Opinion
HHDCV166068953
06-13-2017
A& R Enterprises, LLC v. Sentinel Insurance Co, . LTD
UNPUBLISHED OPINION
MEMORANDUM OF DECISION
Nina F. Elgo, J.
The plaintiff, A& R Enterprises, LLC, commenced this action for breach of contract by way of service upon the defendant, Sentinel Insurance company, LTD, on June 2, 2016, seeking damages in the amount of $3, 278.58 for repairs made to a motor vehicle owned by Creative Electric LLC (Creative Electric) in June 2015. Before the court is the plaintiff's motion to strike the defendant's special defenses.
FACTS
The plaintiff's revised complaint dated September 27, 2016, alleges the following facts. In May 2015, Creative Electric's vehicle was damaged in a one vehicle accident; the vehicle was covered by a commercial automobile insurance policy issued by the defendant. Creative Electric entered into a contract with the plaintiff to complete all reasonable and necessary repairs, pursuant to General Statutes § 14-65g(a). The plaintiff alleges that it completed all reasonable and necessary repairs for a total cost of $9, 681.84, of which only $6, 403.26 was paid by the defendant. A balance of $3, 278.58 still remains due and owing to the plaintiff. The defendant's failure to pay for the repairs is an attempt at " steering" its insured to an auto body shop other than the plaintiff's by placing financial pressure on the insured to choose another repair facility. On June 24, 2015, Creative Electric assigned all of its rights arising out of the vehicle damage against the defendant to the plaintiff. The plaintiff subsequently brought this action.
On October 20, 2016, the defendant responded with its answer and special defenses. The defendant admits that it issued an auto insurance policy to Creative Electric, and that the policy covered the damaged vehicle. The defendant generally denies all other allegations or leaves the plaintiff to its proof. Additionally, the defendant alleges six special defenses: (1) The policy provides for payment of the cost of " repairing or replacing the damaged property with other property of like kind and quality, " pursuant to Section III, C.1.a(2); (2) The policy " will not pay for the amount of betterment, if a repair or replacement results in better than like kind or quality, " pursuant to Section III.C.3; (3) The plaintiff's claim is barred as there is " no duty to provide coverage under the policy unless there has been full compliance with the terms thereof, including that an insured 'must assume no obligation, make no payment or incur no expense without our consent, except at the insured's own cost, '" which consent was not obtained, pursuant to Section IV.A.2.b(1); (4) The plaintiff's claim is " barred by the applicable policy language" that legal action shall not be brought against the insurer " until there has been full compliance with all terms of the Business Auto Conditions Coverage Form, Section IV.A.3.a, and that there has not been full compliance with all such terms" since (i) written consent was not obtained before obligations and expenses were incurred pursuant to Section IV.2.b(1); (ii) an alleged transfer of rights under the policy was effected without the written consent of the defendant pursuant to the common policy declarations F; and (iii) the procedure set forth in the policy where there is a disagreement on the amount of a " loss" was not followed, pursuant to Section IV.A.1; (5) The plaintiff's claim is " barred by the applicable policy language" providing that the insured " may not transfer its rights or duties under the policy without the written consent" of the insurer, " except in the case of death of a named insured, which consent was not sought or given, " pursuant to Common Policy Declarations F; (6) The plaintiff's action is barred by the policy's provision covering " loss conditions" which states that in the event that the parties " disagree on the amount of 'loss, ' either may demand an appraisal of the 'loss.' In this event, each party will select a competent appraiser. The two appraisers will select a competent umpire. The appraisers will separately state the actual cash value and the amount of 'loss.' If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding. Each party will: (a) pay its chosen appraiser; and (b) bear the other expenses of the appraisal and umpire equally. If we submit to an appraisal, we will retain our right to deny the claim."
On December 16, 2016, the plaintiff moved to strike the defendant's special defenses arguing, that the defendant has failed to properly allege a factual basis supporting its defenses, and fails to properly cite the applicable policy language, and pleads unsupported legal conclusions. On February 2, 2017, the defendant filed its objection arguing that, pursuant to Practice Book § 10-39(b), the plaintiff's motion is procedurally defective failing to set forth separately each claim of insufficiency, a defect fatal to the plaintiff's motion. The parties appeared at short calendar on February 14, 2017 to argue their respective positions.
DISCUSSION
" [O]ur rules of practice provide that a party may challenge by way of a motion to strike the legal sufficiency of an answer, 'including any special defenses contained therein . . .' Practice Book § 10-39; see also Practice Book § 10-6." GMAC Mortgage, LLC v. Ford, 144 Conn.App. 165, 179-80, 73 A.3d 742 (2013). " Generally speaking, facts must be pleaded as a special defense when they are consistent with the allegations of the complaint but demonstrate, nonetheless, that the plaintiff has no cause of action . . . The fundamental purpose of a special defense, like other pleadings, is to apprise the court and opposing counsel of the issues to be tried, so that basic issues are not concealed until the trial is underway . . . Whether facts must be specially pleaded [however] depends on the nature of those facts in relation to the contested issues." (Citations omitted; internal quotation marks omitted.) Almada v. Wausau Business Ins. Co., 274 Conn. 449, 456, 876 A.2d 535 (2005). " In . . . ruling on [a] . . . motion to strike, the trial court [has an] obligation to take the facts to be those alleged in the special defenses and to construe the defenses in the manner most favorable to sustaining their legal sufficiency." Connecticut National Bank v. Douglas, 221 Conn. 530, 536, 606 A.2d 684 (1992).
In breach of contract actions, defendant insurers must specially plead certain defenses. See Sortito v. Prudential Ins. Co., 108 Conn. 163, 168, 142 A. 808, 812 (1928), accord Clinton v. Middlesex Mutual Assurance Co., Superior Court, judicial district of Middlesex, Docket No. CV-94-0072024-S (December 11, 1995, Stanley, J.).
" In ruling on a motion to strike the trial court is limited to considering the grounds specified in the motion." Meredith v. Police Commission, 182 Conn. 138, 140, 438 A.2d 27 (1980). The Connecticut Supreme Court " will not uphold the granting of [a] motion to strike on a ground not alleged in the motion nor relied upon by the trial court." Blancato v. Feldspar Corp., 203 Corm. 34, 44, 522 A.2d 1235 (1987). The trial court, in passing upon a motion to strike, may consider only the grounds specified in the motion. Id.
I. Practice Book § 10-41
As a preliminary matter, the court addresses the defendant's assertion that the plaintiff's motion to strike special defenses is fatally defective for failing to set forth each claim of insufficiency within the motion itself. While plaintiff's motion does not set forth the grounds of insufficiency on the face of the motion, the grounds are discussed at length in the plaintiff's memorandum. Practice Book § 10-41, in which there was the express requirement that the grounds of insufficiency must be stated in the motion itself, not just in the memorandum, was repealed on January 1, 2014. Therefore, the court cannot conclude that the plaintiff's motion is fatally defective.
II. First and Second Special Defenses
The defendant's first and second special defenses allege similar theories, both of which are the subject of the plaintiff's motion to strike. The defendant's first special defense alleges that the policy covers only repairs or replacements with property of like kind and quality. The plaintiff argues that both the insurance policy and first special defense fail to define " like kind and quality" for purposes of ensuring the plaintiff's compliance, and that, generally, this language is ambiguous. In support of its argument, the plaintiff asserts that such ambiguity is illustrated by the $3, 278.58 difference in the parties' assessment of the necessary costs to repair the insured's vehicle. In response, the defendant argues that it has the right to raise the issue of monetary policy limits, and that the contract language which the plaintiff relies upon amounts to a limitation of liability.
The defendant's second special defense alleges that the policy does not cover the cost of repairs or replacements resulting in " better than like kind or quality." In its motion to strike, the plaintiff argues that the second special defense should be stricken as the defendant does not plead how the repair or replacement resulted in better than like kind and quality, and that, further, this provision is inapplicable to the insurer's failure to pay the " overall 'repair bill.'" The plaintiff further argues that the policy does not define " like kind and quality" or " betterment, " and that the defendant has not pled facts supporting this claim. In response, the defendant claims that it has set forth specific contractual language amounting to a limitation of liability and implicating policy limits.
The allegations in the complaint trigger the policy provisions governing whether the repairs were either " like kind and quality" or whether the repairs to the vehicle were of " better than like kind or quality." See Almada v. Wausau Business Ins. Co., supra, 274 Conn. 456; Connecticut National Bank v. Douglas, supra, 221 Conn. 536. Since a defendant insurer must specially plead its policy related defenses, see Sortito v. Prudential Ins. Co., supra, 108 Conn. 168, the court concludes that the defendant's first and second special defenses are legally sufficient and denies the motion to strike the first and second special defenses.
III. Fourth Special Defense
The defendant's fourth special defense alleges that the plaintiff is precluded from bringing a legal action against the defendant due to the plaintiff's failure to fully comply with the policy's terms pursuant to the Business Auto Conditions Coverage Form, Section IV.A.3. The terms include (a) failure to obtain the defendant's consent prior to incurring the expense of repair; (b) an alleged transfer of rights under the policy was effected without the written consent of the defendant pursuant to the common policy declarations F; and (c) the procedure set forth in the policy where there is a disagreement on the amount of a " loss" was not followed, pursuant to Section IV.A.1. In its motion to strike, the plaintiff asserts that because this particular special defense is predicated upon aspects of the third, fifth and sixth special defenses, it thereby adopts the arguments presented with respect to each of those special defenses. The defendant argues that the fourth special defense is a factual allegation predicated upon Connecticut Regulation § 38a-334-8(b)(1)(E), permitting the insurer to include language in its policy precluding legal action until the insured complies with all policy terms. Accordingly, the special defense cannot violate public policy since it is authorized by statute.
A. Failure To Obtain Consent Prior To Incurring The Expense Of Repair
The plaintiff argues that this policy provision merely allows the insurer to be notified of and investigate a claim, not control the repair of the covered vehicle. Moreover, the plaintiff argues that the defendant makes this argument to support its right to limit payment, which, in turn, has the effect of steering the insured to the defendant's preferred repairer violating state law. Lastly, the plaintiff argues that this special defense suggests that the defendant can only be liable for its contract of indemnification only when it chooses to be. In response, the defendant claims that the plaintiff's failure to comply with the terms of a contract is a valid special defense to a civil action.
In the present case, whether or not the plaintiff obtained the requisite consent under the terms of the policy prior to performing the repairs is a factual allegation relevant to, and consistent with, the allegations in the plaintiff's revised complaint. See Almada v. Wausau Business Ins. Co., supra, 274 Conn. 456; Connecticut National Bank v. Douglas, supra, 221 Conn. 536. As previously noted, the defendant insurer must specially plead its policy related defenses. See Sortito v. Prudential Ins. Co., supra, 108 Conn. 168. The court concludes that the specific facts alleged in subsection (a) of the fourth special defense correspond to the allegations in the plaintiff's revised complaint and thus, it is legally sufficient.
B. Transfer Of Rights Effected Without Written Consent
The plaintiff argues that this defense violates Connecticut law which permits post-loss assignment of claims. The plaintiff also argues that a majority of other jurisdictions have adopted this same rule, finding that such a prohibition does not violate public policy. The defendant argues that the defense is predicated upon the factual allegation that the plaintiff did not obtain written consent to the assignment which the plaintiff alleges. The defendant further argues that the special defense is predicated upon Connecticut Regulation § 38-334-8(b)(1), which permits the insurer to include a provision in the policy requiring the insurers consent to any assignment of interest under the policy, and is therefore valid.
Policies containing a non-assignment clause are generally interpreted as prohibiting the assignment of the policy itself, as distinguished from a claim for damages arising thereunder. " An assignment before a loss involves a transfer of a contractual relationship, whereas an assignment after a loss is the transfer of a right to a money claim." Peck v. Public Mutual Ins. Co., 114 F.Supp.2d 51, 56 (D.Conn. 2000), cert. denied, 326 F.3d 330 (2003). See also Giglio v. American Economy Ins. Co., Superior Court, judicial district of New Haven, Docket No. CV-02-0282069-S (April 26, 2005, Arnold, J. ), aff'd, 278 Conn. 794, 900 A.2d 27 (2006).
In the present case, the assignment of rights under this policy relates to a claim for damages. Therefore, because the right transferred to the plaintiff was merely the right to a money claim, the court concludes that the claim is not prohibited. Accordingly, subparagraph (b) of the fourth special defense is legally insufficient.
C. Failure To Exercise The Policy's " Arbitration" Procedure
The plaintiff argues that the provision to arbitrate is permissive rather than mandatory, thus it does not prevent the plaintiff from seeking relief in court. In response, the defendant asserts that the plaintiff, in failing to exercise this provision, has waived its right to proceeding to a trial before a jury citing Giulietti v. Connecticut Ins. Placement Facility, 205 Conn. 424, 534 A.2d 213 (1987), in support of this argument.
The Giulietti case is factually distinct from the present case. First, the policy at issue in Giulietti involved a standard fire insurance policy which insures real property. In its reasoning, the court identified the specific clause disclosing the arbitration provision at issue. Id., 431 n.5. The court noted that the " clause is identical to that contained in the 'standard form of fire insurance policy of the state of Connecticut.'" Id. The standard form indicates that the parties " shall" engage in the appraisal process, on the written demand of either, in the event that the parties disagree as to the amount of loss. Id. The court likened the clause to an " agreement to arbitrate" whereby failure to observe such a clause, and proceed to a jury trial, is the equivalent to a waiver of rights under the clause. Id., 432.
In this case, the policy at issue is an automobile insurance policy which provides that the parties " may" exercise their rights under this clause on the written demand of either, but does not require that such a provision be exercised. Additionally, pursuant to the clause, the insurer reserves the right to deny the claim after the insured chooses to exercise the policy's appraisal clause. See Defendant's answer and special defenses dated October 20, 2016 (Entry No. 111). Thus, the clause appears to differ significantly from the clause at issue in Giulietti .
Although the insurer must specially plead certain defenses in an action such as this, the plain language of the contract does not conclusively mandate that the plaintiff exercise the appraisal provision at issue, prior to commencing a civil action. See DiLieto v. County Obstetrics & Gynecology Group, P.C., 310 Conn. 38, 47-48, 74 A.3d 1212 (2013) (observing use of term " may" ordinarily imports permissive conduct whereas " shall" evidences mandatory intent). Therefore, subparagraph (c) of the fourth special defense is also legally insufficient.
Accordingly, the motion to strike is denied as to subparagraph (a) and granted as to subparagraphs (b) and (c) of the fourth special defense. See Zamstein v. Marvasti, 240 Conn. 549, 567, 692 A.2d 781 (1997) (upholding trial court's granting of a motion to strike single paragraph of complaint where that paragraph set forth a separate cause of action); Donovan v. Davis, 85 Conn. 394, 397-98, 82 A.1025 (1912).
IV. Third, Fifth and Sixth Special Defenses
The court notes that the third, fifth and sixth special defenses assert the same factual allegations as those alleged in the fourth special defense; with one distinction, the fourth special defense alleges that the plaintiff's ability to bring a civil action against it is precluded given its failure to fully comply with the policy's terms. The third, fifth and sixth special defenses separately allege that the plaintiff's claim is barred given its failure to fully comply with same policy provisions.
The question of whether the plaintiff fully complied with the policy's provisions, as alleged in the third special defense and subparagraph (a) of the fourth special defense, is a factual allegation going to the heart of this case. Recognizing that the defendant has simultaneously reiterated and consolidated the defenses asserted in special defenses three, five and six, in its motion to strike, the plaintiff separately sets forth its arguments as to why the third, fifth and sixth special defenses must be stricken, and then adopts those same arguments with respect to the fourth special defense.
The court recognizes the distinction, however slight, between the allegation that a party's ability to bring a legal action is precluded pursuant to the terms of the contract, and the allegation that the relief sought is barred pursuant to the terms of the contract. Ultimately, the net effect of either defense is the same. For this reason, the third special defense is stricken on the ground that the allegations reiterate those alleged in subparagraph (a) of the fourth special defense. The court also concludes that the fifth special defense is insufficient as a matter of law, for the reasons articulated in Section III(B) of this decision, and the sixth special defense is insufficient as a matter of law, for the reasons articulated in Section III(C) of this decision.
CONCLUSION
The motion to strike is denied as to the first and second special defenses, as well as subparagraph (a) of the fourth special defense. The motion to strike is granted as to subparagraphs (b) and (c) of the fourth special defense, as well as the fifth and sixth special defenses.