of rights letter, Amica does not have a duty to defend Paradis.   Therefore, a controversy with respect to the duty to defend exists and the issue is not moot.

“Mootness is a question of justiciability that must be determined as a threshold matter because it implicates [this] court's subject matter jurisdiction ․” (Internal quotation marks omitted.)  State v. Milner, 309 Conn. 744, 751, 72 A.3d 1068 (2013).  “The test for determining mootness is whether a judgment, if rendered, would have any practical legal effect upon an existing controversy.   Thus, the central question in a mootness problem is whether a change in the circumstances that prevailed at the beginning of the litigation has forestalled the prospect for meaningful, practical, or effective relief.”  (Internal quotation marks omitted.)  Statewide Grievance Committee v. Burton, supra, 282 Conn. 13.

At issue here is whether Amica, having provided Paradis a defense under reservation of rights, must continue to defend Paradis despite its argument that the allegations against Paradis in the underlying action fall outside the scope of the policy's coverage.  “It is generally held that if an insurer conducts an investigation or defense under a notice of reservation of rights, it will not thereby be estopped to set up any policy defenses that may be available to it ․ If, however the insurer conducts itself in a manner inconsistent with the reservation of rights or makes assurances to the insured that the claim will be taken care of, the reservation of rights may be waived ․ [An] insurer may avoid a waiver of the reservation of rights if it clearly informs the insured that the appearance of its attorneys on the insured's behalf is under a reservation of rights, and the insurer performs no acts inconsistent with such reservation ․ An insurer is not estopped to set up the defense that the assured's loss was not covered by the contract of indemnity by the fact that the insurer participated in the action against the assured, if at the same time it gives notice to the assured that it does not waive the benefits of such defense.”  (Citations omitted, internal quotations omitted.)  West Haven v. Hartford Ins. Co., 221 Conn. 149, 165, 602 A 2d 988 (1992).

Amica's reservation of rights letter first explains that there is “insufficient information to determine if coverage applies for [the] loss under [Paradis'] Homeowners policy ․” The letter continues:  “There may also be other reasons coverage does not apply.   We specifically reserve the right to enforce any exclusion, condition, or limitation of coverage stated in the policy which may become evident during our investigation.   Our investigation of this claim should not be construed as a waiver of our right to deny coverage of this loss for the reasons previously mentioned or discovered during our investigation.”   Finally, Amica's letter states:  “Since a question of coverage exists, and while we investigate the allegations of the Complaint, we will provide you with a defense of this matter by an attorney of your choice ․ In the event we determine that there is no coverage for this incident, we reserve the right to terminate the defense immediately.”

Paradis has made no argument, nor proffered any evidence, that Amica conducted itself in a manner inconsistent with its reservation of rights or made assurances that Paradis' claim would be otherwise taken care of.   In light of Amica's clear indication to Paradis that a defense was being provided under reservation of rights, and the fact that Amica did not waive this reservation, it cannot be said that there is no controversy with respect to Amica's duty to defend Paradis in the underlying action.   Indeed, whether Amica must defend Paradis will turn on the interpretation of Paradis' homeowners policy vis a vis the allegations against Paradis.¹  Such a judgment will have practical legal effect inasmuch as it will determine the legal rights of the parties.   Therefore, the issue is not moot.

II

DUTY TO INDEMNIFY

Paradis next attacks the issue of Amica's duty to indemnify him in the underlying action, arguing that the issue is not ripe for adjudication because the underlying action has not yet been settled.   For its part, Amica argues that Paradis misstates the law, and an insurer need not wait until a loss occurs to adjudicate its duty to indemnify, but instead the issue is ripe for adjudication when liability is incurred and a defense is sought under the policy.   Further, Amica argues, the question posed in its complaint for declaratory judgment is not hypothetical because it requires only the construction of the policy in question in light of the underlying complaint, and no factual finding in the underlying action is necessary.

“[I]n determining whether a case is ripe, a trial court must be satisfied that the case before [it] does not present a hypothetical injury or a claim contingent [on] some event that has not and indeed may never transpire.”   (Internal quotation marks omitted.)  Janulawicz v. Commissioner of Correction, 310 Conn. 265, 271, 77 A.3d 113 (2013).  “The rationale of the ripeness requirement [is] to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements ․” Liberty Mutual Ins. Co. v. Lone Star Industries, Inc., 290 Conn. 767, 813–14, 967 A.2d 1 (2009).

“[A]ppellate courts have not distinguished between ripeness on the issues of obligation to defend and obligation to indemnify.   When a declaratory judgment action is brought, the court has proceeded to analyze the contract language to determine if both duties exist.   See, e.g, Mitchell v. Medical Inter-[Insurance] Exchange, 101 Conn.App. 721, 923 A.2d 790 (2007).   Indeed, in DaCruz v. State Farm Fire & Casualty Co., 268 Conn. 675, 846 A.2d 849 (2004), the court determined that a decision in a declaratory judgment action on the duty to defend necessarily was a decision on the duty to indemnify as well, whether or not the indemnification issue had become fully ripe.   There is no persuasive authority for the proposition that either party [to an insurance coverage agreement] must wait until the insured is found liable before obtaining a decision on whether the indemnity duty is present, at least where the duty to defend is also raised as an issue in the declaratory judgment action.”   Allstate Ins. Co. v. Limone, Superior Court, judicial district of New Britain, Docket No. CV–08–4016936–S (October 10, 2008, Pittman, J.).   See also State Farm Fire & Casualty Co. v. Plasczynski, Superior Court, judicial district of New Britain, Docket No. CV–13–6019509 (September 10, 2013, Wiese, J.) (Insurance company brought declaratory judgment action on ground that coverage in underlying claim not afforded by homeowner's insurance policy;  defendant's motion to dismiss denied because both duty to defend and duty to indemnify ripe for adjudication at that stage.)

This is so because “the duty to defend is broader than the duty to indemnify ․ An insurer's duty to defend is triggered if at least one allegation of the complaint falls even possibly within the coverage ․ Indeed, [i]t is well established ․ that a liability insurer has a duty to defend its insured in a pending lawsuit if the pleadings allege a covered occurrence, even though facts outside the four corners of those pleadings indicate that the claim may be meritless or not covered ․ The obligation of the insurer to defend does not depend on whether the injured party will successfully maintain a cause of action against the insured but on whether he has, in his complaint, stated facts which bring the injury within the coverage.   If the latter situation prevails, the policy requires the insurer to defend, irrespective of the insured's ultimate liability ․ In contrast to the duty to defend, the duty to indemnify is narrower:  while the duty to defend depends only on the allegations made against the insured, the duty to indemnify depends upon the facts established at trial and the theory under which judgment is actually entered in the case.”  (Citations omitted;  internal quotation marks omitted.)  Capstone Building Corp v. American Motorists Ins. Co., supra, 308 Conn. 805–06.   Therefore, because the duty to defend is ripe, and that duty is broader than the duty to indemnify, both issues are ripe for adjudication.

CONCLUSION

For the foregoing reasons, the issue of Amica's duty to defend Paradis in the underlying action is not moot, and the issue of Amica's duty to indemnify Paradis in the underlying action is ripe for adjudication.   Accordingly, the court has subject matter jurisdiction and the motion to dismiss is hereby denied.

Peck, J.

FOOTNOTES

FN1. “[T]he duty to defend is triggered whenever a complaint alleges facts that potentially could fall within the scope of coverage ․” (Emphasis in original;  internal quotation marks omitted.)  Capstone Building Corp. v. American Motorists Ins. Co., 308 Conn. 760, 806, 67 A.3d 961 (2013)..  FN1. “[T]he duty to defend is triggered whenever a complaint alleges facts that potentially could fall within the scope of coverage ․” (Emphasis in original;  internal quotation marks omitted.)  Capstone Building Corp. v. American Motorists Ins. Co., 308 Conn. 760, 806, 67 A.3d 961 (2013).

Peck, A. Susan, J.