Opinion
HHDCV176085529S
12-27-2018
TOWN OF FARMINGTON v. ARGONAUT INSURANCE COMPANY et al.
UNPUBLISHED OPINION
OPINION
Cesar A. Noble, Judge, Superior Court
Before the court is the motion of the defendant, Hollis D. Segur (H.D. Segur), to strike the sixth count of the complaint brought by the plaintiff, Town of Farmington (Town). The principal issue presented is whether the sixth count, which asserts a claim for breach of fiduciary duty, fails for lack of a sufficient factual predicate to establish a fiduciary relationship between the Town and H.D. Segur. Because the court concludes that sixth count does not set out sufficient allegations to support the existence of a fiduciary relationship, the motion is granted.
The Town alleges in its complaint the following facts. In the summer and fall of 2016, an employee of the Town’s accounts payable department received a series of communications from an individual who fraudulently held himself out to be a representative of a vendor engaged by the Town in connection with an ongoing sewer project. The accounts payable employee was deceived into making an electronic funds transfer of $ 2, 042, 448.70 to the account of the fraudulent vendor. The fraud was discovered when the actual vendor inquired as to payment of an overdue invoice payment. Only $ 891, 386.49 of the funds so transferred were recovered. The Town presented a claim to its insurer, the defendant Argonaut Insurance Company, under a policy of insurance issued by Argonaut providing coverage for, inter alia, Computer and Funds Transfer Fraud coverage. Argonaut denied coverage was due under the policy.
The Town filed the present action by complaint dated November 20, 2017, in which it alleges breach of contract and common-law bad faith against Argonaut as a result of its denial of coverage for the loss. The complaint also sets forth claims as to H.D. Segur for breach of contract (fourth count), negligence (fifth count) and, relevant to the motion before the court, breach of fiduciary duty (sixth count). This count is premised on the alternative assumption that coverage is not provided under the policy and contains the allegations that Town relied upon the purported expertise and insurance-related advice that H.D. Segur provided to it to ensure that the Town had in place the proper insurance coverage; H.D. Segur benefited financially as a result of its relationship with the Town, which gave rise to a fiduciary duty on the part of H.D. Segur owed to the Town, which obligated H.D. Segur to act in good faith and in the best interests of the Town. Moreover, in failing to disclose to the Town that the policy would not cover certain crime and computer fraud losses and, by failing to procure necessary insurance coverages of the Town, H.D. Segur allegedly acted in its own financial interests to the Town’s detriment and, in so doing, breached its duty of loyalty to the Town and the obligation to act in good faith and in the best interests of the Town, to its detriment. Finally, the claim for relief seeks punitive damages although the claim does not specify to which count it is directed.
H.D. Segur argues in its motion to strike that the alleged facts do not demonstrate the existence of a fiduciary relationship between H.D. Segur and the Town. Alternatively, even if the Town sufficiently alleges a fiduciary relationship, H.D. Segur asserts that the sixth count does not support the conclusion that it actually breached any purported fiduciary duty. Finally, in the view of H.D. Segur, no punitive damages are awardable because there is no survivable allegation of a breach of fiduciary duty.
"The purpose of a motion to strike is to contest ... the legal sufficiency of the allegations of any complaint ... to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). "[I]t is fundamental that in determining the sufficiency of a complaint challenged by a defendant’s motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted ... The role of the trial court in ruling on a motion to strike is to examine the [complaint], construed in favor of the [plaintiff], to determine whether the [pleading party has] stated a legally sufficient cause of action." (Citation omitted; internal quotation marks omitted.) Coe v. Board of Education, 301 Conn. 112, 116-17, 19 A.3d 640 (2011). "Moreover [the court notes] that [w]hat is necessarily implied [in an allegation] need not be expressly alleged." (Internal quotation marks omitted.) Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 252, 990 A.2d 206 (2010). "[P]leadings are to be construed broadly and realistically, rather than narrowly and technically ..." (Internal quotation marks omitted.) Downs v. Trias, 306 Conn. 81, 92, 49 A.3d 180 (2012). "In ruling on a motion to strike, the court is limited to the facts alleged in the complaint." (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997).
"The essential elements to pleading a cause of action for breach of fiduciary duty under Connecticut case law are: (1) That a fiduciary relationship existed which gave rise to (a) a duty of loyalty on the part of the defendant to the plaintiff, (b) an obligation on the part of the defendant to act in the best interests of the plaintiff, and (c) an obligation on the part of the defendant to act in good faith in any matter relating to the plaintiff; (2) [T]hat the defendant advances his own interests to the detriment of the plaintiff; (3) That the plaintiff sustained damages; (4) That the damages were proximately caused by the fiduciary’s breach of his or her fiduciary duty." (Internal quotation marks omitted) Doe v. Villa Marie Education Center, Superior Court, judicial district of Bridgeport, Docket No. 16-5032101-S, 2017 WL 3671352 (July 20, 2017, Arnold, J.) .
The question of the existence of a fiduciary duty is, although based on facts, one of law. Iacurci v. Sax, 313 Conn. 786, 797-99, 99 A.3d 1145 (2014) (holding that certified public accountants preparing income tax returns do not ordinarily owe fiduciary duty to clients) "[S]ome actors are per se fiduciaries by nature of the functions they perform. These include agents, partners, lawyers, directors, trustees, executors, receivers, bailees and guardians." (Internal quotation marks omitted.) Id., 800; Church Group, Ltd. v. Tyler, Cooper & Alcorn, LLP, 281 Conn. 84, 108-09, 912 A.2d 1019 (2007). "Beyond these per se categories, however, a flexible approach determines the existence of a fiduciary duty, which allows the law to adapt to evolving situations wherein recognizing a fiduciary duty might be appropriate." Iacurci v. Sax, supra, 313 Conn. 800. "[A] fiduciary or confidential relationship is characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interests of the other ... The superior position of the fiduciary or dominant party affords him great opportunity for abuse of the confidence reposed in him." (Internal quotation marks omitted.) Id.
Importantly, not all business relationships implicate the duty of a fiduciary. "Professional negligence alone ... does not give rise automatically to a claim for breach of fiduciary duty." Beverly Hills Concepts, Inc. v. Schatz & Schatz, Ribicoff & Kotkin, 247 Conn. 48, 56, 717 A.2d 724 (1998). "[T]rust and confidence, superior knowledge, skill or expertise, and an expectation that one party is under a duty to represent the interests of the other are typically necessary, but not always dispositive, conditions giving rise to a fiduciary duty in business settings. Rather, particular attention is given to whether there is a great opportunity for abuse of the confidence reposed in the hired party." (Internal quotation marks omitted.) Iacurci v. Sax, supra, 313 Conn. 801. "The unique element that inheres a fiduciary duty to one party is an elevated risk that the other party could be taken advantage of and usually unilaterally. That is, the imposition of a fiduciary duty counterbalances opportunities for self-dealing that may arise from one party’s easy access to, or heightened influence regarding, another party’s moneys, property, or other valuable resources. All of this precludes us from unduly extending the scope of fiduciary obligations to all ordinary business relationships." (Emphasis in original.) Id., 801-02. In light of the guidance provided by Iacurci, a claim of breach of fiduciary duty must, in order to survive a motion to strike, set out sufficient facts to establish a sufficient degree of control over the affairs of another that imparts the likelihood of vulnerability in the event of self-dealing.
In the present case, the Town essentially recasts its claim of professional negligence as one of a breach of fiduciary duty. Professional negligence alone does not give rise automatically to a claim for breach of fiduciary duty. Sherwood v. Danbury Hospital, 278 Conn. 163, 196, 896 A.2d 777 (2006). Thus, not every instance of professional negligence results in a breach of a fiduciary duty. Id. Professional negligence implicates a duty of care, while breach of a fiduciary duty implicates a duty of loyalty and honesty. Id. Although the Town specifically alleges that "[t]he relationship between the plaintiff and H.D. Segur gave rise to a fiduciary duty on the part of H.D. Segur running to the plaintiff," it alleges no facts beyond the existence of a professional relationship, and superior expertise in the field of insurance coverage and reliance thereon, that permit the finding of a fiduciary relationship. Missing is the necessary predicate of a superior position or control over the Town’s affairs. "A motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged." (Internal quotation marks omitted.) Santorso v. Bristol Hospital, 308 Conn. 338, 349, 63 A.3d 940 (2013). Accordingly, the sixth count fails to state a legally sufficient claim for a breach of a fiduciary duty because it does not allege sufficient facts to permit a finding of the existence of a fiduciary relationship between the Town and H.D. Segur.
In light of this finding, the court need not consider H.D. Segur’s second argument that the sixth count fails to allege an actual breach of any purported fiduciary duty.
The remaining argument is addressed of the claim for punitive damages. As previously noted, the claim is nonspecific in that it does not reference the count or theory of liability upon which it is based. H.D. Segur could have corrected this ambiguity by means of a request to revise pursuant to Practice Book § 10-35 et seq. Because the relief of punitive damages is applicable to the claim of common-law bad faith as to Argonaut, the court declines to strike it. In this respect, the motion to strike is denied.
For the foregoing reasons the motion to strike the sixth count is granted while the motion to strike the claim for punitive damages is denied.