Metsack et al v. Liberty Mutual Fire Insurance Company
Filing
41
ORDER denying 14 Motion to Dismiss. See the attached memorandum of opinion. Signed by Judge Vanessa L. Bryant on 9/30/15.(Shechter, N.)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
STEPHEN A. METSACK AND
GAIL D. METSACK,
Plaintiffs
v.
LIBERTY MUTUAL FIRE INSURANCE
COMPANY AND ALLSTATE INSURANCE
COMPANY,
Defendants.
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CIVIL ACTION NO.
3:14-CV-01150 (VLB)
September 30, 2015
MEMORANDUM OF DECISION DENYING DEFENDANTS’ MOTION TO DISMISS
THE COMPLAINT [Dkt. 14]
I.
Introduction
The Plaintiffs, Stephen A. Metsack and Gail D. Metsack (the “Metsacks”),
bring this action against Defendants Liberty Mutual Fire Insurance Company
(“Liberty Mutual”), and Allstate Insurance Company (“Allstate”), alleging breach
of contract, breach of the implied covenant of good faith and fair dealing, and
violations of the Connecticut Unfair Insurance Practices Act (“CUIPA”) and Unfair
Trade Practices Act (“CUTPA”), as a result of Liberty Mutual’s decision to decline
coverage for damage to the basement walls of Plaintiffs’ home (the “Property”)
under a homeowners insurance policy (the “Policy”) issued to the plaintiffs by
Liberty Mutual. Liberty Mutual has moved to dismiss the Complaint for failure to
state a claim upon which relief can be granted under Fed. R. Civ. P. 12(b)(6),
arguing that the Policy excludes coverage for the type of damage claimed by
defendants to any “foundation” or “retaining wall” and that the basement walls of
1
the Property are a “foundation” or “retaining wall” within the meaning of the
Policy exclusion. Plaintiffs argue that those terms are ambiguous as used in the
Policy and therefore must be construed in favor of coverage. For the reasons
that follow, Defendant Liberty Mutual’s Motion to Dismiss is DENIED.
II.
Factual Background
The following facts and allegations are taken from Plaintiffs’ First Amended
Complaint.
Defendant Liberty Mutual is an insurance company incorporated under the
laws of the Commonwealth of Massachusetts and has a principal place of
business in Massachusetts. [Dkt. 30, Amend. Compl. at ¶ 2]. Defendant Allstate
is an insurance company incorporated under the laws of the State of Illinois and
has a principal place of business in Illinois. [Id. ¶ 3]. The Metsacks are
Connecticut residents who purchased a residential property at 148 Laurel Lane,
Ashford, Connecticut in June of 1991. [Id. ¶ 1]. The residence that is the subject
of this action was constructed in 1992. [Id. ¶ 5]. The Metsacks insured their
home at 148 Laurel Lane between June of 1991 and September of 2009 with a
homeowner’s policy issued by Allstate. [Id. ¶ 55]. Beginning in 2009, the
Metsacks insured the Property with a homeowner’s policy issued by Liberty
Mutual. [Id. ¶ 6].
In the Spring of 2014, the Metsacks noticed water in their basement and
noticed a series of horizontal and vertical cracks throughout most of the
basement walls of their home. [Id. ¶¶ 8, 9]. In April of 2014, the Metsacks were
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advised by their contractor, Dean Soucy, that the form of “pattern cracking”
found in the basement walls of their home was due to a chemical compound
found in certain basement walls constructed in the late 1980s and the early 1990s
with concrete most likely from the J.J. Mottes Concrete Company. [Id. ¶ 11]. This
compound “began to oxidize (rust) and expand, breaking the bonds of the
concrete internally.” [Id. ¶ 12]. Plaintiffs allege that “[a]t some point between the
date on which the basement walls were poured and the month of April, 2014 the
basement walls suffered a substantial impairment to their structural integrity.”
[Id. ¶ 14]. The Metsacks notified Liberty Mutual on April 15, 2014 of the condition
of their basement walls and made a claim for coverage. [Id. ¶¶ 14, 15].
Liberty Mutual’s claims representative denied the Metsacks’ claim for
coverage in a letter dated May 12, 2014 stating that the Policy does not afford
coverage for “settling/earth movement or seepage of ground water….” [Id. ¶ 19].
Plaintiffs allege that Allstate’s claims representative also denied the Metsacks’
claim orally on March 10, 2015, asserting that the Allstate policy does not afford
coverage for losses that occur “over time” and that “too much time has passed
since Allstate covered the property.” [Id. ¶ 68]. Plaintiff alleges that the cost of
replacing the basement walls “is expected to be not less than $125,000.00.” [Id. ¶
23].
The Liberty Mutual Policy, which is the relevant policy for the purposes of
Liberty Mutual’s Motion to Dismiss, is attached as an Exhibit to the First
Amended Complaint and provides coverage under Section 8 of the Policy for
“direct physical loss to covered property involving collapse of a building or any
3
part of a building caused only by one or more of the following:…(b) Hidden
decay;… or (f) Use of defective material or methods in construction, remodeling
or renovation.” [Dkt. 30, Ex. A, at 5]. Section 8 also includes an exclusionary
clause, which excludes coverage for appurtenances, stating that “[l]oss to an
awning, fence, patio, pavement, swimming pool, underground pipe, flue, drain,
cesspool, septic tank, foundation, retaining wall, bulkhead, pier, wharf or dock is
not included unless the loss is a direct result of the collapse of a building.” [Id.]
(emphasis added).
Plaintiff alleges that Liberty Mutual has “a general business practice of
acting intentionally to mislead its insureds into believing that the collapse of the
basement walls of a building caused by hidden decay or by the use of faulty or
defective materials or methods of construction is not a covered loss.” [Id. ¶ 33].
As evidence of a general business practice, Plaintiff points to at five other
substantially similar pending or resolved “concrete decay” lawsuits against
either Liberty Mutual or companies within the Liberty Mutual Group within the last
four years. 1 The Amended Complaint also states that Liberty Mutual and Allstate
participate “in the Insurance Services Office, Inc., (“ISO”) which is a cooperative
organization formed and controlled by its participants for the purpose, among
others, of collecting data on the type of claims made, the policy provisions cited
1
See Belz v. Peerless Insurance Company, Connecticut Federal District Court
Civil Action No. 3:13-cv- 1315 (JCH); Karas v. Liberty Insurance Corporation,
Connecticut Federal District Court Civil Action No. 3:13-cv-1836 (SRU); Matthews
v. Peerless Insurance Company, Connecticut Federal District Court Civil Action
No. 3:12-cv-01506 (WWE); Roberts v. Liberty Mutual Fire Insurance Company,
Connecticut Federal District Court Civil Action No. 3:13-cv-00435 (SRU); Waters v.
Liberty Mutual Group, Inc., et al., Massachusetts Superior Court, Hampden
Division, Docket No. 06-131.
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for the basis of each claim, the geographic areas in which the claimed damage
has occurred, and the actions taken by insurers in response to such claims.” [Id.
¶ 38]. By means of their participation in the ISO, Plaintiff claims that Liberty
Mutual and Allstate have joined “in an insurance industry wide practice of
denying coverage for concrete decay claims.” [Id. ¶ 41].
Plaintiff also argues that Defendant Liberty Mutual was aware of an opinion
issued by a court in this district concerning a concrete decay claim against
another insurer in Bacewicz v. NGM Ins. Co., in which that court denied a
summary judgment by an insurer, finding that a policy exclusion cited here by
Liberty Mutual was “reasonably susceptible to more than one reading.” No. 3:08CV-1530 (JCH), 2010 WL 3023882, at *3-6 (D. Conn. Aug. 2, 2010). Plaintiff argues
that Liberty Mutual thereafter engaged in a practice of “refusing to attempt in
good faith to effectuate prompt, fair and equitable settlements of concrete decay
claims in which liability has become reasonably clear.”
On August 8, 2014, Plaintiffs filed their original Complaint against
Defendant Liberty Mutual. On October 30, 2014, Liberty Mutual moved to dismiss
the Complaint under Fed. R. Civ. P. 12(b)(6), arguing that it fails to state a claim
on which relief can be granted due to the exclusion in the Policy for loss to a
“foundation” or “retaining wall.” Defendant also argued that Plaintiffs’ Complaint
was fatally vague for failing to state whether the damage occurred during the
period of the Liberty Mutual Policy or prior to that Policy taking effect in 2009.
After the parties briefed the instant Motion, Plaintiffs sought leave of this Court to
amend their Complaint in order to add Allstate as a party, and leave was granted.
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On March 18, 2015, Plaintiffs filed an Amended Complaint and requested
issuance of a summons to Allstate. Although counsel for Allstate entered an
appearance on April 17, 2015, and was a participant in the parties’ Rule 26(f)
conference, Allstate has not moved to dismiss the Amended Complaint or
otherwise filed a timely Answer, the deadline to respond to the Amended
Complaint having long since passed. Plaintiffs have not moved for default
judgment as to Allstate and neither Defendant has in any way indicated an intent
to rely upon the arguments set forth in Liberty Mutual’s Motion to Dismiss the
original Complaint. Nonetheless, as discussed below, the Court can resolve the
issues presented by Liberty Mutual’s motion.
Standard of Review
“‘To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to state a claim to relief that is plausible on its
face.’” Sarmiento v. U.S., 678 F.3d 147 (2d Cir. 2012) (quoting Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009)). While Rule 8 does not require detailed factual
allegations, “[a] pleading that offers ‘labels and conclusions’ or ‘formulaic
recitation of the elements of a cause of action will not do.’ Nor does a complaint
suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’”
Iqbal, 556 U.S. at 678 (citations and internal quotations omitted). “Where a
complaint pleads facts that are ‘merely consistent with’ a defendant's liability, it
‘stops short of the line between possibility and plausibility of ‘entitlement to
relief.’ ” Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007)). “A
claim has facial plausibility when the plaintiff pleads factual content that allows
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the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Id. (internal citations omitted).
In considering a motion to dismiss for failure to state a claim, the Court
should follow a “two-pronged approach” to evaluate the sufficiency of the
complaint. Hayden v. Paterson, 594 F.3d 150, 161 (2d Cir. 2010). “A court ‘can
choose to begin by identifying pleadings that, because they are no more than
conclusions, are not entitled to the assumption of truth.’” Id. (quoting Iqbal, 556
U.S. at 679). “At the second step, a court should determine whether the ‘wellpleaded factual allegations,’ assumed to be true, ‘plausibly give rise to an
entitlement to relief.’” Id. (quoting Iqbal, 556 U.S. at 679). “The plausibility
standard is not akin to a probability requirement, but it asks for more than a sheer
possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678 (internal
quotations omitted).
In general, the Court’s review on a motion to dismiss pursuant to Rule
12(b)(6) “is limited to the facts as asserted within the four corners of the
complaint, the documents attached to the complaint as exhibits, and any
documents incorporated in the complaint by reference.” McCarthy v. Dun &
Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 2007). The Court may also consider
“matters of which judicial notice may be taken” and “documents either in
plaintiffs' possession or of which plaintiffs had knowledge and relied on in
bringing suit.” Brass v. Am. Film Techs., Inc., 987 F.2d 142, 150 (2d Cir.1993);
Patrowicz v. Transamerica HomeFirst, Inc., 359 F. Supp. 2d 140, 144 (D. Conn.
2005)(MRK). Here, Plaintiffs attach the homeowners policies issued by Allstate
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and Liberty to his complaint as exhibits. Therefore, the Court may consider the
entirety of these Policies to analyze the pending motion to dismiss.
III.
Discussion
The filing of an Amended Complaint typically renders any motions relevant
to the original Complaint moot. Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124,
1128 (2d Cir.1994) (internal quotation omitted) (“It is well established that an
amended complaint ordinarily supersedes the original, and renders it of no legal
effect.”); Thompson v. Pallito, 949 F. Supp. 2d 558, 582 (D. Vt. 2013) (“motions
addressed to the original complaint are generally regarded as moot upon the
filing of an amended complaint”). However, “[i]t frequently happens in the district
court that a plaintiff amends its complaint while a motion to dismiss is pending . .
. a court then has a variety of ways in which it may deal with the pending motion,
from denying the motion as moot to considering the merits of the motion in light
of the amended complaint.” In re Colonial Ltd. P'ship Litig., 854 F. Supp. 64, 80
(D. Conn. 1994)
In the instant case, the Amended Complaint merely recited the same claims
against Liberty Mutual against a new Defendant, Allstate. Otherwise, with one
exception, the issues presented by Liberty Mutual’s Motion to Dismiss the
original complaint, and the factual allegations relevant to those issues, have not
changed. Therefore, the Court will consider Defendant Liberty Mutual’s Motion to
Dismiss the original Complaint and the issues alleged therein in light of the
allegations of the Amended Complaint. The sole exception is Defendant’s
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argument that Plaintiffs’ claims are fatally vague for failure to identify the policy
period in which the damage occurred. That argument has been rendered moot by
the Amended Complaint’s addition of Allstate as a party, such that the two
Defendants are alleged to have provided coverage throughout the entirety of the
existence of the Metsack’s home. That portion of Defendant’s Motion to Dismiss
which argues for dismissal of the original Complaint on the grounds of
vagueness is DENIED as moot.
A. Count One: Breach of Contract
An insurance policy “is to be interpreted by the same general rules that
govern the construction of any written contract.” Zulick v. Patrons Mut. Ins. Co.,
287 Conn. 367, 372–73, 949 A.2d 1084 (2008). Any contract “must be construed to
effectuate the intent of the parties, which is determined from the language used
and interpreted in the light of the situation of the parties and the circumstances
connected with the transaction.” Murtha v. City of Hartford, 303 Conn. 1, 7–8
(2011); Harbour Pointe, LLC v. Harbour Landing Condominium Ass'n, Inc., 300
Conn. 254, 260 (2011) (“[i]n ascertaining the contractual rights and obligations of
the parties, we seek to effectuate their intent, which is derived from the language
employed in the contract, taking into consideration the circumstances of the
parties and the transaction”).
Where the language of a contract is unambiguous, a court “must give the
contract effect according to its terms.” Harbour Pointe, LLC, 300 Conn. at 260. A
contract is unambiguous when “its language is clear and conveys a definite and
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precise intent.... The court will not torture words to impart ambiguity where
ordinary meaning leaves no room for ambiguity.” Id. (citation omitted); Murtha,
303 Conn. at 9 (same). “[T]he mere fact that the parties advance different
interpretations of the language in question does not necessitate a conclusion that
the language is ambiguous.” Harbour Pointe, LLC, 300 Conn. at 260 (citation
omitted).
Where the language of an insurance policy is ambiguous, such language
must be construed against the insurance company that drafted the policy. See
Springdale Donuts, Inc. v. Aetna Cas. & Sur. Co., 247 Conn. 801, 806, 724 A.2d
1117 (1999). However, any ambiguity in a contract “must emanate from the
language used by the parties” and “a contract is ambiguous if the intent of the
parties is not clear and certain from the language of the contract itself.” Murtha,
300 Conn. at 9. “The contract must be viewed in its entirety, with each provision
read in light of the other provisions ... and every provision must be given effect if
it is possible to do so.... If the language of the contract is susceptible to more
than one reasonable interpretation, the contract is ambiguous.” Harbour Pointe,
LLC, 300 Conn. at 261 (citation omitted).
The Metsacks allege that Liberty Mutual is obligated to provide coverage
for their alleged losses under Section 8 of the Policy. That Section provides:
8. Collapse. We insure for direct physical loss to covered property
involving collapse of a building or any part of a building caused by one or
more of the following: . . . (b) Hidden decay; . . . or (f) Use of defective
material or methods in construction, remodeling or renovation.” [Dkt. 30,
Ex. A, at 5].
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Liberty Mutual argues for the application of an exclusion contained in
Section 8 which states that “[l]oss to an awning, fence, patio, pavement,
swimming pool, underground pipe, flue, drain, cesspool, septic tank, foundation,
retaining wall, bulkhead, pier, wharf or dock is not included unless the loss is a
direct result of the collapse of a building.” [Id.] (emphasis added). The parties
agree that the damage alleged by Plaintiffs was not a direct result of the collapse
of a building. Thus, Liberty Mutual argues that if the damage to the Metsack’s
“basement walls” is considered damage to a “foundation” or “retaining wall,”
Liberty Mutual is not obligated to provide coverage.
The arguments raised by Liberty Mutual here have been persuasively
rejected three times by courts in this District. See Bacewicz, 2010 WL 3023882, at
*3-6 (D. Conn. Aug. 2, 2010) (denying insurer’s motion for summary judgment and
finding that a “reasonable juror could conclude that the ‘basement walls’ did not
constitute the ‘foundation’ of the house”); Karas v. Liberty Ins. Corp., 33 F. Supp.
3d 110, 115-16 (D. Conn. 2014) (denying Liberty Mutual’s motion to dismiss and
holding that the terms “foundation” and “retaining walls” were ambiguous and
should be construed against Liberty Mutual”); Belz v. Peerless Insurance Co., 46
F.Supp.3d 157, 163-164 (D. Conn. 2014) (finding that the terms “foundation” and
“retaining wall” are both ambiguous).
Prior courts have held that the term “foundation” could refer to the
“footings” of a structure, citing an Alabama Supreme Court case which described
the “footings” as a “three-by-three foot piece of concrete under the basement
wall.” Turner v. State Farm Fire and Cas. Co., 614, So.2d 1029, 1030 (Ala. 1993).
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Plaintiff urges that this is a correct statement of the law, arguing that a dictionary
definition of “foundation” defines that term as “the lowest load-bearing part of
the building.” See “Foundation,” Oxford American Dictionary and Thesaurus,
2003. In homes with a basement, the Metsacks argue, the lowest load-bearing
part of the building would be the footings underneath the basement wall.
Defendant urges a different definition, arguing that a “foundation” is “a usually
stone or concrete structure that supports a building from underneath . . . an
underlying base or support . . . the whole masonry substructure of a building.”
See “Foundation,” Merriam Webster, available at:
http://www.merriamwebster.com/dictionary/foundation.
Defendant also argues that the result of the above-cited prior cases should
not be followed, in part because language elsewhere in the policy indicates that
the terms “footings” and “foundation” refer to different parts of the structure.
Specifically, an amendatory endorsement to the Policy provides:
We do not insure, however, for loss . . . [c]aused by: b. Freezing,
thawing, pressure or weight of water or ice, whether driven by wind
or not, to a: (1) Fence, pavement, patio or swimming pool; (2)
Foundation, retaining wall, or bulkhead; or (3) Pier, wharf or dock; (4)
Footings.
[Id. at ] (emphasis added).
However, the separate usage of “footings” and “foundation” elsewhere in
the policy is not dispositive here, because a house may or may not have a
separate “footing” and “foundation” depending upon its construction. At the
time the subject premises were constructed it was a customary building practice
in Connecticut to construct a home by first excavating the site, then erecting
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footings consisting of a concrete footprint of the house, erecting a basement or
foundation consisting of a horizontal base or floor and vertical walls on top of the
footings which serves as the home’s basement, and erect the above-ground
floors and walls of the home on top of the basement. Employing that method of
construction, the footings beneath the basement could constitute a separate
structural component serving as the structural support beneath the basement for
the house. In such circumstances, a reasonable trier of fact could conclude the
“footings” to be the “foundation.” This interpretation would not render either
term superfluous, because, there may be circumstances in which a house has
foundational walls, supported by footings, without any basement. In such
circumstances, the “foundation” and “footings” could refer to different elements
of the below-ground masonry structure supporting the house, necessitating that
the Policy distinguish between the two terms.
This interpretation is supported by the NCRS Engineering Dictionary
definition of footings, which defines the “footings” as a building component
“made of concrete and used under chimneys and columns as well as under
foundation walls to distribute the weight of the structure over a greater area and
thus prevent settling . . . [f]ootings are placed below the frostline to prevent
movement during freezing.” See “Footings,” NCRS Construction Dictionary,
available at: Http://www.engineering-dictionary.org/NCRS-ConstructionDictionary/FOOTING. Notably, the NCRS Engineering Dictionary has no definition
for the term “foundation” or the term “basement.” Id. However, according to the
Civil Engineering Dictionary, the purpose of a foundation is “the lowest part of
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the structure which supports the structure by distributing its load on the soil and
keeping it less than the bearing capacity of soil.” See “Foundation,” Civil
Engineering Dictionary, available at: http://www.aboutcivil.org/geo-technicalfoundation-engineering.html. A “foundation” serves to keep “the load on the soil
in allowable range by distributing it on a vast calculated area.” Id.
In addition, the Policy language prescribing the method of calculating the
replacement value of a covered “building” provides further support for the
Plaintiffs’ position. Section I(3)(b)(3) of the Policy provides:
(3) To determine the amount of insurance required to equal 80% of
the full replacement cost of the building immediately before the loss,
do not include the value of:
(a) Excavations, foundations, piers or any supports which are
below the undersurface of the lowest basement floor;
(b) Those supports in (a) above which are below the surface of
the ground inside the foundation walls, if there is no
basement; and
(c), Underground flues, pipes, wiring and drains.
[Ex. A. at 9]. The replacement value calculation language is consistent with
a customary construction method used in Connecticut at the time the subject
premises were constructed. Further, implicit in the calculation are two key
concepts: first, that a foundation can exist “below the undersurface of the lowest
basement floor,” which implies that a basement wall and a foundation are not
always one and the same, and second, that the policy in at least some capacity
differentiates between homes constructed with and without a basement by
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distinguishing “foundation walls . . . if there is no basement” from “foundations
below the undersurface of the lowest basement floor.”
Because both parties have offered reasonable, but differing interpretations
of the term “foundation,” each supported by dictionary definitions and language
cited elsewhere in the Policy, the Court finds the term “foundation” to be
ambiguous. 2
Similarly, the Court is persuaded that the phrase “retaining wall” is
ambiguous. Defendant argues that a dictionary defines “retaining wall” as “a wall
built to resist lateral pressure other than wind pressure; esp: one to prevent an
earth slide.” See “Retaining Wall,” Merriam Webster, available at:
http://www.merriamwebster.com/dictionary/retaining%20wall. Plaintiff counters
that a “retaining wall” is defined as “a wall for holding in place a mass of earth or
the like, as at the edge of a terrace…” See “Retaining Wall,” Dictionary.com,
available at: http://dictionary.reference.com/browse/retaining+wall. Although
Plaintiff’s definition would conform with a more colloquial understanding of the
phrase “retaining wall” as typically referring to a free-standing structure, the
2
Given that the term “foundation” is ambiguous, the Court notes that Plaintiff’s
interpretation is potentially supported by the interpretative principal of noscitur a
sociis, as “the meanings of particular words may be indicated or controlled by
associated words” 11 Williston on Contracts § 32:6 (4th ed.). The Policy
exclusion applies to an: “awning, fence, patio, pavement, swimming pool,
underground pipe, flue, drain, cesspool, septic tank, foundation, retaining wall,
bulkhead, pier, wharf or dock.” With the exception of “foundation,” all of the
terms used in the exclusion reference ancillary structures to the building itself. A
reasonable trier of fact could conclude that the other terms used in the exclusion
shed light on the term “foundation” and suggest that term to be a reference to a
more ancillary structure than the wall of a basement room.
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Court finds either definition to be reasonable. As such, the term “retaining wall”
is also ambiguous. In addition,
The Metsacks have sufficiently pled a cause of action for breach of
contract. The allegations of the Complaint more than sufficiently put Liberty on
notice of the nature of their claim, fully satisfying the requirements of Rule 8 of
the Federal Rules of Civil Procedure. Liberty Mutual’s motion to dismiss Count
One is DENIED.
B. Count Two: Breach of Covenant of Good Faith and Fair Dealing
The duty of good faith and fair dealing “is a covenant implied into a
contract or a contractual relationship,” and every contract “carries an implied
duty requiring that neither party do anything that will injure the right of the other
to receive the benefits of the agreement . . . .” Renaissance Mgmt. Co., Inc. v.
Conn. Hous. Fin. Auth., 281 Conn. 227, 240 (Conn. 2007) (quoting De La Concha
of Hartford, Inc. v. Aetna Life Ins. Co., 269 Conn. 424, 432–33 (Conn. 2004)).
Implicit in every contract is a covenant of good faith and fair dealing. “To
constitute a breach of [the implied covenant of good faith and fair dealing], the
acts by which a defendant allegedly impedes the plaintiff’s right to receive
benefits that he or she reasonably expected to receive under the contract must
have been taken in bad faith.” Id.; Capstone Bldg. Corp. v. Am. Motorists Ins. Co.,
308 Conn. 760, 795 (Conn. 2013) (same). “Bad faith in general implies both actual
or constructive fraud, or a design to mislead or deceive another, or a neglect or
refusal to fulfill some duty or some contractual obligation, not prompted by an
16
honest mistake as to one’s rights or duties, but by some interested or sinister
motive . . . [b]ad faith means more than mere negligence; it involves a dishonest
purpose.” De La Concha, 269 Conn. at 433; Capstone Bldg. Corp., 308 Conn. at
795 (same); TD Bank, N.A. v.. J & M Holdings, LLC, 143 Conn.App. 340, 348 (Conn.
App. Ct. 2013) (same).
In the context of an insurance policy, “[a] bad faith action must allege
denial of the receipt of an express benefit under the policy.” Capstone Bldg.
Corp., 308 Conn. at 794. Any cause of action for bad faith “not tied to duties
under the insurance policy must therefore fail as a matter of law.” Id. at 797.
Because the Court finds that Plaintiffs have stated a plausible claim for an
express benefit under the Policy covering the alleged loss, the question becomes
whether Plaintiffs have alleged that Liberty Mutual acted with “actual or
constructive fraud” or a “design to mislead” or have acted with “neglect or
refusal to fulfill” its duties. De La Concha, 269 Conn. at 433.
Plaintiffs argue that Liberty Mutual “denied their claim without any
investigation” and misled Plaintiffs “into believing that there was no coverage by
citing inapplicable policy language.” Prior courts in this District have found
these same allegations sufficient to state a claim for breach of the covenant of
good faith and fair dealing at the 12(b)(6) stage. See Karas, 33 F. Supp. 3d at 116117 (rejecting motion to dismiss good faith claim where “denial of coverage was
made without the benefit of any inspection of the basement walls at issue in order
to verify the damage or its possible causes”); Belz, 46 F.Supp.3d at 164-165
(rejecting motion to dismiss good faith claim where insurer was alleged to have
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“intentionally referred to irrelevant and misleading portions of the Policy”). The
Court notes that this is not the first “concrete decay” claim in which Liberty
Mutual or a related insurer within the Liberty Mutual Group has initially denied
coverage on one basis – here based upon language excluding “settling” or
“seepage” of groundwater – only to later raise arguments that the affected
structures were excluded “foundation[s]” or “retaining wall[s].” See Belz, 46
F.Supp.3d at 165 (noting that “the arguments made by Peerless in support of its
Motion to Dismiss do not mention the exclusions cited in the denial letter”). The
Court also finds that Liberty Mutual could have acted in bad faith by describing a
structural wall as a “foundation” without any inspection of the premises. These
allegations support a plausible claim for breach of the covenant of good faith and
fair dealing. Liberty Mutual’s motion to dismiss Count Two is DENIED.
C. Count Three: CUIPA and CUTPA Claims
CUIPA does not provide a private right of action, but, the Connecticut
Supreme Court has recognized “the existence of a private cause of action under
CUTPA to enforce alleged CUIPA violations.” Mead v. Burns, 199 Conn. 651, 663,
509 A.2d 11 (Conn. 1986). However, “conduct by an insurance broker or
insurance company that is related to the business of providing insurance can
violate CUTPA only if it violates CUIPA,” because “the legislative determinations
as to unfair insurance practices embodied in CUIPA are the exclusive and
comprehensive source of public policy in this area.” State v. Acordia, Inc., 310
Conn. 1, 9-12, 73 A.3d 711 (Conn. 2013).
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Section 38a–816 of CUIPA proscribes “unfair methods of competition and
unfair and deceptive acts or practices in the business of insurance,” including
“unfair claim settlement practices.” Conn. Gen.Stat. § 38a–816. Plaintiffs have
alleged that Liberty Mutual violated these unfair claim settlement practices
provisions. See Conn. Gen.Stat. § 38a–816(6)(C) (failure “to adopt and implement
reasonable standards for the prompt investigation of claims arising under
insurance policies”); Conn. Gen.Stat. § 38a–816(6)(D) (refusal “to pay claims
without conducting a reasonable investigation based upon all available
information”). Unfair claim settlement practices constitute a CUIPA violation
when they are “[c]ommitt[ed] or perform[ed] with such frequency as to indicate a
general business practice.” Conn. Gen.Stat. § 38a–816(6).
Although Plaintiff has pointed to five other legal actions against Defendant
alleging similar “concrete decay” claims, Liberty Mutual argues that these actions
were brought against “distinct and separate entities within the Liberty Mutual
Group.” In rejecting motions to dismiss similar “concrete decay” claims under
CUIPA, two prior courts in this District have looked to:
“[t]he degree of similarity between the alleged unfair practices in other
instances and the practice allegedly harming the plaintiff; the degree of
similarity between the insurance policy held by the plaintiff and the policies
held by other alleged victims of the defendant’s practices; the degree of
similarity between claims made under the plaintiff’s policy and those made
by other alleged victims under their respective policies; and the degree to
which the defendant is related to other entities engaging in similar
practices.”
Belz, 46 F.Supp.3d at 166; see also Karas, 33 F. Supp. 3d at 117.
19
Although Liberty Mutual is entitled to present evidence establishing that its
various related entities have approached “concrete decay” claims independently
and without a general business practice across related entities at the summary
judgment stage of the proceedings, Plaintiff has plausibly alleged a pattern of
“concrete decay” claims across related entities at this stage of the proceedings.
Defendant also argues that its mere “participation” in an ISO or “the use of
ISO forms in insurance policies” does not support a claim for a violation of
CUTPA/CUIPA. One prior court has held that the ISO allegation could plausibly
establish “a mechanism” by which Liberty Mutual could have shared information
with other insurers regarding denial of “concrete decay” claims and “methods to
avoid liability for such cracking.” Belz, 46 F.Supp.3d at 166. Although the ISO
allegation strikes this Court as failing to cross the line between “possible” and
“plausible,” at this stage the number of substantially related claims before courts
in this jurisdiction alone supports a plausible allegation of a general business
practice within the Liberty Mutual Group. Liberty Mutual’s motion to dismiss
Count Three is DENIED.
IV.
Certification
Defendant argues that the issues presented in this action are “ripe for
adjudication by the Connecticut Supreme Court” and argues for certification to
the Connecticut Supreme Court pursuant to Conn. Gen. Stat. § 51-199b(d).
Defendant seeks to certify the question of whether the terms “foundation” and
“retaining wall” are ambiguous. The Connecticut Supreme Court, however, has
20
provided the necessary guidance for this Court to determine whether, under
Connecticut law, an ambiguity exists in a given contract. See Part IIIA, supra. It
is presently premature to certify to the Connecticut Supreme Court the question
of whether the term “foundation” as used in the Liberty policy is ambiguous.
Certification of questions related to these issues could possibly be appropriate at
a later stage in this litigation, upon the development of a factual record regarding
both the Property and the Policy at issue that would be helpful to an appellate
court.
V.
Conclusion
For the foregoing reasons, Defendants’ [Dkt. 14] Motion to Dismiss the
Complaint is DENIED.
IT IS SO ORDERED.
________/s/______________
Hon. Vanessa L. Bryant
United States District Judge
Dated at Hartford, Connecticut: September 30, 2015
21
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