Opinion
FSTCV176030765S
05-07-2018
Bruce Angus v. Maxum Indemnity Company
UNPUBLISHED OPINION
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Jacobs, Irene P., J.
MEMORANDUM OF DECISION RE DEFENDANT’S MOTION FOR SUMMARY JUDGMENT [#114.00]
Jacobs, J.
BACKGROUND
The plaintiff, an officer or director of MoGo Sport brought this January 3, 2017 action against the defendant, an insurance company for MoGo Sport, for breach of contract as a result of the defendant’s failure to provide a defense for the plaintiff in an arbitration of claims made by other members of MoGo Sport as against the plaintiff. The defendant filed an answer, special defenses, and counterclaims on March 17, 2017. The plaintiff filed his reply on April 17, 2017. The defendant filed the instant motion for summary judgment, accompanied by a memorandum of law and exhibits, on October 31, 2017. The plaintiff filed his memorandum in opposition, accompanied by exhibits, on December 11, 2017. [#116.] The defendant filed its reply on January 2, 2018 [#119]. The court heard oral argument at short calendar on January 8, 2018.
The defendant, in its reply, notes that the plaintiff filed his memorandum after the time permitted for its filing in the modified scheduling order. The trial court has ample discretion in considering untimely motions for summary judgment. See Grimm v. Fox, 303 Conn. 322, 339 (2012). Nevertheless, a trial court acts in error when it refuses to consider a plaintiff’s memorandum in opposition to summary judgment when it was filed after the scheduling order but within the forty-five-day rule under Practice Book § 17-45. Jacob v. Dometic Origo AB, 100 Conn.App. 107, 111-12, cert. granted, 282 Conn. 922 (2007) (appeal withdrawn August 7, 2007). Thus, the court will consider the plaintiff’s memorandum.
The defendant moves for summary judgment on three grounds: (1) the court does not have subject matter jurisdiction because the plaintiff lacks standing as he did not sustain any damages; (2) the prior notice exclusion provision contained in the policy precludes coverage; and (3) the plaintiff did not allege a claim that was first made within the policy period. The plaintiff argues that he sustained damages in the form of debts incurred due to loans advanced to him during the arbitration due to Maxum’s failure to provide a defense and that the prior notice exclusion provision is ambiguous.
The plaintiff, Bruce Angus, alleges the following facts in his one-count complaint. The plaintiff was a duly elected or appointed director or officer of MoGo Sport, LLC (MoGo). The defendant, Maxum Indemnity Company, issued an insurance policy to MoGo that covered defense costs and settlement payments for asserted claims against MoGo and its directors. The policy period ran from January 19, 2015, to January 19, 2016. On November 11, 2015, MoGo effectuated a transaction where it sold over 50 percent of its membership interests. In response, on December 15, 2015, other members who owned MoGo membership interests prior to that sale commenced arbitration against the plaintiff. The claimants to the arbitration alleged that the plaintiff failed to disclose a corporate opportunity that arose in October 2015, that belonged to MoGo. The plaintiff gave timely notice to Maxum of the arbitration, but Maxum declined to provide coverage. Another insurer provided some coverage to the plaintiff. The arbitration proceeded, and the claims against the plaintiff were settled.
DISCUSSION
" Summary judgment is a method of resolving litigation when 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." (Internal quotation marks omitted.) Grenier v. Commissioner of Transportation, 306 Conn. 523, 534 (2012). " [S]ummary judgment is appropriate only if a fair and reasonable person could conclude only one way." (Internal quotation marks omitted.) Dugan v. Mobile Medical Testing Services, Inc., 265 Conn. 791, 815 (2003). " In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party." (Internal quotation marks omitted.) Bozelko v. Papastavros, 323 Conn. 275, 282 (2016). " [O]nly evidence that would be admissible at trial may be used to support or oppose a motion for summary judgment." (Internal quotation marks omitted.) Nash v. Stevens, 144 Conn.App. 1, 15, cert. denied, 310 Conn. 915 (2013). " The party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under applicable principles of substantive law, entitle him to a judgment as a matter of law ..." (Internal quotation marks omitted.) Stuart v. Freiberg, 316 Conn. 809, 821 (2015). " [O]nly [o]nce [the] defendant’s burden in establishing his entitlement to summary judgment is met [does] the burden [shift] to [the] plaintiff to show that a genuine issue of fact exists justifying a trial ... Summary judgment should be denied where the affidavits of the moving party do not affirmatively show that there is no genuine issue of fact as to all of the relevant issues of the case." (Citations omitted; internal quotation marks omitted.) Romprey v. Safeco Ins. Co. of America, 310 Conn. 304, 320 (2013).
Standing
The court treats the first ground of the motion for summary judgment, arguing lack of subject matter jurisdiction, as a motion to dismiss. Litvack v. Artusio, 137 Conn.App. 397, 401 n.3 (2012). " A motion to dismiss tests, inter alia, whether, on the face of the record, the court is without jurisdiction." (Internal quotation marks omitted.) MacDermid, Inc. v. Leonetti, 310 Conn. 616 (2013). " [T]he question of subject matter jurisdiction, because it addresses the basic competency of the court, can be raised by any of the parties, or by the court sua sponte, at any time." (Internal quotation marks omitted.) New Hartford v. Connecticut Resources Recovery Authority, 291 Conn. 511 (2009). " [I]t is the burden of the party who seeks the exercise of jurisdiction in his favor ... clearly to allege facts demonstrating that he is a proper party to invoke judicial resolution of the dispute ... It is well established that, in determining whether a court has subject matter jurisdiction, every presumption favoring jurisdiction should be indulged." (Internal quotation marks omitted.) Financial Consulting, LLC v. Commissioner of Insurance, 315 Conn. 196 (2014).
" [B]ecause the issue of standing implicates subject matter jurisdiction, it may be a proper basis for granting a motion to dismiss." Electrical Contractors, Inc. v. Dept. of Education, 303 Conn. 402 (2012). " Standing is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless he [or she] has, in an individual or representative capacity, some real interest in the cause of action, or a legal or equitable right, title or interest in the subject matter of the controversy ... Standing requires no more than a colorable claim of injury ... Standing is established by showing that the party claiming it is authorized by statute to bring suit or is classically aggrieved ... The fundamental test for determining aggrievement encompasses a well-settled twofold determination: first, the party claiming aggrievement must successfully demonstrate a specific, personal and legal interest in [the subject matter of the challenged action] ... Second, the party claiming aggrievement must successfully establish that this specific personal and legal interest has been specially and injuriously affected by the [challenged action] ... Aggrievement is established if there is a possibility, as distinguished from a certainty, that some legally protected interest ... has been adversely affected." (Internal quotation marks omitted.) Ferri v. Powell-Ferri, 326 Conn. 438 (2017). The court may consider undisputed evidence to determine jurisdiction. Conboy v. State, 292 Conn. 642 (2009). If " the plaintiff’s standing does not adequately appear from all materials of record, the complaint must be dismissed." (Internal quotation marks omitted.) Burton v. Dominion Nuclear Connecticut, Inc., 300 Conn. 542, 550 (2011).
In the present case, the defendant concedes that the plaintiff was an " Insured Person" under its policy. " It is axiomatic that an action upon a contract or for breach of a contract can be brought and maintained by one who is a party to the contract sued upon ... This principle applies with equal force to insurance contracts." (Citations omitted; footnote omitted; internal quotation marks omitted.) Wilcox v. Webster Ins., Inc., 294 Conn. 206 (2009). As a named insured, the plaintiff is a party to the insurance contract at issue and, therefore, has a specific, personal and legal interest in the enforcement of the contract. See id., 215-16. Moreover, the plaintiff’s complaint states that he " sustained damage as a result of the breach." The plaintiff also states in his affidavit in opposition to the defendant’s motion that he remains liable for the advances made on his behalf for his defense in the arbitration. The court concludes that the plaintiff has standing.
The defendants also argue that the plaintiff lacks standing because he cannot prove damages. Although the burden of proving damages is on the plaintiff; Weiss v. Smulders, 313 Conn. 227, 253 (2014); it is " well established that an award of nominal damages is appropriate where there is insufficient evidence produced at trial to prove actual damages." (Internal quotation marks omitted.) Hartford v. International Assn. of Firefighters, Local 760, 49 Conn.App. 805, 816, cert. denied, 247 Conn. 920 (1998). The plaintiff, thus, has standing, at the very least, to receive nominal damages from the defendant should he prevail in this action.
Prior Notice Exclusion Provision
" [C]onstruction of a contract of insurance presents a question of law for the court ... An insurance policy is to be interpreted by the same general rules that govern the construction of any written contract ... In accordance with those principles, [t]he determinative question is the intent of the parties, that is, what coverage the ... [insured] expected to receive and what the [insurer] was to provide, as disclosed by the provisions of the policy ... If the terms of the policy are clear and unambiguous, then the language, from which the intention of the parties is to be deduced, must be accorded its natural and ordinary meaning ... Under those circumstances, the policy is to be given effect according to its terms ... When interpreting [an insurance policy], [the court] must look at the contract as a whole, consider all relevant portions together and, if possible, give operative effect to every provision in order to reach a reasonable overall result ... In determining whether the terms of an insurance policy are clear and unambiguous, [a] court will not torture words to import ambiguity where the ordinary meaning leaves no room for ambiguity ... Similarly, any ambiguity in a contract must emanate from the language used in the contract rather than from one party’s subjective perception of the terms ... As with contracts generally, a provision in an insurance policy is ambiguous when it is reasonably susceptible to more than one reading ... Under those circumstances, any ambiguity in the terms of an insurance policy must be construed in favor of the insured because the insurance company drafted the policy ... This rule of construction may not be applied, however, unless the policy terms are indeed ambiguous." (Internal quotation marks omitted.) National Grange Mutual Ins. Co. v. Santaniello, 290 Conn. 81 (2009). " While the insured bears the burden of proving coverage, the insurer bears the burden of proving that an exclusion to coverage applies." Nationwide Mutual Ins. Co. v. Pasiak, 327 Conn. 225 (2017). " Because [t]he duty to defend has a broader aspect than the duty to indemnify and does not depend on whether the injured party will prevail against the insured ... [i]f an allegation of the complaint falls even possibly within the coverage, then the insurance company must defend the insured." (Citation omitted; emphasis omitted; internal quotation marks omitted.) Imperial Casualty & Indemnity Co. v. State, 246 Conn. 313, 323-24 (1998). " This is true even [if] facts outside the four corners of those pleadings indicate that the claim may be meritless or not covered ..." (Internal quotation marks omitted.) QSP, Inc. v. Aetna Casualty & Surety Co., 256 Conn. 343 (2001). The court, must, therefore, compare the complaint to the insurance contract. See Misiti, LLC v. Travelers Property Casualty Co. of America, 308 Conn. 146 (2013).
The defendant’s policy is a claims-made policy. " [A] [c]laims-made policy [is] an insurance policy ... that covers liability for injury or damage that the insured is legally obligated to pay (including injury or damage occurring prior to the effective date of the policy, but subsequent to the retroactive date, if any), arising out of incidents, acts or omissions, as long as the claim is first made during the policy period or any extended reporting period ... [T]he purpose behind claims-made insurance [is] to limit [the insurer’s] liability to a fixed period of time ... This increased certainty permits an insurer to charge lower premiums for this particular species of policy." (Citations omitted; internal quotation marks omitted.) National Waste Associates, LLC v. Travelers Casualty & Surety Co. of America, 294 Conn. 511 (2010). " To permit an insured to recover for claims arising from the same fact[s], circumstance[s], situation[s], transaction[s], event[s] or [w]rongful [acts] alleged in a pending lawsuit or made the subject of a prior notice given to another insurer would be to grant the insured more coverage than he bargained for and paid for, and to require the insurer to provide coverage for risks not assumed." (Internal quotation marks omitted.) National Waste Associates, LLC v. Travelers Casualty & Surety Co. of America, 51 Conn.Supp. 369 (2008), aff’d, 294 Conn. 511 (2010).
The prior notice exclusion provision, Section IV.C. of the " Common Policy Terms and Conditions Section," of the insurance contract in the instant case states in relevant part:
" The ‘Insurer’ shall not be liable to make any payment for ‘Loss’ in connection with a ‘Claim’ made against any ‘Insured’ ... based upon, arising out of, directly or indirectly resulting from or in consequence of, or in any way involving:
" 1. any ‘Wrongful Act’ alleged in any claim which has been reported, or in any circumstance of which notice has been given, prior to the ‘Policy Period’ under any other policy of which this ‘Policy’ is a renewal or replacement or which it succeeds in time, or
" 2. any other ‘Wrongful Act’ whenever occurring, which together with a ‘Wrongful Act’ which has been the subject of such claim or notice, would constitute ‘Related Wrongful Acts.’ "
The parties do not dispute that the plaintiff is the " Insured" and an " Insured [Person]," and the defendant is the " Insurer" ; nor do they dispute that the " Policy Period" was from January 19, 2015, to January 19, 2016. Under the definitions of the policy, " Loss" means " Costs of Defense" which, in turn, means " reasonable and necessary fees, costs and expenses . resulting solely from the ... defense ... of a covered or potentially covered ‘Claim’ against the ‘Insureds’ ..." A " Claim" includes an arbitration proceeding. " Wrongful Act" means " any actual or alleged breach of duty, neglect, error, misstatement, misleading statement, omission or act by the ‘Insured Persons’ in their respective capacities as such, or any matter claimed against them by reason of their status as ‘Insured Persons’ ..." " Related Wrongful Act" means " ‘Wrongful Acts’ which are logically or causally connected by reason of any common fact, circumstance, situation, transaction, casualty, event or decision."
The court finds that the prior exclusion provision of the policy is unambiguous. Applying the relevant definitions, the defendant would not be obligated to pay for defense costs and expenses in connection with an arbitration proceeding made against the plaintiff based upon, arising out of, directly or indirectly resulting from or in consequence of, or in any way involving any alleged breach of duty by the plaintiff in his capacity as director of MoGo alleged in any claim that has been reported prior to January 19, 2015, under any other policy.
The defendant asserts that it was not obligated to provide a defense to the plaintiff in the 2015 arbitration because the underlying claims- breach of the operating agreement, diversion and misappropriation of a business opportunity, breach of fiduciaries duties, and fraud- in the arbitration arose out of the alleged wrongful acts- misappropriation of a corporate opportunity and breach of fiduciary duties- of the plaintiff set forth in numerous 2013 demand letters sent between the plaintiff and other members of MoGo. The defendant asserts that the prior notice exclusion provision applies because the plaintiff’s previous insurer, Carolina Casualty, Inc. (Carolina), agreed to provide a complete defense to the plaintiff based on those 2013 demand letters and provided a partial defense in the 2015 arbitration. The plaintiff argues that the 2013 alleged acts were not related to the 2015 alleged acts.
In Connecticut, the phrase " arising out of" has been interpreted broadly. Board of Education v. St. Paul Fire & Marine Ins. Co., 261 Conn. 37, 48 (2002). " [I]t is sufficient to show only that the accident or injury was connected with, had its origins in, grew out of, flowed from, or was incident to the [occurrence], in order to meet the requirement that there be a causal relationship between the accident or injury and the [occurrence]." (Internal quotation marks omitted.) Hogle v. Hogle, 167 Conn. 572, 577 (1975); accord Misiti, LLC v. Travelers Property Casualty Co. of America, supra, 308 Conn. 164.
In the present case, comparing the policy’s language to the complaint and the evidence, the court concludes that the policy does not obligate the defendant to provide a defense. Subsection 1 of the prior notice exclusion provision states that the defendant shall not provide a defense for " any ‘Wrongful Act’ alleged in any claim which has been reported [to another insurer] ..." Wrongful Act is defined as " any actual or alleged breach of duty, neglect, error, misstatement, misleading statement, omission or act by the [the plaintiff] ..." The language of the exclusion is broad because it covers " any claim" arising out of any alleged breach of duty by the plaintiff. A plain reading of the exclusion gives it a definite and precise meaning, which excludes coverage of just these sorts of claims. The court will not torture the language of the exclusion to find an ambiguity where none exists. See Associated Community Bancorp, Inc. v. Travelers Companies, Inc., United States District Court, Docket No. 3:0CV1357 (JCH) (D.Conn. Apr. 8, 2010), aff’d, 421 Fed.Appx. 125 (2d Cir. 2011) (concluding insurer’s insolvency exclusion provision applied to then-current proceedings because those proceedings arose out of plaintiff’s prior insolvency).
The plaintiff’s complaint admits that some of the of the plaintiff’s loss was paid by Carolina. The plaintiff, in his affidavit opposing the defendant’s motion for summary judgment, also admits that he gave notice to Carolina of the claims against him in the 2015 arbitration. The plaintiff further admits that Carolina provided a defense to the plaintiff in that proceeding. Further, and most importantly, the defendant submitted a letter from Carolina to the plaintiff that stated " the July 2013 Notice Letters and the Claimant’s Arbitration involve the same Wrongful Act or any Related Wrongful Acts" because both claims involved the same parties, the same subject matter, and similar claims of breach of fiduciary duties, conflicts of interest, and usurping a corporate opportunity. Accordingly, Carolina concluded that the arbitration was related to the 2013 demand letters and provided a defense to the plaintiff. The plaintiff has not presented sufficient evidence showing a genuine issue as to these facts. Thus, because the plaintiff provided notice to Carolina about the 2015 arbitration for his alleged wrongful acts, the prior notice exclusion provision of the defendant’s policy applies, precluding coverage to the plaintiff. The fact that the arbitration alleged other facts that occurred between 2013 and 2015 does not change this analysis; the wrongful acts alleged in the arbitration arise out of, overlap with and are closely connected to the wrongful acts alleged in 2013. The court concludes that there is no genuine issue of material fact that the defendant was not required to provide a defense or insurance coverage to the plaintiff because the prior notice exclusion in the policy precludes coverage. Having concluded that the policy’s prior notice provision precludes coverage, the court does not address the third ground of the defendant’s motion.
CONCLUSION
The defendant’s motion for summary judgment is granted.