Opinion
HHDCV156063159S
04-05-2018
ARBELLA PROTECTION INS. CO. v. GREAT AMERICAN INSURANCE CO. OF NEW YORK
UNPUBLISHED OPINION
OPINION
Peck, JTR
In a complaint filed on October 23, 2015, the plaintiff, Arbella Protection Insurance Co., brings two counts against the defendant, Great American Insurance Company of New York, claiming equitable subrogation and unjust enrichment. The plaintiff alleges the following facts. On July 24, 2014, a truck owned by Gerald F. Barnish Sr. carrying lumber overturned on Route 2 in Glastonbury, Connecticut. At the time of the incident, the plaintiff and the defendant insured Gerald F. Barnish Sr. and Gerald F. Barnish Lawn and Garden Services, respectively. While responding to the overturned truck, the Connecticut State Police called A & M Towing and Recovery, Inc. (" A & M" ) to remove the truck, trailer, and lumber from the highway area. Subsequently, A & M brought claims to recover the cost of removal and storage of the truck, trailer, and cargo from both the plaintiff and the defendant. After the defendant refused to pay A & M, the plaintiff paid the debt in order to extinguish all liabilities of the parties’ insureds, Gerald F. Barnish Sr. and Barnish Lawn and Garden. The plaintiff now seeks to recover payment from the defendant.
On March 17, 2017, the court, Dubay, J., ordered the parties to file cross motions for summary judgment addressing the issue of whether the defendant is liable under its insurance policy with Barnish Law and Garden for any portion of the costs related to the reloading, removal, and safeguarding of the cargo. On July 31, 2017, the plaintiff and defendant filed cross motions for summary judgment and memoranda in support. The plaintiff subsequently filed reply memoranda. Oral argument was heard on December 11, 2017.
DISCUSSION
" Practice Book § 17-49 provides that 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. 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.) Brooks v. Sweeney, 299 Conn. 196, 210, 9 A.3d 347 (2010). " [T]he genuine issue aspect of summary judgment requires the parties to bring forward before trial evidentiary facts, or substantial evidence outside the pleadings, from which the material facts alleged in the pleadings can warrantably be inferred ... A material fact has been defined adequately and simply as a fact which will make a difference in the result of the case." (Citation omitted; internal quotation marks omitted.) Buell Industries, Inc. v. Greater New York Mutual Ins. Co., 259 Conn. 527, 556, 791 A.2d 489 (2002).
In the plaintiff’s memorandum in support of its motion for summary judgment, it argues that the defendant’s insurance policy provides coverage to its insured for the reloading of cargo and for whatever costs are determined to have been reasonable and attributable to the removal and safeguarding of the cargo. Specifically, the plaintiff argues that the defendant is liable under the language of Section C(4) of insurance form CM 00 01, entitled " Duties in the Event of Loss." The language of that provision provides that the insured must:
Take all reasonable steps to protect the Covered Property from further damage, and keep a record of your expenses necessary to protect the Covered Property, for consideration in the settlement of the claim. This will not increase the Limit of Insurance. However, we will not pay for any subsequent loss or damage resulting from a cause of loss that is not a Covered Cause of Loss. Also, if feasible, set the damaged property aside and in the best possible order for examination.
Additionally, the plaintiff argues that the defendant is liable under Section A(4)(c) of Form 76 77 for " Reloading Expense" which covers expenses incurred while reloading cargo spilled as a result of an accident up to $5,000.
Section A(4)(c) states " If Covered Property is spilled, dislocated, exposed to the weather or immobilized as a direct result of an accident to the conveying vehicle, we will pay our necessary expense to reload the Covered Property. This coverage applies when there has been no ‘loss’ to Covered Property or when the amount of the direct physical ‘loss’ is less than the amount of your deductible. The most we will pay in any one occurrence is $5,000. This limit is separate from the Limits of Insurance shown in the declarations."
The defendant points out that the language relied upon by the plaintiff under Section C (4) of form CM 00 01 is preceded by the heading, " Duties [of the insured] In The Event Of Loss," which states: " You must see that the following are done in the event of loss or damage to Covered Property." The defendant argues that this provision is merely a condition of coverage and does not create an additional liability on the defendant. Moreover, the defendant argues that it fulfilled its duty to the insured by paying the $5,000 of " additional coverage" for " Debris Removal" listed in Section A(4)(b) in form CM 76 77.
Section A(4)(b) states " We will pay your expense to remove debris of Covered Property caused by or resulting from a Covered Cause of Loss that occurs during the policy period ... The most we will pay under this coverage is 10% of the applicable Limit of Insurance for direct physical ‘loss’ to Covered Property, up to a maximum of $5,000 for the sum of all such expenses for each occurrence. The Debris Removal Limit is separate from the Limit of Insurance stated elsewhere in this policy."
" The general principles that guide our review of insurance contract interpretations are well settled. [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], we must look at the contract as a whole, consider all relevant portions together and, if possible, given operative effect to every provision in order to reach a reasonable overall result." Lexington Insurance Co. v. Lexington Healthcare Group, Inc., 311 Conn. 29, 37-38, 84 A.3d 1167 (2014).
" 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." (Internal quotation marks omitted.) Id., 38.
" It is a basic principle of insurance law that policy language will be construed as laymen would understand it and not according to the interpretation of sophisticated underwriters, and that ambiguities in contract documents are resolved against the party responsible for its drafting; the policyholder’s expectations should be protected as long as they are objectively reasonable from the layman’s point of view." (Internal quotation marks omitted.) O’Brien v. U.S. Fidelity & Guaranty Co., 235 Conn. 837, 843, 669 A.2d 1221 (1996).
Reloading Expenses
Section A(4)(c) of Form 76 77 allows for the " additional coverage" of reloading expenses for Covered Property dislocated as a result of an accident to the conveying vehicle. Though the plaintiff suggests that the defendant may be liable under this provision, a close reading shows that it is inapplicable to the present action. Specifically, the provision only applies when " there has been no ‘loss’ to the Covered Property or when the amount of the direct physical ‘loss’ is less than the amount of your deductible." As the parties have stipulated, the defendant declared the cargo a total loss and paid the shipper the sum of " $18,117.77 representing the full value of the cargo less the policy deductible of $1,000 as provided for" under the defendant’s policy. Thus, in the present action neither condition precedent for reloading expenses was met and the defendant is not liable under that provision.
Duties in the Event of Loss
Next, the plaintiff argues that the defendant is liable under the language of. Section C(4) of insurance form CM 00 01, " Duties in the Event of Loss." The language of the policy, quoted above, quite clearly requires the insured to take steps to protect the property from further damage after a loss. The provision does not, however, contain a direct promise on the part of the insurer to pay the insured for the expenses incurred in protecting the property, as it merely states it will be used for " consideration in the settlement of the claim."
Though our courts have not yet analyzed the language at issue, identical language has been interpreted in a number of other federal and state courts, where it is often analyzed as a " sue and labor" clause. " The purpose of a sue and labor clause is to encourage the prevention of loss that is the subject of the policy; that is, the clause is designed to allow reimbursement for measures taken by the insured to mitigate damages in order to reduce the insurer’s obligation under the policy." GTE Corp. v. Allendale Mutual Ins. Co., 372 F.3d 598, 618 (2004).
The California Supreme Court has explained:
The " sue and labor" clause ... makes express the duty implied in law on the part of the insured to labor for the recovery and restitution of damages or detained property ... and it contemplates a correlative duty of reimbursement separate from and supplementary to the basic insurance contract. Its purpose is to encourage and bind the assured to take steps to prevent a threatened loss for which the underwriter would be liable if it occurred, and when a loss does occur to take steps to diminish the amount of the loss. Under this clause the assured recovers the whole of the sue and labor expense which he has incurred ... and without regard to the amount of the loss or whether there has been a loss or whether there is salvage, and even though the underwriter may have paid a total loss under the main policy. (White Star S.S. Co. v. North British & Merc. Ins. Co. (E.E.Mich. 1943) 48 F.Supp. 808, 813; see Reliance Insurance Company v. The Escapade, Supra, 280 F.2d 482, 488-89, fn.11; 15 COUCH ON INSURANCE, 2D (1966) § 55:123, p. 552; VANCE ON INSURANCE (2d ed. 1930) § 255, pp. 864-65.)
There is, however, a fundamental limitation upon the insurer’s duty under a " sue and labor" clause to compensate the insured for expenses incurred in the preservation and protection of insured property: the expenses in question must be incurred to preserve the insured property from a peril insured against under the basic policy. Since an assured has the duty toward his underwriter to exercise the care of a prudent uninsured owner to protect insured property in order to minimize or prevent the loss from the occurrence for which the underwriter would be liable under the policy, the clause undertakes to reimburse the assured for these expenditures which are made primarily for the benefit of the underwriter either to reduce or eliminate a covered loss altogether ... Taking the analysis through the next step, it is obvious that since the clause is to reimburse the assured for expenses incurred in satisfying the assured’s duty to the underwriter, there is no such duty where the policy, for one reason or another ... does not apply ... The obligation comes into being only when the action taken is to minimize or prevent a loss for which the underwriter would be liable. If the underwriter would not be liable at all ... there would be no contractual obligation to repay sue and labor ... Reliance Insurance Company v. The Escapade, Supra, F.3d 482, 488-89; see also Home Ins. Co. v. Ciconett (6th Cir. 1950) 179 F.3d 892, 895; White Star S.S. Co. v. North British & Merc. Ins. Co., Supra, 48 F.Supp. 808, 812-13; Berns & Koppstein, Inc. v. Orion Insurance Co. (S.D.N.Y. 1959) 170 F.Supp. 707, 719; 15 COUCH ON INSURANCE 2D (1966) § 55:125, pp. 552-53; VANCE INSURANCE (2d ed. 1930) § 255, pp. 864-65.(Citations omitted; internal quotation marks omitted.) Young’s Market Co. v. American Home Assurance Co., 4 Cal.3d 309, 313-14, 481 P.2d 817, 820 (1971).
" The great weight of authority from other jurisdictions holds that an insured’s ability to recover mitigation costs under a sue and labor clause is tied to the insurer’s obligations under the general insuring provisions of the policy. In an early case dealing with recovery under a sue and labor clause, the United States Supreme Court said,
If this clause be construed with reference to what is most evidently its subject-matter, that is a loss within the policy, and in connection with other parts of the instrument, it seems impossible to misunderstand it, or that it should receive so extensive an application as the plaintiff is desirous of giving to it. The parties certainly meant to apply it only to the case of those losses or injuries for which the insurers, if they had happened, would have been responsible. Having, in such cases only, an interest in rescuing or relieving the property, it is reasonable, that then only they should defray the charges incurred by an effort made for that purpose; but when a loss takes place, which cannot be thrown on them, it would require a much stronger and more explicit stipulation than we find in the policy, to render them liable to contribute to such expenses.(Emphasis in original.) Biays v. Chesepeake Ins. Co., 11 U.S. 415, 419, 3 L.Ed. 389 (1813)" ; RK Mechanical, Inc. v. Traveler’s Property Casualty Co., 944 F.Supp.2d 1013, 1025 (2011).
This intent is reflected in the plain language of the defendant’s policy. Although the policy requires an insured, in the event of loss, to take all reasonable steps to protect Covered Property from further damage, it clearly provides that the defendant consider the reasonable expenses in the settlement of the claim and " will not pay for any subsequent loss or damage resulting from a cause of loss that is not a Covered Cause of Loss." This implies that the defendant would pay for any further damage to the Covered Property if it occurred by way of a Covered Cause of Loss, and consequently would be willing to pay the insured its reasonable costs if it prevents further damage for which the insured would be liable. Thus, the defendant’s liability for the cost of reloading and storage of the cargo following the overturn of the truck depends on whether the " further loss" that the insured sought to prevent would have been the result of a covered cause of loss or an excluded cause of loss.
See e.g. American Commercial Finance Corp. v. Seneca Insurance Co., 66 Mass.App.Ct. 830, 850 N.E.2d 1114 (2006) (fire policy provision requiring insured to take all reasonable steps to protect covered property from further damage and to keep a record of expenses necessary to protect covered property for consideration in settlement of claim implied coverage for the insured’s expenses to protect property from further fire damage, even though provision was in policy section on insured’s duties after loss); Klein’s Moving & Storage, Inc. v. Westport Insurance Corp., 196 Misc.2d 735, 766 N.Y.S.2d 495 (2003) (insured not required to pay cost of moving goods out of a warehouse when purpose was for repainting the premises that had been damaged by fire and not for purpose of preventing further loss of property); Benjamin Shapiro Realty Co. v. Agricultural Insurance Co., 287 A.D.2d 389, 731 N.Y.S.2d 453 (2001) (policy language that states insured must " take all responsible steps to protect the covered property from further damage by a covered cause of loss" creates insurer liability where further loss would have been considered a covered loss).
Here, " Covered Cause of Loss" is defined under Section A(3) of form 76 77 as the insured’s " legal liability as a motor carrier, either as imposed by law or assumed by written contract, for Direct Physical ‘Loss’ to covered Property except those Causes of ‘Loss’ listed in the Exclusions."
The most relevant excluded cause of loss provision, Section B(2)(c) of form 76 77, states:
We will not pay your liability for a " loss" caused by or resulting from any of the following ... wear and tear, any quality in the property that causes it to damage or destroy itself, spoilage, deterioration, rot, bacteria, mold, rusting, corrosion, extremes of temperature or humidity, freezing, shrinkage, evaporation, loss of weight, changes in flavor, finish or texture, contamination, insects, vermin and rodents.
But we will pay for your liability for direct " loss" to Covered Property caused by fire, explosion, smoke, riot or civil commotion, vandalism or malicious mischief, theft, flood, collision, upset or overturn of the transporting conveyance.
Examining the facts as stipulated by the parties, it appears that the cargo was removed in part to facilitate the retrieval of the truck and trailer as well as to safeguard the cargo from further damage as the result of the overturning of the truck, and not due to an excluded cause or loss.
As to the " reasonableness" of the costs, while the cargo was determined by the defendant at some point in time after the accident to be a total loss, it is not clear under the facts alleged that the insured would have known immediately after the accident whether the Covered Property was a complete loss or whether there was some remaining value that needed to be protected from further damage as required under Section C(4). Thus, it would be reasonable for the insured to have determined that retrieving the cargo that had fallen off the truck would prevent further " Direct Physical Loss" up and until the point that the insured was aware that the cargo was a complete loss or some such situation arose which made protecting the Covered Property from further damage " unreasonable." Thus, to the extent that the facts show the costs incurred to retrieve and store the Covered Property were " reasonable," the defendant would be liable under Section C(4) of form CM 00 01.
Debris Removal
The defendant argues that " additional coverage" for debris removal precludes liability under Section C(4) of form CM 00 01. However, a reading of the provisions together do not indicate this. Section C(4) states that it " will not increase the Limit of Insurance" whereas Section A(4)(b) of form CM 76 77, " Debris Removal" states " The most we will pay under this overage is ... a maximum of $5,000 ... The Debris Removal Limit is separate from the Limit of Insurance stated elsewhere in the policy." Thus, both provisions are paid out of separate policy limits. Moreover, the debris removal coverage covers expenses to " remove debris of Covered Property ..." While " debris" is not defined by the policy, a laymen would understand that " debris of Covered Property" means something distinct from the Covered Property sought to be protected from further damage under Section C(4) (" take all reasonable steps to protect the Covered Property from further damage" ). Consequently, the plain language of the policy suggests the provisions cover different situations and does not preclude the defendant from liability under both Section C(4) " Duties in the Event of Loss" and for " Debris Removal."
The " Limit of Insurance" is $100,000 " in any one loss." Form CM 76 76.
CONCLUSION
Accordingly, for the foregoing reasons, the plaintiff’s motion for partial summary judgment is hereby granted and the defendant’s motion for summary judgment is hereby denied.