Opinion
No. 375290
March 3, 2004
MEMORANDUM OF DECISION
The principal issue raised by the defendant insurer in its motion for summary judgment is whether the plaintiffs violated the "concealment or fraud" provision of their dwelling policy, thereby forfeiting coverage.
The plaintiffs, Philip J. Bauco and Marc Pennino, filed a two-count amended complaint alleging that the defendant, Hartford Fire Insurance Company, failed to pay for damage to their building pursuant to an insurance policy. The plaintiffs have also alleged that the defendant breached a covenant of good faith and fair dealing by refusing to make a payment pursuant to their policy.
The parties' submissions fail to reflect a genuine issue of material fact as to the following. The plaintiffs are the owners of several rental properties. The plaintiff, Philip Bauco (hereafter, the plaintiff) is responsible for the subject property, which is a three-story, four-family rental property located in Bridgeport. The third story does not completely cover the second story. The building contains four rental units.
In 1999, two or three of the units were occupied by so-called "section 8 tenants," tenants whose rent was subsidized pursuant to Section 8 of the Housing and Community Development Act of 1974. 42 U.S.C. § 1437f. In 1999, and for at least three years prior thereto, a second-floor apartment and part of the third floor was occupied by Antoinette Williams and her children. The Williams' apartment consisted of a front bedroom, occupied by Williams, and a rear bedroom, occupied by one of her children. The third floor of the building did not cover the portion of the second floor which contained this rear bedroom.
42 U.S.C. § 1437f, entitled "LOWER-INCOME HOUSING ASSISTANCE. (a) AUTHORIZATION FOR ASSISTANCE PAYMENTS," provides in relevant part: `For the purpose of aiding lower-income families in obtaining a decent place to live and of promoting economically mixed housing, assistance payments may be made with respect to existing housing in accordance with the provision of this section. (b) Other Existing Housing Programs. (1) The Secretary is authorized to enter into annual contributions contracts with public housing agencies pursuant to which such agencies may enter into contracts to make assistance payments to owners of existing dwelling units in accordance with this section . . ."
At various times during Williams' tenancy, between 1997 and 1999, portions of the ceiling in her second-floor apartment leaked when it rained. Pursuant to the requirements of the Section 8 program, the subsidized apartment was inspected at least once a year by inspectors from the Housing Authority. On September 4, 1997, officials of the Bridgeport Housing Authority inspected Williams' apartment. The apartment failed the inspection because, as evidenced by the visible water stains, the ceiling above the front and rear bedroom leaked. The apartment failed a second inspection on October 17, 1997, but passed its third inspection on November 5, 1997, at which time the inspectors noted that the problems with the bedroom ceilings had been corrected.
In 1998, the apartment failed a total of three inspections on August 31, 1998, September 17, 1998 and October 28, 1998. The inspectors noted that the ceiling tile in a rear room was bulging and had water stains. They also observed water stains on the ceiling elsewhere in the apartment. It appears that the plaintiffs continued to receive Section 8 assistance payments that year, so apparently, the apartment must have passed inspection sometime that year.
On August 31, 1999, Williams' apartment again failed inspection because, as noted in their report, the inspectors observed that the "2nd Floor Rear Bedroom Ceiling Leaks." The inspectors directed that this condition, and other deficiencies in the apartment, be corrected in order for the apartment to pass inspection. The inspectors also noted that the Williams' apartment was an "undesirable unit," "Home is a Dump . . . Roof Leaks — Ceili[ng] Falls — Many Violations . . ." That same year, the apartment failed a second inspection on October 4, 1999, a third inspection of October 22, 1999, and a fourth inspection on November 3, 1999. The apartment finally passed its fifth inspection.
Since April 10, 1999, the plaintiffs were named insureds on a dwelling policy covering the subject property issued by the defendant. The policy provided: "We insure for direct loss to the property covered caused by . . . Windstorm or hail. This peril does not include loss . . . to the interior of a building or the property contained in a building caused by rain . . . unless the direct force of wind or hail damages the building causing an opening in a roof or wall and the rain . . . enters through the opening . . ." Under "Exclusions," the policy stated: "We do not cover loss resulting directly or indirectly from . . . Neglect, meaning your neglect to use all reasonable means to save and preserve property at and after the time of a loss, or when property is endangered by a Peril Insured Against." Under "Conditions," the policy provided: "Concealment or Fraud. We do not provide coverage if you have intentionally concealed or misrepresented any material fact or circumstance relating to this insurance." The policy further provided that in the case of a covered loss, the insured was required to submit within sixty days a sworn statement of loss stating, inter alia, the time and cause of the loss, and to submit to an examination under oath.
The plaintiffs claim in their complaint that a windstorm on September 16, 1999 in Bridgeport "caused damage to [the] roof and allowed water to enter [the] building." The plaintiffs submitted a proof of loss to the defendant, dated December 29, 1999, claiming $19,744.76 in damages. On January 11, 2000, the defendant took the plaintiffs' examination under oath, pursuant to the provisions of the policy, and on February 2000 took a recorded statement from Antoinette Williams. The defendant also obtained the 1997, 1998 and 1999 inspection reports of the Williams' apartment issued by the Bridgeport Housing Authority. After the defendant refused to pay the plaintiffs' claim, the plaintiffs brought this action. Additional facts will be set forth as necessary.
In the first count of their amended complaint, the plaintiffs allege that on April 10, 1999, the defendant issued an insurance policy insuring the plaintiffs' building against, among other losses, water damage. They further allege that on September 16, 1998 storm caused water damage to the insured building that was covered under the policy. Although the plaintiffs had given the defendant notice of the loss, the defendant has refused to pay.
Incorporating the allegations of the first count, the plaintiffs allege in the second count that the defendant has acted in bad faith in that: (1) it failed to make payment pursuant to the insurance policy when in good faith it should have; (2) it failed to adopt and implement reasonable standards for the prompt investigation of claims arising under its insurance policies, was evidenced by its refusal to pay the plaintiffs' claims prior to conducting a reasonable investigation based upon all available information, and its failure to effectuate a prompt, fair and equitable settlement of the plaintiffs' claim in which liability had become reasonably certain; and (3) it made a pretextual claim of fraud against the plaintiffs for the purpose of denying their claim.
The defendant has filed an amended answer and special defenses. The first defense, which is the only defense at issue here, is that the plaintiffs violated a provision of the policy prohibiting the intentional concealment or misrepresentation of any material fact relating to the insurance. The defendant has moved for summary judgment on the basis that the plaintiffs violated this provision of the policy.
"In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact . . . Although the party seeking summary judgment has the burden of showing the nonexistence of any material fact . . . a party opposing summary judgment must substantiate its adverse claim by showing that there is a genuine issue of material fact together with the evidence disclosing the existence of such an issue . . . In ruling on a motion for summary judgment, it is customary for the court to review documentary proof submitted by the parties to demonstrate the existence or nonexistence of issues of material fact. Practice Book § 17-45.
"Practice Book § 17-49 provides in relevant part: [J]udgment . . . shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material act 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 . . . 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 . . . and the party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact . . . The test is whether a party would be entitled to a directed verdict on the same facts." Sorban v. Sterling Engineering Corp., 79 Conn. App. 444, 447-48, 830 A.2d 372, cert. denied, 266 Conn. 925, 835 A.2d 473 (2003).
I
The defendant claims that it is entitled to summary judgment because the plaintiffs breached the "concealment or fraud" condition of the insurance policy. Under "Conditions," the policy provides: "Concealment or Fraud. We do not provide coverage if you have intentionally concealed or misrepresented any material fact or circumstance relating to this insurance." In its motion for summary judgment, the defendant alleges that the plaintiffs violated this condition by: (1) stating that the water damage to the Williams Apartment and the other areas of premises was caused by rain water that entered the building through an open third-floor window; (2) stating that the water damage noted by the Housing Authority on August 31, 1999, was completely repaired prior to September 16, 1999; (3) stating that the property passed inspection by the Housing Authority between August 31, 1999 and September 16, 1999; (4) stating that the water damage noted by the Housing Authority on October 4, 1999, was caused by new water damage occurring on September 16, 1999, which completely erased the effects of the alleged completed repair that occurred between August 31, 1999 and September 16, 1999; and (5) altering the date on a copy of a Housing Authority letter presented to the defendant.
"An insurer who raises this special defense [of concealment or misrepresentation] must prove only that the insured wilfully concealed or misrepresented a material fact with the intention of deceiving the insurer . . . Unlike a party asserting a cause of action for common-law fraud, an insurer who raises the special defense of concealment or misrepresentation does not have to prove that the insurer actually relied on the concealment or misrepresentation or that the insurer suffered injury . . . [I]n the case of an insurance contract, the consequence of the alleged concealment or misrepresentation is the forfeiture of a contractual benefit, and therefore the burden of proof normally applicable to contractual claims, the preponderance of the evidence standard, should control." (Citations omitted.) Rego v. Connecticut Insurance Placement Facility, 219 Conn. 339, 346-47, 593 A.2d 491 (1991).
The defendant first claims that the plaintiff committed a misrepresentation by "stating that the water damage to the Williams Apartment and the other areas of the insured premises discovered by the Housing Authority on August 31, 1999, occurred as a result of rain water that entered the building through an open third-floor window." This claim fails for two reasons.
The transcript of the plaintiff's examination under oath, conducted by the defendant on January 11, 2000, reveals that the plaintiff provided two distinct, but not wholly inconsistent explanations for the water damage to the Williams' apartment observed by the Housing Authority inspectors on August 31, 1999. At certain times during the examination, the plaintiff stated under oath that the water damage was caused by an open window on the third floor. He explained that the rain water entered the apartment through the open window and eventually seeped into the Williams' apartment on the second floor. At other times, the plaintiff stated that the water damage was not only attributable to the open third-floor window but also to a crack in the "valley" on the roof that he subsequently repaired with tar.
See Transcript of Examination under Oath of Philip J. Bauco, January 11, 2000, pages 23, 27, 31 and 62.
See transcript of Examination under Oath of Philip J. Bauco, January 11, 2000, pages 32 and 5960. A "valley" on a roof refers to a ridge of low elevation at the base of slopes of higher elevation. Harrington v. Grillo, Superior Court, judicial district of Hartford-New Britain, No. CV9-0579272-S, Nov. 20, 2000) (Rubinow, J.); see, e.g., Lowdermilk v. Vescovo Building and RLT, 91 S.W.3d 617, 622 (Mo.App. 2002); Star v. Cambridge Green Homeowners Assn., 30 App.Div.2d 779, 751 N.Y.S.2d 640 (2002); Merrill v. Knauf Fiber Glass GMBH, 771 N.E.2d 1258, 1265-66 (Ind.App. 2002); D.B. Warehouse, Inc. v. Sanders, 349 Ark. 94, 102-03, 76 S.W.3d 254 (2002).
The plaintiff's testimony as to the cause of the water damage cannot serve as a basis for forfeiting the plaintiffs' benefits under the insurance policy by way of summary judgment. On summary judgment, a witness's testimony must be viewed as a whole and in context. See Nolan v. Borkowski, 206 Conn. 495, 507, 538 A.2d 1031 (1988); Acampora v. Asselin, 179 Conn. 425, 427, 426 A.2d 797 (1980). The water damage to the Williams' apartment may have been caused by either or both the open third-floor window or the crack in the valley of the roof, these causes not being mutually exclusive. Moreover, the defendant has failed to establish what, in fact, was the cause of the water damage that the Housing Authority inspectors observed on August 31, 1999. As long as a question remains as to the actual cause of the water damage, the defendant has not met his "burden of showing the absence of any genuine issue of material facts . . . that would entitle [it] to a judgment as a matter of law . . ." (Internal quotation marks omitted.) Gould v. Mellick Sexton, 263 Conn. 140, 146, 819 A.2d 216 (2003).
Second, the defendant claims that the plaintiff made a misrepresentation by stating that the water damage observed by the Housing Authority inspectors on August 31, 1999 had been "completely repaired" prior to September 16, 1999. This claim, too, is unavailing. Because the defendant has not established the cause of the preexisting water damage, the defendant cannot establish that the plaintiff, by closing the third-floor window and placing tar on a crack in the roof, did not cure the cause of the damage. Furthermore, it is not clear that the plaintiff was simply stating his opinion when he represented that he had repaired the problem. A misrepresentation that forfeits the contractual benefit under an insurance policy must generally be a misrepresentation of fact; see Rego v. Connecticut Insurance Placement Facility, supra, 219 Conn. 346; not of opinion. Davis-Scofield Co. v. Reliance Ins. Co., CT Page 3330 109 Conn. 686, 689, 145 A.42 (1929); Aetna Casualty Surety Co. v. Pizza Connection, Inc., 55 Conn. App. 488, 496, 740 A.2d 408 (1999).
In his examination under oath, the plaintiff stated several times that he repaired the cause of the leak, although he never used the word "completely."
"The requirement that a representation be made as a statement of fact focuses on whether, under the circumstances surrounding the statement, the representation was intended as one of fact as distinguished from one of opinion . . . It is sometimes difficult to determine whether a given statement is one of opinion or one of fact inasmuch as the subject matter, the form of the statement, the surrounding circumstances, and the respective knowledge of the parties all have a bearing upon the question . . . [E]ach case must in a large measure be adjudged upon its own facts." (Internal quotation marks omitted.) Anastasia v. Beautiful You Hair Designs, Inc., 61 Conn. App. 471, 478, 767 A.2d 228 (2001). The defendant has not persuaded the court that the plaintiff's statements that he had repaired the cause of the water damage observed in August 1999 were statements of fact and not opinion.
Next, the defendant claims that the plaintiff made a misrepresentation by stating that the water damage observed by the Housing Authority inspectors after the storm of September 16, 1999 was new water damage which, in the plaintiff's words, "completely erased the effects of alleged completed repair that occurred between August 31, 1999 and September 16, 1999." This claim is unavailing because the defendant has not clearly established the cause of the water damage observed by the Housing Authority inspectors on August 31, 1999 and subsequent to September 16, 1999. Thus, the defendant has not established that the plaintiff's statement, even assuming that it was a statement of fact was false.
The defendant also claims that the plaintiff misrepresented a material fact by stating that the property passed inspection by the Housing Authority sometime after the August 31, 1999 inspection and September 16, 1999. The transcript of the plaintiff's examination under oath reflects the following exchanges:
Q . . . Perhaps I should ask you as of September 15th. Let's just stay away from the date of the loss and let me ask you if anybody made any complaints for the 30 days prior of any conditions?
A Back in August was the first complaint of a leak in the roof and I took care of that. The reason for the leak was there's a third floor that they're not presently occupying. There's bedrooms up there. She squeezes all her kids on the second-floor level.
Q Now who is that?
A We're talking about Antoinette Williams.
Q Okay. I'm sorry. Go ahead.
A The reason for the leak was the third-floor window was left open and the rain worked its way down through the walls into her kid's third-floor bedroom. I found the leak, took care of it, replaced the ceiling tiles that were damaged, called for an inspection, a reinspection, because when the inspectors go out there, they jot down anything that needs to be repaired, and as soon as you repair them, you call them back, they come out for the reinspection. They came out for the reinspection approximately ten days, two weeks later. Everything was up to par, they put me back on schedule.
And then this happened the following month, and they had to come out, she called again for ceiling damage, roof leaking, ceiling damage. That's where we are now.
. . .
Q Okay. Had you made the repair from the open window water leak?
A Yes.
Q As of August 31st?
A Yes. And I called for a reinspection personally.
Q And you called before August 31st?
A No, after.
Q After August 31st. Okay.
But had your repair, the one you did —
A Right.
Q — taken place before August 31? Do you follow what I'm saying now?
A Yes, I follow what you're saying. No. This inspection.
Q When you say "this," we're talking about August 31st?
A August 31st I made, after August 31st made repairs. To the best of my recollection, after that date, I called for another inspection, the inspector came out saw the repairs were made, and I can't remember the date, but it was approved by their inspector.
Q And it would be your testimony that this occurred before the loss of September 16?
A Correct.
. . .
Q Did they inspect your work before the loss of September 16th?A Yes. Q Did you pass? A Yes.
Transcript of Examination Under Oath of Philip J. Bauco, January 11, 2000, pages 22-23, 26-27, 32.
Contrary to the plaintiff's repeated assertions, the property did not pass inspection prior to September 16, 1999. Indeed in response to a request for admission submitted in November 2002 the plaintiff denied that he had claimed that the property passed inspection sometime between August 31, 1999 and September 16, 1999. The property not only failed its original inspection on August 31, 1999, but also a second inspection on October 4, 1999, a third inspection on October 22, 1999, and a fourth inspection on November 3, 1999. Only after its fifth inspection did the property pass. Notably, the plaintiff's examination under oath was taken less than four months after the date of the alleged loss and little more than two months after the property last failed a Housing Authority inspection. On February 4, 2000, the plaintiff certified under oath that he had read the transcript of his examination and that it was true and accurate to the best of his knowledge. The court concludes that there is no genuine issue of material fact that the plaintiff misrepresented that the property passed inspection between August 31, and September 16, 1999.
Next the court addresses whether the plaintiff's misrepresentation was of a material fact. The court concludes that there is no genuine issue of material fact that the misrepresentation was material.
Connecticut appellate courts have not articulated a test for determining materiality in the context of an insurance policy provision such as that here, but "[m]ost courts have construed materiality broadly, emphasizing that the subject of the misrepresentation need not ultimately prove to be significant to the disposition of the claim, so long as it was reasonably relevant to the insurer's investigation at the time." Wagnon v. State Farm Fire Casualty Co., 146 F.3d 764, 768 (10th Cir. 1998); see also Willis v. State Farm Fire Casualty Co., 219 F.3d 715, 718 (8th Cir. 2000); Pinette v. Assurance Co. of America, 52 F.3d 407 (2d Cir. 1995).
Over 120 years ago, the United States Supreme Court, in Claflin v. Commonwealth Insurance Co., 110 U.S. 81, 94-95, 3 S.Ct 507, 28 L.Ed. 76 (1884), stated: "The object of the provisions in the policies of insurance, requiring the assured to submit himself to an examination under oath, to be reduced to writing, was to enable the company to possess itself of all knowledge, and all information as to other sources and means of knowledge, in regard to the facts, material to their rights, to enable them to decide upon their obligations, and to protect them against false claims. And every interrogatory that was relevant and pertinent in such an examination was material, in the sense that a true answer to it was of the substance of the obligation of the assured. A false answer as to any matter of fact material to the inquiry, knowingly and wilfully made, with intent to deceive the insurer, would be fraudulent. If it accomplished its result, it would be a fraud effected; if it failed, it would be a fraud attempted. And if the matter were material and the statement false, to the knowledge of the party making it, and wilfully made, the intention to deceive the insurer would be necessarily implied, for the law presumes every man to intend the natural consequences of his acts. No one can be permitted to say, in respect to his own statements upon a material matter, that he did not expect to be believed; and if they are knowingly false, and wilfully made, the fact that they are material is proof of an attempted fraud, because their materiality, in the eye of the law, consists in their tendency to influence the conduct of the party who has an interest in them, and to whom they are addressed."
The United States Court of Appeals for the Second Circuit has stated that "the materiality requirement is satisfied if the false statement concerns a subject relevant and germane to the insurer's investigation as it was then proceeding." Fine v. Bellafonte Underwriters's Ins. Co., 725 F.2d 179, 183 (2d Cir. 1984), cert. denied, 474 U.S. 826, 106 S.Ct 86, 88 L.Ed.2d 70 (1985). In Fine, the court determined that false statements made by the plaintiff, insured, under oath, regarding the operability of the sprinkler systems in the insured properties, were material even though later revealed to be unimportant because the fire and the loss were caused by factors other than those with which the statements dealt. This is because the "materiality of false statements is not determined by whether or not the false answers deal with a subject later determined to be unimportant because the . . . loss [was] caused by factors other than those with which the statements dealt. False sworn answers are material if they might have affected the attitude and action of the insurer. They are equally material if they may be said to have been calculated either to discourage, mislead or deflect the company's investigation in any area that might seem to the company, at that time, a relevant or productive area to investigate." Id., 184. This formulation has been cited with approval by many other courts. See Wagnon v. State Farm Fire Casualty Co., supra, 146 F.3d 768; Dadurian v. Underwriters at Lloyds of London, 787 F.2d 756, 760 (1st Cir. 1986); Parasco v. Pacific Indemnity Co., 920 F. Sup. 647, 654 (E.D.Pa. 1996); Tran v. State Farm Fire Casualty Co., 136 Wash.2d 214, 224, 966 P.2d 358 (1998); Michalski v. Farmers Ins. Co., Wash.App. No. 24472-1-II (Jan. 26, 2001) (unpublished opinion); Pink Cadillac Bar Grill v. United States Fidelity Guaranty Co., 22 Kan. App. 2d 944, 953-54, 925 P.2d 452 (1996), rev. denied, CT Page 3335 261 Kan. 1084 (1997); Mina v. General Star Indemnity Co., 218 Mich. App. 678, 686-87, 555 N.W.2d 1 (1996), rev'd in part on other grounds, 455 Mich. 865, and app. denied, 455 Mich. 866, 569 N.W.2d 80 (1997); Callaway Sublimity Ins. Co., 123 Or. App. 18, 23, 858 P.2d 888 (1993); Passero v. Allstate Ins. Co., 196 Ill. App.3d 602, 608, 554 N.E.2d 384 (1990); Longobardi v. Chubb Ins. Co. of New Jersey, 121 N.J. 530, 541, 582 A.2d 1257 (1990); Ofstein v. Nationwide Mutual Ins. Co., Superior Court, Judicial District of New Britain, No. CV-96-0478229-2 (May 5, 1999, Aurigemma, J.) ( 24 Conn.L.Rptr. 494); Middlesex Mutual Assurance Co. v. Perrino, Superior Court, Judicial District of Hartford/New Britain at Hartford, Nos. CV 91-07019335 and CV 91-00394910 (April 13, 1994, Aurigemma, J.); and is adopted here.
This court, however, disagrees with the application of Fine by the United States Court of Appeals for the Second Circuit in Pacific Indemnity Co. v. Golden, 985 F.2d 51 (2d Cir. 1993).
In Golden, the defendant, insured, during a fire that caused extensive damage to his home, directed firefighters to recover two garbage cans filled with gasoline located at the opposite end of his home from where the fire started. The firefighters removed the containers without incident and the gasoline did not contribute to the fire. When questioned by the fire marshal at the scene about his reasons for storing the gasoline at home, the defendant responded that the gasoline would be used to fuel a snowmobile. Later, the defendant admitted under oath that he stored the containers of gasoline for the purpose of poisoning his neighbor's lawn. The defendant's insurer initiated suit seeking a declaratory judgment of no liability under the policy and seeking reimbursement for monies already paid to a mortgagee. The insurer then sought summary judgment on the ground that the defendant had made a material misrepresentation voiding coverage. The Second Circuit reversed the granting of summary judgment for the insurer on the grounds that although the defendant had intentionally made false statements to the insurer concerning the gasoline's origin and use, the misrepresentations were not material because the insurer failed to show how its investigation would have proceeded differently had the defendant stated his true intention for the gasoline.
While the Golden court quoted the test for material stated in Fine, supra, Golden tended to look more to the subjective effect of the insured's misrepresentation on the insurer in determining the question of materiality. This imposes on the insurer an unnecessary and problematic element to prove. Proof that the insured's misrepresentations subjectively effected the insurer's investigation is not what the policy provision nor, in Connecticut, what Connecticut General Statutes § 38a-307, which prescribes the standard form policy on which the policy provision is based, requires. Moreover, such a requirement comes dangerously close to imposing on the insurer the burden of proving reliance or prejudice, contrary to Rego v. Connecticut Insurance Placement Facility, 219 Conn. 339, 346-47, 593 A.2d 491 (1991). Other courts have held that the materiality of the misrepresentation is determined by the objective standard of its effect on a reasonable insurer. See, e.g., Woods v. Independent Fire Ins. Co., 749 F.2d 1493, 1497 (11th Cir. 1985); Lively v. Southern Heritage Ins. Co., 256 Ga. 195, 196, 568 S.E.2d 98 (2002); Longobardi v. Chubb Ins. Co. of New Jersey, 121 N.J. 530, 541-42, 582 A.2d 1257 (1990); Cummings v. Fire Ins. Exchange, 202 Cal.App.3d 1407, 1423, 249 Cal.Rptr. 568 (1988).
"The materiality of a misrepresentation is a mixed question of law and fact that under most circumstances should be determined by the trier of fact . . . However, materiality can be decided as a matter of law if reasonable minds could not differ on the question." Wagnon v. State Farm Fire and Casualty Co., supra, 146 F.3d 768.
The overarching question presented by the plaintiff's claim under the policy was what caused the loss. If the damage claimed in the plaintiff's proof of loss — damage to the roof that allowed water to enter the building — preexisted the date of the claimed loss, then the plaintiff was not entitled to benefits under the policy. Only if the storm of September 16, 1999 damaged the building causing an opening in the roof through which rain entered causing interior damage was the plaintiff entitled to be compensated by the defendant for the loss. The plaintiff's claim that the property had passed inspection by Housing Authority inspectors prior to September 16, 1999 bolstered his claim that the roof was damaged by the force of the storm on that date. The plaintiff was, in effect, asserting that it was not only his opinion that he had "repaired" the cause of the leaks and water damage that predated September 16 but that impartial government officials corroborated that opinion. The plaintiff's misrepresentation was obviously material.
The court addresses whether the insured's misrepresentation of a material fact was committed "wilfully." See Rego v. Connecticut Insurance Placement Facility, supra, 219 Conn. 346. A material fact is wilfully concealed or misrepresented if the insured knew it was untrue when it was made. State Bank Trust Co. v. Connecticut General Life Insurance Co., 109 Conn. 67, 72, 145 A. 565 (1929); see Pacific Indemnity Co. v. Golden, 985 F.2d 51, 55 (2d Cir. 1993); Middlesex Mutual Assurance Co. v. Walsh, 218 Conn. 681, 692, 590 A.2d 957 (1991). A mere honest mistake or failure of recollection will not forfeit payment under the policy. Webb v. American Family Mutual Ins. Co., 493 N.W.2d 808, 811 (Iowa 1992); Longobardi v. Chubb Ins. Co. of New Jersey, supra, 121 N.J. 540. Although whether an act is wilful is ordinarily a question of fact, there are instances that are "so clear cut that the disposition of the case becomes a question of law." (Internal quotation marks omitted.) Mullen v. Horton, 46 Conn. App. 759, 765, 700 A.2d 1377 (1997).
There is no genuine issue of material fact that the misrepresentation was committed wilfully. First, the misrepresentation that the property had passed inspection prior to the claimed loss was of an unambiguous fact, the truth or falsity of which was not open to dispute. Second, the plaintiff's misrepresentation was temporally proximate to the occurrence or non-occurrence of that event. That is, on January 11, 2000 the plaintiff testified to the fact that the Housing Authority inspectors passed the property some time between August 31, 1999, the date of the first failed inspection, and September 17, 1999, the date of the alleged loss. Third, the property did not pass inspection until some time subsequent to November 3, 1999. Thus, little more than two months after the property had failed its fourth inspection, the plaintiff testified that it had passed inspection the second time. "This is not a case of an insured making a misstatement due to oversight, a misstatement regarding an irrelevant trifle, or one made during a bad faith investigation." Longobardi v. Chubb Ins. Co. of New Jersey, supra, 121 N.J. 544. No reasonable fact finder could fail to find that the plaintiff's misrepresentation was wilful. Cf. Wagnon v. State Farm Fire and Casualty Co., supra, 146 F.3d 770.
While the plaintiff ignores this claim of misrepresentation in his brief, in an accompanying affidavit he states, without referencing this particular claim of misrepresentation: "I did not intentionally misrepresent to or conceal from, the Defendant any fact, material or otherwise."
Such conclusory averments are insufficient to show the existence of a triable issue of fact. "A party must substantiate his adverse claim by specifically showing that there is a genuine issue of material fact together with the evidence disclosing the existence of such an issue." Farrell v. Farrell, 182 Conn. 34, 39, 438 A.2d 415 (1980). The plaintiff's bare assertion that he did wilfully misrepresent a material fact is not sufficient without supporting evidence, to refute the defendant's claim.
Thus, in Hebrew Home Hospital, Inc. v. Neiman, 3 Conn. App. 51, 484 A.2d 486 (1984), the defendant, who was sued by the plaintiff on a guarantee for services to his mother between the admission to the plaintiff's nursing home and her eventual receipt of social security benefits, appealed the granting of summary judgment, arguing that he had filed a counter-affidavit stating that his "guaranty was not intended to be a blank check; it was intended to cover actual and necessary care given to [the mother]" which he claimed totaled only $5,000.00. Id., 53 n. 4. The Appellate Court held that summary judgment was properly granted for the plaintiff. With respect to the defendant's affidavit, the court stated: "Such a conclusory statement cannot be said to include admissible evidentiary facts." Id. So too here, the plaintiff's conclusory statements do not counter the defendant's assertion that the plaintiff engaged in a wilful misrepresentation.
Finally, the defendant must prove that the plaintiff's wilful misrepresentation of a material fact was made "with the intention of deceiving the insurer." Rego v. Connecticut Insurance Placement Facility, supra, 219 Conn. 346. "[T]he intent to defraud the insurer is necessarily implied when the misrepresentation is material and the insured wilfully makes it with knowledge of its falsity. Thus, the plaintiff's intent to deceive [is] established as a matter of law." (Emphasis added.) Claflin v. Commonwealth Insurance Co., supra, 110 U.S. 95; Cummings v. Farmers Ins. Exchange, 202 Cal.App.3d 1404, 1418, 249 Cal.Rptr. 568 (1988); see Pacific Indemnity Co. v. Golden, 985 F.2d 51, 55-56 (2d Cir. 1993); Pacific Indemnity Co. v. Golden, 791 F. Sup. 935, 938-39 (D.Conn. 1991), rev'd on other grounds, 985 F.2d 51 (2d Cir. 1993); Cohen v. Metropolitan Life Ins. Co., 444 S.W.2d 498, 505 (Mo.App. 1969) ("An intent to defraud may be presumed or inferred where a false statement, in its nature calculated to defraud and injury, is made with knowledge of its falsity . . ."). Here, the same factors that establish that the plaintiff's false statement was made wilfully establish that it was made with the intention of deceiving the insurer.
Finally, the defendant argues that the plaintiff concealed or misrepresented a material fact by altering the date of a letter sent to him by the Housing Authority. The letter, sent by the Housing Authority on its official stationery, stated:
FIRST AND FINAL NOTICE
DATE: Sept 1, 1999
02 BAUCO, PHILIP JOHN 00884
35 McKINLEY AVENUE
BRIDGEPORT, CT 06606 RE: ANTOINETTE WILLIAMS
Dear LANDLORD:
Please be advised that an Annual Inspection was made at the property located at the address noted below on 8/31/99
The result of this inspection was:
X____ The attached list of repairs are needed to meet Section 8 housing Quality Standards. A re-inspection of this unit will be made on 10/4/99 between 1:00 PM 4:00 PM.
FAILURE TO CORRECT THE ATTACHED REPAIRS WITHIN THE NEXT THIRTY 30 DAYS, WILL RESULT IN THE ABATEMENT OF YOUR SECTION 8 PAYMENTS. YOUR TENANT SHOULD CONTINUE TO PAY HIS OR HER SHARE OF THE RENT, AS LONG AS THEY OCCUPY THE UNIT.
If you complete the repairs before the above date, please call (203 337-8874).
Sincerely,
HOUSING AUTHORITY OF THE CITY OF BRIDGEPORT
DEPARTMENT OF INSPECTIONS
ANTOINETTE WILLIAMS E0005
134 BENHAM AVENUE
2ND FL
BRIDGEPORT, CT 06605
CC: TENANT
The plaintiff now admits that he altered the date in the copy of the document that he submitted to the defendant from September 29, 1999 to September 1, 1999.
The plaintiff's alteration of this document was wilful and deliberate. He deliberately submitted a false document to the defendant. This was egregious conduct. Although the plaintiff denies that he submitted the doctored document to the defendant for the purpose of facilitating the payment of his claim, this argument is unavailing. "The insured's motive for lying . . . is irrelevant. Forfeiture does not depend on proof that an insured harbored an intent to recover proceeds to which he or she was not entitled. An insurer may refuse payment if an insured wilfully misrepresented material facts after a loss, even if the insured did not harbor such an intent." Pacific Indemnity Co. v. Golden, supra, 985 F.2d 56, quoting Longobardi v. Chubb Ins. Co. of New Jersey, supra, 121 N.J. 540.
The court addresses whether the submission of the altered document was material. The defendant posits that the plaintiff submitted the doctored document in an incomplete attempt to convince the defendant that the inspection report that accompanied it related to the condition of the property subsequent to the loss. The scheme, as postulated by the defendant, was incomplete because the plaintiff forgot to also alter the date of the inspection, August 31, 1999, in the body of the letter and in the report.
The court need not embark on such speculation nor solve this enigma. Applying the test in Fine v. Bellefonte Underwriters Ins. Co., supra, 725 F.2d 183-84, the plaintiff's submission of the letter with an altered date was material. At his examination under oath, the plaintiff presented the scenario that after he learned that the Housing Authority inspectors had found roof leaks and water damage in the building during the August 31, 1999 inspection he repaired the problem. However, according to the date on the cover letter that the plaintiff presented to the defendant, the plaintiff was not apprised of the results of this inspection until September 29, 1999 at the earliest. How then did he know to repair the roof? The only other source of information identified by the plaintiff was Antoinette Williams. Even if the court were to accept that Williams might have been the source of the information, this does not negate that letter's relevance. "Evidence need not be conclusive to be relevant . . ." (Internal quotation marks omitted.) State v. Esposito, 223 Conn. 299, 316, 613 A.2d 242 (1992). The date on the letter was relevant, even if not dispositive, as to when the plaintiff learned that he had to repair the roof since it identified when Antoinette Williams may have imparted the information to the plaintiff. That the plaintiff's forgery was ultimately self-defeating, indeed enigmatically foolish, is of no moment. The altered date on the letter "concern[ed] a subject relevant and germane to the insurer's investigation as it was then proceeding." Id., 183.
Another possibility was that the plaintiff was concerned if documentary evidence existed that the property was in such poor overall condition on August 31, 1999 it would impair his claim. An inspector from the Housing Authority did write on his inspection checklist "Undesirable unit . . . Home is a Dump." Moreover, the insurance policy contained an exclusion for neglect that stated: "We do not cover loss resulting directly or indirectly from . . . Neglect, meaning your neglect to use all reasonable means to save and preserve property at and after the time of loss or when property is endangered by a Peril Insured Against." In Tuchman v. Aetna Casualty Surety Co., 44 Cal.App.4th 1607, 1616, 52 Cal.Rptr.2d 274 (1996), the court held that this exclusion means that the insured must act reasonably to save and protect the property (1) at the time of the loss, (2) after the loss, and (3) when "the insured . . . [has] knowledge of a readily identifiable, imminent, and real peril, endangering the property." Id. Because of the analysis this court employs to determine the issue of materiality, it need not determine whether to adopt the holding in Tuchman or whether the plaintiff violated this exclusion.
This indeed was an inquiry made of the plaintiff by the defendant at the plaintiff's examination under oath, at pages 33-34.
Beyond this, the plaintiff's alteration of the Housing Authority letter is material in a more fundamental way. Ours is a culture in which the written word occupies a central position. See Brookfield v. Candlewood Shores Estates, Inc., 201 Conn. 1, 10, 513 A.2d 1218 (1986), quoting McCormick, Evidence (3d Ed. 1984) § 230. The falsification of a written document is an especially perfidious and palpable act of mendacity. The only evidence that the plaintiff had repaired the cause of the leak prior to the date of the loss was his word. The alteration of the Housing Authority letter was material because it uniquely and fundamentally undermined the plaintiff's credibility.
"[T]he consequence of the alleged concealment or misrepresentation is the forfeiture of a contractual benefit . . ." Rego v. Connecticut Insurance Placement Facility, supra, 209 Conn. 347. Since there is no genuine issue of material fact that the plaintiff intentionally misrepresented material facts relating to his claim, the plaintiff forfeited any benefits to which he was entitled under the policy and the defendant is entitled to summary judgment on the first count of the complaint.
II
The second count incorporates the allegations of the first count and further alleges that the defendant acted in bad faith by refusing to pay the plaintiff's benefits for the loss sustained on the insured property. The court determined in part I that the plaintiff wilfully misrepresented material facts to the defendant in violation of the "concealment or fraud" provision in the policy. Accordingly, the defendant may not be held to have acted in bad faith for refusing to pay the plaintiff's benefits to which they were not entitled. See Habetz v. Condon, 224 Conn. 231, 237, 618 A.2d 501 (1992) (implying dishonest purpose in definition of bad faith); see also Elm Street Builders, Inc. v. Enterprise Park Condominium Assn., Inc., 63 Conn. App. 657, 667-68, 778 A.2d 237 (2001).
Moreover, even if the plaintiff had not, as a matter of law, violated the "concealment or fraud" provision, the plaintiff's claim for bad faith necessarily fails. "To prove a claim for bad faith under Connecticut law, the plaintiffs [are] required to prove that the defendants engaged in conduct design[ed] to mislead or to deceive . . . or a neglect or refusal to fulfill some duty or home contractual obligation not prompted by an honest mistake as to one's rights or duties . . . [B]ad faith is not simply bad judgment or negligence, but rather it implies the conscious doing of a wrong because of dishonest purpose or moral obliquity . . . it contemplates a state of mind affirmatively operating with furtive design or ill will . . . Moreover, [b]ad faith is an indefinite term that contemplates a state of mind affirmatively operating with some design or motive of interest or ill will." (Internal quotation marks omitted.) Elm Street Builders, Inc. v. Enterprise Park Condominium Assn., Inc., 63 Conn. App. 657, 667-68, 778 A.2d 237 (2001), quoting Chapman v. Norfolk Dedham Mutual Fire Ins. Co., 39 Conn. App. 306, 320, 665 A.2d 112, cert. denied, 235 Conn. 925, 666 A.2d 1185 (1995).
In some jurisdictions, the rule is that "an insurer breaches its duty of good faith and fair dealing by denying a claim when the insurer's liability has become reasonably clear." State Farm Fire Casualty Co. v. Simmons, 963 S.W.2d 42, 44, 41 Tex.Sup.Ct.J. 371 (Tex. 1998); accord, Medical Care America v. National Union Fire, 341 F.3d 415, 425 (5th Cir. 2003). In many jurisdictions, this standard is codified into the state's unfair insurance practices act. See, e.g., Cal. Ins. Code § 790.03(5); Colo. Rev. Stat. § 10-3-1104(1); 215 Il. C.S. § 5//54.6; Ky. Rev. Stat § 304.12-230; La. R.S. 22:1214(14) (f); Mass. Gen. L. ch. 176D § 3(9)(f); Mont. C.A. § 33-18-201; New Mexico S.A. § 59A-16-20; N.C. Gen Stat. § 58-63-15(11) (f); Or. Rev. Stat. 746.230; S.C. Code § 38-59-20; Utah A.S. 284-30-330(6). Notably, in Connecticut's Unfair Insurance Practices Act, General Statutes § 38a-815 et seq., provides that an unfair claim settlement practice includes "[c]ommitting or performing with such frequency as to indicate a general business practice . . . failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage . . ." (Emphasis added.)
Although there is no claim that the defendant has previously failed to promptly settle a claim in any other case, nor that its refusal here was for the purpose of exerting leverage on a claim brought on another part of the policy, the court finds the standard of settlement "where liability has become reasonably clear" to be helpful in the application of the common-law doctrine of bad faith. First "[a]lthough we recognize that the provisions of the act do not control the outcome, it is well established that statutes are a useful source of policy for common-law adjudication, particularly when there is a close relationship between the statutory and common-law subject matters . . . Statutes are now central to the law in the courts, and judicial lawmaking must take statutes into account virtually all of the time . . . Hardly ever is a statute now regarded as a candidate for narrow construction because it may be in derogation of the common law. More often, the issue is rather to what extent a statute is itself a source of policy for consistent common law development." (Citations omitted; emphasis omitted; internal quotation marks omitted.) CJ Builders Remodelers, LLC v. Geisenheimer, 249 Conn. 415, 419-20, 733 A.2d 193 (1999). Certainly, there is a close relationship between common-law bad faith and unfair insurance practices. Second, consistency between common law and statutory law is especially desirable in the insurance industry, which is so highly regulated. See Serrano v. Aetna Ins. Co., 233 Conn. 437, 453, 664 A.2d 279 (1995). Third, as observed supra, the "reasonably clear" standard is employed in many states. Its adoption here as the standard for bad faith thus affords insurers who do business in Connecticut a consistent intra-state standard with respect to common-law and statutory claims of bad faith as well as, in many instances, a consistent interstate standard as well. Fourth, the "reasonably clear" standard affords a meaningful measure for conduct in an area otherwise fraught with vagueness. See, e.g., Smith v. Stonebridge Life Insurance Co., United States District Court, Civil No. 03-1006 (RHK/AJB) (D.Minn. 2003).
"[T]he examination of good faith and fair dealing in the settling of an insurance claim requires a case-by-case analysis." CT Page 3343 Verrastro v. Middlesex Ins. Co., 207 Conn. 179, 190, 540 A.2d 693 (1988).
The plaintiffs allege that the defendant acted in bad faith because it: (1) failed to make payment pursuant to the insurance policy when in good faith it should have; (2) failed to adopt and implement reasonable standards for the prompt investigation of claims arising under its insurance policies, as evidenced by its refusal to pay the plaintiffs' claims without first conducting a reasonable investigation based upon all available information, and attempt in good faith to effectuate a prompt, fair and equitable settlement of the plaintiffs' claim in which liability has become reasonably certain; and (3) made a pretextual claim of fraud to deny the claim.
With respect to the plaintiff's claim that the defendant failed to establish standards for and conduct a reasonable investigation, the evidence indicates otherwise. An adjuster for the defendant inspected the plaintiffs' building, including the claimed damage, about thirty days after the storm and "actually went up onto the roof and inspected the roof damage with the [plaintiffs'] adjuster." Affidavit of Philip Bauco, para. 6. The defendant obtained copies of the Housing Authority's inspection reports of the property for the past three years. The defendant examined the plaintiff under oath and obtained a statement from his tenant, Antoinette Williams. The plaintiff has not suggested what else the defendant should have done or done differently in its investigation. As a matter of law, the defendant conducted a reasonable investigation.
With respect to the denial of the claim itself, the defendant had evidence that the Housing Authority found leaks on the ceiling of the second floor during its annual inspection for three consecutive years. This was corroborated by Antoinette Williams. The plaintiff claimed that he learned about the 1999 leak in August, either from the Housing Authority or from Antoinette Williams. The letter from the Housing Authority enclosing the inspection that found the leak, however, was dated September 29, 1999, after the date of the loss. The defendant had reason to believe that the plaintiff had altered the date of that letter.
The plaintiff stated that on learning of the leak he closed the window on the third floor that caused the leak and patched the crack on the roof with tar. Given the basic nature of the repairs, no documentation was made of the work done. The plaintiff testified that after the repair but before September 16, 1999, the building passed inspection by the Housing Authority. This statement was untrue. The building did not pass inspection before the September 16, 1999 loss.
Additionally, in her statement to the defendant after the loss, Antoinette Williams stated that there was a "blue tarp" on the roof in August 1999 and that three or four men were up on the roof "banging," from which the defendant could have reasonably inferred that the plaintiff was in the process of removing part of the roof prior to the loss and, thus, the plaintiff's version of repair was false. Moreover, Williams stated that there was still a window open on the third floor, stuck since the frame had been painted, but that water did not come through that window. Finally, Williams contradicted the plaintiff's statement that after the September 16, 1999 storm there were roof shingles on the ground.
Based on the reports generated by the Housing Authority over three years, the statement of the plaintiff's tenant Antoinette Williams, and the plaintiff's own examination under oath, no reasonable person could find that the defendant's duty to make payment to the plaintiff had become reasonably clear. The defendant was entitled to examine the plaintiff's claim in light of the lies, inconsistent evidence and other questionable circumstances. See Verrastro v. Middlesex Ins. Co., supra, 207 Conn. 190 (no bad faith where insured hindered insurer's ability to process the case by, for example, giving a voluntary statement that contained numerous untruths). It follows that the plaintiff cannot claim that the defendant "made a pretextual claim of fraud to deny the claim."
The defendant's motion for summary judgment is granted.
BY THE COURT
Bruce L. Levin Judge of the Superior Court