Opinion
No. CV 02-0817023
July 27, 2005
MEMORANDUM OF DECISION ON MOTION FOR SUMMARY JUDGMENT
The court heard argument at short calendar on July 11, 2005 concerning the defendant's motion for summary judgment (#172). After considering the parties' arguments, the court issues this memorandum of decision. For the reasons set forth below, the motion is denied.
I Background
The background of this matter recently was summarized by the court (Langenbach, J.) in its March 18, 2005 memorandum of decision (#169.10) ( 39 Conn. L. Rptr. 72) (memorandum of decision) concerning the plaintiff's motion to strike the defendant's special defenses. For ease of reference, the court quotes from that decision: "The defendant, Worcester Insurance Company, issued an automobile liability policy to Joaquim and Emilia Oliveira that was in effect on February 16, 1997. On that date, the son of Joaquim and Emilia Oliveira, Mario Oliveira (`the insured'), was operating the insured automobile with permission. He lost control of the automobile and struck a tree, killing the passenger, Thierry Goncalves. Goncalves' estate sued Mario and Joaquim Oliveira for damages. The defendant hired the same defense counsel to represent both individuals. A settlement agreement was reached with Joaquim Oliveira for the policy limits of $300,000. The agreement also released from liability Emilia Oliveira and the defendant, neither of whom was named as a defendant in the estate's suit for damages. The agreement did not release the insured from liability. The defendant controlled the defense of the suit against the insured after the settlement and up to April 27, 2000, when the Goncalves estate obtained a judgment of $987,817.28 against the insured.
The plaintiff, Infinity Insurance Company, is the assignee of all rights of the Goncalves estate in the judgment against the insured. The CT Page 11090-ec plaintiff is also the assignee of the insured's claims against the defendant. The plaintiff brings the action in its capacity as assignee of these claims.
The complaint alleges three counts. The first count sounds in breach of contract and alleges that the defendant improperly failed to defend the insured by failing to list him in the settlement agreement, failing to settle the estate's claim against him and failing to seek judgment in his favor pursuant to the Supreme Court's decision in Alvarez v. New Haven Register, Inc., 249 Conn. 709, 735 A.2d 306 (1999), in which the court held that, where vicarious liability exists pursuant to the doctrine of respondeat superior, the release of the employee also releases the employer from liability.
The second count sounds in negligence and repeats the first count's three allegations of failure to defend. The second count adds the factual claims that the defendant knew or should have known about the Alvarez decision and nevertheless failed to assert the ruling as a defense. The second count also claims that the defendant had the opportunity to settle the claim against the insured for $20,000 and was `cognizant of the likelihood that through either special arbitration or intercompany arbitration it could seek reimbursement of this payment from the plaintiff,' and nevertheless chose not to settle, thereby `consciously' exposing him to liability for the judgment. The third count alleges bad faith and repeats the allegations of the first two counts. The count claims that the defendant breached its duty of good faith and fair dealing, thereby subjecting the insured to the judgment . . .
The defendant filed an answer dated November 27, 2002 and amended special defenses dated December 12, 2003. The amended special defenses make the following factual assertions. The plaintiff issued to the insured an automobile liability policy with a limit of $20,000 which was in effect at the time of the accident. The policy covered use of a car not owned by the insured only if the non-owned car was used with permission and not available for the insured's regular use. When the Goncalves estate brought its claim against the insured, the plaintiff denied coverage claiming that the insured regularly used his parents' car. The defendant alleges that the plaintiff conducted no investigation whatsoever prior to making this assertion. The plaintiff continued to deny coverage from October 1997 until September 1998, despite the unrefuted testimony of Joaquim and Emilia Oliveiira that at the tine of the accident Mario had permission to use the car for only one week while the Oliveiras were on vacation and that the car was not used by Mario on a regular basis. In September 1998, the plaintiff tendered the policy limit of $20,000 to the Goncalves estate with the condition that the CT Page 11090-ed estate release all claims against the plaintiff, including bad faith claims for its prior refusals to pay the policy limit. The estate refused the offer and obtained judgment against the insured on April 28, 2000.
Subsequent to Judge Langenbach's memorandum of decision, the defendant filed its amended special defenses, dated June 10, 2005 (#182).
The estate then commenced suit against the plaintiff as statutory subrogee to the insured alleging in part that the plaintiff breached its contractual duties to the insured in bad faith and that the plaintiff engaged in unfair claims settlement practices and unfair trade practices in violation of CUTPA and CUIPA. The plaintiff settled the estate's claim and obtained a general release and assignment from the estate and an assignment from the insured." See memorandum of decision, pp. 1-4.
Additional references to the facts are set forth below.
II Standard of Review
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." Practice Book § 17-49. "The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law. The courts hold the movant to a strict standard. To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact . . . As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent . . . When documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the nonmoving party has no obligation to submit documents establishing the existence of such an issue . . . Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue . . . It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue. Mere assertions of fact . . . are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court under Practice Book § [17-45] . . ." Boone v. William W. Backus Hospital, 272 Conn. 551, 558-59, 864 A.2d 1 (2004).
"[S]ummary judgment is appropriate only if a fair and reasonable person could conclude only one way." (Internal quotation marks omitted.) Dugan CT Page 11090-ee v. Mobile Medical Testing Services, Inc., 265 Conn. 791, 815, 830 A.2d 752 (2003). "A material fact . . . [is] a fact which will make a difference in the result of the case." (Internal quotation marks omitted.) H.O.R.S.E. of Connecticut, Inc. v. Washington, 258 Conn. 553, 560, 783 A.2d 993 (2001). "[T]he court's function is not to decide issues of material fact, but rather to determine whether any such issues exist." Nolan v. Borkowski, 206 Conn. 495, 500, 538 A.2d 1031 (1988).
III Discussion A Insured's Consent
In its first special defense, the defendant alleges that the insured, represented by personal counsel, consented to and approved the $300,000 settlement in order to protect his parents from personal liability, knowing and understanding that he would not be released from the estate's claims. The defendant argues that consent by an insured bars a subsequent claim by an insurer standing in the insured's shoes. It contends that the plaintiff's claim that the estate's claim should not have been settled is barred by the insured's consent.
In support of this argument, the defendant relies on two affidavits, one from its claim representative, Michael Falkowski (Exhibit B to the motion), and the second, a copy of an April 2000 affidavit of Mario Oliveira, the insured (Exhibit F to the motion). "It is especially appropriate to hold an affidavit by a moving party to a stringent standard." Evans Products Co. v. Clinton Building Supply, Inc., 174 Conn. 512, 516, 391 A.2d 157 (1978). Affidavits containing self-serving and unsubstantiated allegations need not be viewed as persuasive by the court. See 2830 Whitney Avenue Corp. v. Heritage Canal Development Assoc., Inc., 33 Conn.App. 563, 568, 636 A.2d 1377 (1994).
The court is unpersuaded by Falkowski's affidavit. In paragraph 24 thereof, he states that "[d]uring January of 1998, [the insured] consulted with his personal counsel, Attorney Edward F. Czepiga, and decided to consent to the . . . settlement, to protect his parent's personal assets from exposure, knowing that the claim as against [the insured] would not be settled." This assertion must be disregarded as hearsay. The affiant does not state that he was present during the alleged consultation nor does he contend that he bases his statement on CT Page 11090-ef personal knowledge.
With regard to Mario Oliveira's, the insured's, year 2000 affidavit, although a copy was submitted, the defendant contends, and the plaintiff does not dispute, that the original of that document was previously submitted to the court in connection with prior litigation. Accordingly, the court may consider the affidavit. See Bailey v. Mansour, Superior Court, judicial district of Hartford-New Britain at Hartford, Docket No. 398360 (October 16, 1991, Schaller, J.).
While his affidavit states that the insured wanted to have the claim settled as against his parents (see paragraph 12) and that he had been represented by counsel (see paragraph 13), it does not state that the insured's consent was based on a full understanding of his personal exposure or that he had been advised by his personal counsel, as opposed to counsel who secured a release as to his parents and the defendant. His affidavit does not even mention the name of the counsel who advised him concerning the consent issues. Under these circumstances, as to the issue of the insured's consent, the defendant has not met its burden to make it "quite clear what the truth is," to the exclusion of "any real doubt as to the existence of any genuine issue of material fact." Boone v. William W. Backus Hospital, supra, 272 Conn. 558.
B Independent Contractor
Based on the rule that the release of a principal or agent operates as a release of the other, the defendant contends that, since it hired independent counsel for the insured, the plaintiff's claims that the defendant erred by failing to raise a legal defense for the insured, are barred by the independent contractor defense, set forth in its tenth special defense. In support of this contention, it relies on two affidavits, the Falkowski affidavit referenced above, and the affidavit of Heidi MacEwen, another claims representative, Exhibit E to the motion.
Generally, "an employer is not liable for the negligence of its independent contractors." (Internal quotation marks omitted.) Pelletier v. Sordoni/Skanska Construction Co., 264 Conn. 509, 517, 825 A.2d 72 (2003). In his memorandum of decision, p. 25. Judge Langenbach stated, concerning this issue, "[t]he court agrees that the independent contractor doctrine, if proved by the defendant could excuse the defendant from liability for those aspects of the complaint that allege failure to present an adequate legal defense." Further, he stated that, CT Page 11090-eg "[t]he plaintiff claims that certain decisions made in the defense of the insured resulted in tortious injury to the insured. If the defendant is able to prove that the counsel hired to represent the insured satisfies the independent contractor criteria and was responsible for the allegedly tortious acts, then defendant may properly be excused from liability for those acts." (Emphasis added). See memorandum of decision, p. 25-26.
Among its claims, the plaintiff contends that, in breach of its duty to the insured, based on its assumption of his defense, the defendant failed to include the insured in the Estate's settlement and release; failed to settle the Estate's claim, exposing the insured to a substantial judgment; and failed to seek judgment under Alvarez v. New Haven Register, Inc., supra, 249 Conn. 709.
"The question of status, in the absence of controlling circumstances, is one of fact." Rosenblit v. Danaher, 206 Conn. 125, 146, 537 A.2d 145 (1988). "The determination of the status of an individual as an independent contractor or employee is, in the absence of controlling considerations, a question of fact." Id.
The defendant's claims representatives' averments concerning the role of retained counsel are conclusory and self-serving. See Falkowski affidavit, Exhibit B, ¶¶ 11-17; MacEwen affidavit, Exhibit E, ¶¶ 11-17. Accordingly, they are insufficient to support summary judgment. See Scinto v. Stamm, 224 Conn. 524, 533, 620 A.2d 99, cert. denied, 510 U.S. 861, 114 S.Ct. 176, 126 L.E.2d 136 (1993).
Without question, the defendant's conduct, separate from that of retained counsel, was involved in the events. For example, in its memorandum in support of its motion, at p. 6, the defendant states that "Worcester settled the claim against Joaquim Oliveira for $300,000 to protect Mario's parents' personal assets." No affidavit from the allegedly independent attorney, Sergio Deganis, was presented with the motion. As stated above, the presentation is insufficient to show the insured's knowing consent to not being included in the release and to continued exposure. Significant gaps in the factual presentation preclude summary judgment here.
C Public Policy
Citing its sixth special defense, the defendant also argues that the plaintiff's claim is non-assignable and, therefore, public policy, concerning maintenance and champerty, bars it. The defendant cites Judge CT Page 11090-eh Langenbach's memorandum of decision, p. 19, as the law of the case: "the plaintiff here claims that the insured suffered injury from the defendant's negligence and bad faith in failing adequately to defend him against the claims of the estate. These tort claims are personal in nature, akin to a malpractice claim, and are subject to the public policy rule that personal torts are unassignable."
However, Judge Langenbach also stated that "the plaintiff insurer seeks recovery from the defendant of the judgment against its insured, which allegedly resulted from the defendant's tortious conduct. The law set forth in Wasko [ v. Manella, 269 Conn. 527, 849 A.2d 777 (2004)] and Westchester Fire [ Insurance Co. v. Allstate Insurance Co., 236 Conn. 362, 672 A.2d 939 (1996)] indicates that the plaintiff's action is based upon equitable subrogation." See memorandum of decision, p. 10. "[T]he plaintiff cannot avoid the court's determination of equity by casting its claim in assignment." Id., p. 12.
Judge Langenbach determined that the sixth special defense survived the motion to strike. See memorandum of decision, p. 20. He also stated that champerty is not a valid defense to an action based in equitable subrogation, citing Westchester Fire Insurance Co. v. Allstate Insurance Co., supra, 236 Conn. 373. See memorandum of decision, p. 18.
The defendant argues that since the plaintiff recently disclosed a copy of the assignment in response to a discovery request, see defendant's memorandum in support of the motion (defendant's memorandum), p. 26, "the evidence reveals that the plaintiff is in fact proceeding pursuant to an assignment . . ." This disclosure does not change the analysis set forth by Judge Langenbach concerning the applicability of equitable subrogation to the plaintiff's claims. The defendant does not contend that its public policy argument is applicable to a claim based on equitable subrogation. Accordingly, the defendant has not met its burden to establish that, under applicable principles of substantive law, it is entitled to judgment as a matter of law. See Boone v. William W. Backus Hospital, supra, 272 Conn. 558-59.
D Plaintiff's Damages
In addition, the defendant contends that the plaintiff has sustained no damages and, therefore, cannot establish a prima facie case as a matter of law. It asserts that the judgment against the insured is valueless and unenforceable. There are three claimed bases for this contention: the plaintiff has covenanted that it will not enforce the estate's judgment CT Page 11090-ei against the insured, Connecticut law prohibits an insurer from seeking reimbursement from its own insured, and public policy prohibits the enforcement of such a judgment. See defendant's memorandum, p. 27.
The court is unpersuaded. Our Supreme Court addressed and rejected a similar argument in Black v. Goodwin, Loomis and Britton, Inc., 239 Conn. 144, 681 A.2d 293 (1996). There, the insurer argued that the insured's "assignment of rights in favor of the plaintiff was not effective because the plaintiff had released [the insured] from liability and, accordingly, [the insured] had incurred no payment obligation requiring indemnification." See id., 155. The court noted that a liability policy was at issue, see id., 156, and that where an insurer breaches its duty to defend its insured, "it is no position to argue that the steps the insured took to protect himself should inure to the insurer's benefit." (Internal quotation marks omitted.) Id., 154.
Here, the plaintiff is not seeking reimbursement from its own insured. Rather, the plaintiff claims that the defendant is responsible for the judgment which ensued against the insured. Under General Statute § 38a-321 an "insurer is absolutely liable whenever there is a loss under the policy, and payment of such loss shall not `depend upon the satisfaction by the assured of a final judgment against him for loss . . .'" Black v. Goodwin, Loomis and Britton, Inc., supra, 239 Conn. 156 n. 13.
Contrary to the defendant's argument, see defendant's memorandum, p. 28, by its claim against the defendant insurer the plaintiff is not seeking subrogation from one insured while standing in the shoes of another. See DiLullo v. Joseph, 259 Conn. 847, 850, 792 A.2d 819 (2002). Rather, as Judge Langenbach noted, the plaintiff's claim, is grounded in equitable subrogation. See memorandum of decision, p. 10.
E Damages In Excess Of Policy Limits
The defendant argues, in addition, that plaintiff's first and second counts are barred since claims for damages in excess of an insurer's policy limits are permitted only pursuant to causes of action in which bad faith is alleged. In both the first and second counts, the plaintiff alleges that the defendant paid the policy limit of $300,000.00. See complaint, first and second counts, ¶¶ 11-12. In these counts, bad faith is not alleged.
"[W]here 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 CT Page 11090-ej conducting his own defense but in the absence of fraud or collusion, the amount of a judgment [or settlement) obtained against the insured up to the limit of liability fixed by its policy." (Internal quotation marks omitted.) R.T. Vanderbilt Co. v. Continental Casualty Co., 273 Conn. 448, 470-71, 870 A.2d 1048 (2005), citing Keithan v. Massachusetts Bonding Ins. Co., 159 Conn. 128, 139, 267 A.2d 660 (1970) ( Keithan) and Missionaries of the Co. of Mary, Inc. v. Aetna Casualty Surety Co., 155 Conn. 104, 114, 230 A.2d 21 (1967) ( Missionaries). In Keithan, 159 Conn. 140, our Supreme Court cited 7A Appleman, Insurance Law and Practice (Appleman), § 4689, as support for this rule. Keithan and Missionaries were based on situations in which the insurer refused to defend. See Keithan, 159 Conn. 140; Missionaries, 155 Conn. 114. See also Schurgast v. Schumann, 156 Conn. 471, 491, 242 A.2d 695 (1968) (same).
Thus, the factual underpinnings in the cases cited differed from those at issue here, where the plaintiff alleges that the defendant undertook the insured's defense and then, in breach of its obligation to him, reached a settlement which left him with exposure. Appleman also states that "an insurer, defending an action against the insured, is bound to exercise that degree of care which a man of ordinary prudence would exercise in the management of his own affairs, and if the insurer fails to meet that standard it is liable to the insured for the excess of the judgment over the policy limits, irrespective of fraud or bad faith. That is to say, an insurer undertaking a defense must exercise not only good faith, but also ordinary care and reasonable diligence and caution." (Emphasis added and footnote omitted.) 7C Appleman, § 4687 (Berdal ed. 1979), p. 179-80. Such a claim may state a cause of action in tort or for breach of contract. See 7C Appleman, § 4687 (Berdal ed. 1979), pp. 182-83. Appleman remains a standard treatise on insurance which our Supreme Court frequently cites as an authority. See Wasko v. Manella, supra, 269 Conn. 537 n. 8.
Likewise, 14 L. Russ T. Segalla, Couch on Insurance (3d. Ed. 1999) (Couch), § 202:18, p. 202-54-202-56, also states that "[w]hen an insurer under a liability or indemnity policy assumes the duty of defending or settling suits or claims against the insured, the insurer is required to exercise due care and utmost good faith . . . If the insurer is negligent in performing its duty, the insurer is liable for damages resulting to the insured, even if such damages exceed policy limits." (Footnotes omitted.) Our appellate courts also rely on Couch as an authority. See Hansen v. Ohio Casualty Ins. Co., 239 Conn. 537, 548, 687 A.2d 1262 (1996); Lee v. Duncan, 88 Conn.App. 319, 325, 870 A.2d 1, cert. denied, 274 Conn. 902, (2005).
Here, the plaintiff does not allege that the damages flow from the CT Page 11090-ek insurer's refusal to defend, but, rather, from its acts and omissions which occurred in the course of providing a defense to the insured. In contrast to loss which results from a refusal to defend, where the insurer should foresee damages limited to the extent of the policy limits as a consequence of its breach, loss beyond those limits may be foreseen as a consequence of breach where it fails to properly provide a defense. "Loss may be foreseeable as a probable result of the breach because it follows from the breach (a) in the ordinary course of events, or, (b) as a result of special circumstances, beyond the ordinary course of events, that the party in breach had reason to know." Restatement (Second) Contracts § 351(2). See Neiditz v. Morton S. Fine Associates, Inc., 199 Conn. 683, 689 n. 3, 508 A.2d 438 (1986) (citing Restatement § 351 and discussing applicable causation standards for awarding damages for negligent breach of contract as compared with a case founded solely on breach of contract); Mattegat v. Klopfenstein, 50 Conn.App. 97, 105, 717 A.2d 276 (1998) (same).
Under these circumstances, the defendant has not shown that it is entitled to judgment as a matter of law as a result of having paid the policy limit. Its motion for summary judgment on this ground is denied.
F Bad Faith
The defendant contends that there is no basis for a claim of bad faith against it. As evidence of its lack of bad faith, the defendant again relies on the conclusory and self-serving affidavits of its claims representatives, Falkowski and MacEwen, see Exhibits B and E, and on the insured's April 2000 affidavit, Exhibit F. As stated above, these are insufficient to support summary judgment.
In support of this argument, the defendant also refers the court to various unauthenticated exhibits which may not be considered. See Exhibits A, C, and D to the motion. These documents apparently were produced by the plaintiff in response to a request for production. See defendant's memorandum, pp. 3-4 n. 1. They were not authenticated by an interrogatory answer or a response to a request for admission. See Practice Book § 17-45. "Only evidence that would be admissible at trial may be used to support or oppose a motion for summary judgment." (Internal quotation marks omitted.) Peerless Ins. Co. v. Gonzalez, 241 Conn. 476, 481, 697 A.2d 680 (1997), citing Practice Book § 381, now § 17-46, which provides, "[s]worn or certified copies of all papers or parts thereof referred to in an affidavit shall be attached thereto." Exhibits A, C, and D do not comply with this requirement. CT Page 11090-el
Practice Book § 17-45 provides, in pertinent part, "[a] motion for summary judgment shall be supported by such documents as may be appropriate, including but not limited to affidavits, certified transcripts of testimony under oath, disclosures, written admissions and the like."
In contrast to Deneault v. Sargeant, Superior Court, judicial district of Ansonia-Milford at Milford, Docket No. CV02-0077202S (May 23, 2003, Holden, J.) n. 3, cited by the defendant, where the court considered responses to requests for production, the plaintiff here objected to the court's consideration of these documents. In Deneault v. Sargeant, supra, the non-movant did not object to the court's consideration of responses to requests for production.
Under these circumstances, the defendant has not met its burden of proof to as to the plaintiff's bad faith claim.
G Estate's Release
Based on its Seventh special defense, the defendant also argues that the estate's release of the defendant as to all causes of action bars the plaintiff's current claim, as the estate's assignee. In paragraph 1 of its special defense, the defendant asserts that "[t]he plaintiff . . . alleges that this action has been brought, in part, by the plaintiff as the assignee of the Goncalves Estate." (Emphasis added.) As discussed above, the action is also brought by the plaintiff as the assignee of the insured; Judge Langenbach characterized the action as based on equitable subrogation.
The defendant's argument about the estate's release is not addressed to the other aspects of plaintiff's claims, which are grounded in equitable subrogation, although the defendant acknowledges, in its special defense, that they form a basis for each count of the complaint. Thus, by its argument concerning the estate's release, it seeks a summary judgment on part of the claims made in the plaintiff's counts.
"There is no Practice Book rule permitting the entry of a summary judgment under these circumstances. Superior courts have declined to grant motions for partial summary judgment on only a portion of a count in a complaint or a fragment of a claim." Home Insurance Co. v. Hartford Underwriters Insurance Co., Superior Court, judicial district of Middlesex, Complex Litigation Docket at Middletown, Docket No. X04-CV-03-0103487S (April 6, 2005, Quinn, J.) ( 39 Conn. L. Rptr. 60) (collecting cases).
As set forth above, the court has denied the defendant's motion concerning the assignment to the plaintiff by the insured. It would be improper procedurally to grant a motion for partial summary judgment on parts of the counts in the complaint. See id.
CONCLUSION
The defendant has not shown that there is no genuine issue as to any material fact and that it is entitled to judgment as a matter of law. The defendant's motion for summary judgment is denied. It is so ordered. CT Page 11090-em
BY THE COURT
ROBERT B. SHAPIRO
JUDGE OF THE SUPERIOR COURT