Seven Bridges Foundation, Inc. v. Wilson Agency, Inc. (2014)

MEMORANDUM OF DECISION re MOTION TO STRIKE (# 154.00)

This is a lawsuit brought by plaintiff, against its insurance broker(s)—the agency and the agency's principal.   The court adopts excerpts from an earlier decision of

Having successfully moved to strike plaintiff's prior efforts to allege a breach of fiduciary duty, defendants, for a third time, have moved to strike the breach of fiduciary duty claims asserted in the fourth amended revised complaint filed by plaintiff (# 153.00).   The appropriate starting point is the second decision of Judge Tobin, granting the second motion to strike:

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 defendants' motion to strike counts three and four together with the prayers for relief for interest, disbursements and attorneys fees associated with those counts.

(See, pp. 6–7 of docket entry # 145.00;  some internal quotation marks, omitted.) ¹

The question for the court is whether plaintiff's latest complaint cures the deficiencies that were identified in the last-challenged version of the complaint.

Following the example set by Judge Tobin, the court looks to the allegations that have been added since the granting of the last motion to strike (see, # 137.86 and # 145.00).

27. The Agency was disloyal and dishonest towards the Plaintiff in that it was under a debilitating conflict of interest, that being, the Agency wanted it to appear to Seven Bridges that the Agency was protecting Seven Bridges' interests by offering the same amount of coverage while at the same time, causing a reduction in Seven Bridges' premium, when in fact the opposite was true, the Agency caused a huge reduction in coverage, close to $4,500,000, while making it appear that the same amount of coverage was in place on a percentage basis, i.e., 100%, at a lower premium.

28. In this case the particular conflict was putting the Agency's interest of maintaining Seven Bridges as a client, by creating the false impression that it could find and bind 100% coverage of the anticipated losses at a reduced premium, ahead of Seven Bridges' interests, of keeping 100% coverage in place.

29. The Agency was further dishonest, immoral and debilitated by conflicts of interest as it engaged in a calculated gamble with Seven Bridge's property without disclosing to Seven Bridges that it was engaging in this highly dangerous practice, that is lowering the coverage, creating a “co-insured penalty” during the time between the placement of coverage and the completion of the building, and gambling that there would be no casualty which would expose the Agency's gamble and breach of its fiduciary duties.   This was a calculated gamble which was intended to make the Agency appear to be a star, by lowering the covered amount and thus the premium, without decreasing the amount recoverable.   However, and unfortunately, the gamble backfired and the building suffered a major fire during the policy period and it came as a complete shock and surprise to Seven Bridges to learn that because the Agency lowered the coverage to almost half of the construction value, Seven Bridges became a ‘co-insured’ with Travelers, and Travelers imposed the ‘coinsurance penalty’ of nearly 50%, meaning that Seven Bridges, because of the Agency's dishonest gamble, had its coverage lowered by 75%, first a near 50% reduction in requested coverage, and then half amount being unrecoverable because of the ‘coinsurance penalty.’

30. Further by failing to advise the Plaintiff of the increased liability that Seven Bridges was incurring as a result of the co-insurance provisions of the Travelers' Policy and applicable law which further reduced the insurance coverage, it was dishonestly attempting to curry favor and/or enhance its image and reputation with the Plaintiff, so as further secure business opportunities by giving the Plaintiff the false impression that the Agency had lowered the Plaintiff's insurance premiums, and thus effected a putative savings to the Plaintiff, without increasing the Plaintiff's risk or decreasing its coverage below $3,000,000.00.2

In connection with a motion to strike, the court is required to “construe the complaint in the manner most favorable to sustaining its legal sufficiency,” accepting the truth of well-pleaded facts.  Mercer v. Champion, 139 Conn.App. 216, 223 (2012).   Plaintiff repeatedly has used the word “gamble” which, based on common usage as well as argument of counsel, connotes an intentional undertaking of a risk.   Here, plaintiff is asserting that defendants intentionally put plaintiff at financial risk in order to retain and curry favor with a client, i.e. for their own pecuniary benefit.   Although the court noted during argument that business entities presumptively are in business for their own pecuniary benefit, the allegations of the complaint, read most favorably to plaintiff, state that defendants were gambling, at their client's risk, to further their own ends.   Or, to put it more colloquially, defendants were gambling with someone else's money (plaintiff's).

Further, the allegations of an intentional failure to disclose, leading to a false impression on the part of plaintiff, when read in a manner favorable to plaintiff, suggest a claim of misrepresentation—seemingly intentional or fraudulent.

The court must presume that plaintiff has a good faith basis for making these assertions of aggravated misconduct, going beyond mere negligence.   Assuming that plaintiff believes it can prove that which has been alleged, plaintiff has alleged adequate causes of action sounding in breach of fiduciary duty, relating both to the agency and the individual defendant.   The motion to strike, therefore, must be denied.

POVODATOR, J.

FOOTNOTES

FN1. Judge Tobin found that there were sufficient allegations of the existence of a fiduciary relationship.   In the absence of good cause to revisit that determination, the court treats that determination as the law of the case, and not an issue to be addressed in this memorandum.  Breen v. Phelps, 186 Conn. 86, 99–100 (1992).   This decision focuses solely on the adequacy of allegations of a breach of such a relationship..  FN1. Judge Tobin found that there were sufficient allegations of the existence of a fiduciary relationship.   In the absence of good cause to revisit that determination, the court treats that determination as the law of the case, and not an issue to be addressed in this memorandum.  Breen v. Phelps, 186 Conn. 86, 99–100 (1992).   This decision focuses solely on the adequacy of allegations of a breach of such a relationship.

FN2. There are additional “new” allegations but these seem to be the ones particularly directed at “alleging facts suggesting fraud, self-dealing, conflict of interest, or other immorality on the defendants' part” as was identified as lacking in the previous challenged iteration of the complaint.  (The court is quoting the allegations directed to the agency;  there are similar allegations directed to the individual defendant.).  FN2. There are additional “new” allegations but these seem to be the ones particularly directed at “alleging facts suggesting fraud, self-dealing, conflict of interest, or other immorality on the defendants' part” as was identified as lacking in the previous challenged iteration of the complaint.  (The court is quoting the allegations directed to the agency;  there are similar allegations directed to the individual defendant.)

Povodator, Kenneth B., J.