Opinion
No. CV01-0508221
April 30, 2003
MEMORANDUM OF DECISION ON MOTION FOR SUMMARY JUDGMENT
The plaintiffs, DND Enterprises Ins., d/b/a Locomotion ("DND") and Dominick DeMartino, have commenced this suit against the defendant, American Equity Insurance Co. ("American Equity") alleging that American Equity failed in its duty to defend the plaintiffs in a federal action brought against it by American Reliable Ins. Co. ("ARIC"). American Equity has moved for summary judgment under Practice Book § 17-49 (judgment shall be granted if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law).
The undisputed facts show as follows: The plaintiffs operate a club in Southington which was vandalized in June 1996. They subsequently submitted a claim for damages to their property insurer ARIC. ARIC paid $32,504.59 to the plaintiffs' landlord's mortgagee, but refused to pay any more on the claim, losses alleged by the plaintiffs to be extensive. The plaintiff DND brought suit against ARIC, in 1998, to recover fully on this claim and the suit eventually was removed to federal district court.
The record shows that Dominick DeMartino was a shareholder of DND. See Release dated July 12, 2000, Exhibit C to American Equity's motion for summary judgment.
On December 2, 1999, ARIC answered DND's federal complaint and raised affirmative defenses and instituted a counterclaim. Relevant to the case now pending, the second defense claimed that DND failed to meet its burden of showing that its losses were not due to its own actions. The third defense stated that DND had a duty under the ARIC policy to maintain the burglar alarm at the club, but had failed to do so. The counterclaim sought to recover against DND and Demartino for the $32,504.59 paid to the mortgagee and for other expenses arising from the "wrongful conduct" of DND and DeMartino that resulted in damage to the premises on June 10, 1996. A logical reading of ARIC's suit, therefore, is the claim that DND and DeMartino had acted to injure their own property, and at least to a certain extent this had occurred through the failure to maintain a burglar alarm system.
At page 2 of the plaintiffs' brief, they claim that they had an alarm system, but DeMartino "failed to activate the system" when he closed the premises prior to the vandals gaining entry to the club. This explanation is extraneous to ARIC's special defense that DND was required to "maintain" an alarm system, but failed to maintain it, and thereby brought about injury. The word "maintain" conveys an active, continuous duty. Davis v. Rich, 180 Mass. 235, 62 N.E. 375, 377 (1902).
At the time the counterclaim was made, the plaintiffs were insured by CT Page 5987-g American Equity, a general liability insurer, and they submitted the counterclaim to American Equity seeking that it retain counsel to defend them against ARIC's federal action. American Equity refused to provide a defense. DND's attorney subsequently arrived at a settlement with ARIC on July 12, 2000, in which $25,000 was paid to DND and the counterclaim was withdrawn. The plaintiffs have now sued American Equity for breach of its duty to defend under its insurance contract, seeking DND's federal court litigation costs, including attorneys fees, further costs that should have been covered by American Equity, and additional damages for the initial vandalism loss.
"It is well established . . . that a liability insurer has a duty to defend its insured in a pending lawsuit if the pleadings allege a covered occurrence, even though facts outside the four corners of those pleadings indicate that the claim may be meritless or not covered . . . [T]he oft-stated principle [is] that the duty to defend is broader than the duty to indemnify . . ." (Citations omitted; internal quotation marks omitted.) QSP, Inc. v. Aetna Casualty Surety Co., 256 Conn. 343, 352 (2001) (affirming the granting of a motion for summary judgment).
"Indeed, `[i]f an allegation of the complaint falls even possibly within the coverage, then the insurance company must defend the insured . . . [In deciding the issue of coverage], [t]he [i]nterpretation of an insurance policy, like the interpretation of other written contracts, involves a determination of the intent of the parties as expressed by the language of the policy . . . The determinative question is the intent of the parties, that is what coverage the . . . [insured] expected to receive and what [insurer] was to provide, as disclosed by the provisions of the policy . . ." (Citations omitted; internal quotation marks omitted.) Community Action for Greater Middlesex County, Inc. v. American Alliance Ins. Co., 254 Conn. 387, 399 (2000).
American Equity in its motion for summary judgment argues that the counterclaim did not claim losses as a result of an `occurrence' as defined in the Policy." (Defendant's brief at p. 15.) The policy provided in this regard as follows: "Coverage A. Bodily Injury and Property Damage Liability. 1. Insuring Agreement. a. We will pay . . . damages because of . . .'bodily injury' or `property damage' to which this insurance applies. We will have the right and duty to defend any `suit' seeking those damages . . . b. This insurance applies to `bodily injury' or `property damage' only if: (1) The `bodily injury' or `property damage' is caused by an `occurrence' that takes place in the `covered territory' . . . Section V — Definitions. `Occurrence' means an accident, including continuous or repeated exposure to substantially the same general harmful conditions." CT Page 5987-h
It also argues that DND's federal complaint itself should be examined by the court. The court, however, will confine itself to the "four corners" of the counterclaim itself, which alleges that the "damage at the plaintiff's premises" was caused by or done at the behest of DND and DeMartino. See Yakima Cement Products Co. v. Great American Insurance CT Page 5987-j Co., 544 P.2d 763 (Wash.App. 1975) (analysis of counterclaim). The court will also take into account that ARIC was raising the special defense that DND did not establish that its own actions did not cause the loss, as well as the special defense that DND did not maintain a burglar alarm system at the premises.
Thus the claim against the plaintiffs for the injury to the property at their dance club would have to be the result of an "accident" for the policy to provide coverage. Our Supreme Court has stated that "the term `accident' is to be construed in its ordinary meaning of an `unexpected happening.'" Commercial Contractors Corp. v. American Insurance Co., 152 Conn. 31, 42 (1964). The "wrongful conduct" alleged by ARIC hardly may be termed "unexpected." See also Aetna Life Casualty Co. v. Griffiths, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 93-0301939 (January 11, 1994, Vertefeuille, J.), where the court concluded theft of a diamond ring was not an "accident"; the act of stealing cannot be accidental.
The plaintiffs argue that if the alleged "wrongful conduct" was due to the failure to maintain the alarm system, then they have proved an "occurrence." Such a failure, even if negligent, is not an accident. Even the expansive definition in DaCruz v. State Farm Fire and Casualty Co., 69 Conn. App. 507, 516, cert. granted, 261 Conn. 938 (2002), would not cover the positive act of the failure to maintain an alarm system: "The policy defines `occurrence' as `an accident . . . which results in: (a) bodily injury; or (b) property damage during the policy period . . .' Accident is defined as `an event or condition occurring by chance or arising from unknown or remote causes; lack of intention or necessity; an unforeseen unplanned event or condition.'"
In addition the policy in question excludes coverage for property damage to "property you own, rent or occupy." Policy, Section 2, j (1). The counterclaim alleged that the plaintiffs wrongfully destroyed their own property, and this is the intent of the policy exclusion. The plaintiffs contend that the provision does not apply because DeMartino was not a plaintiff in the federal lawsuit. This does not hold, as clearly by the plaintiffs' own admission, at p. 2 of their brief, that DeMartino was a "principal" in DND. See also American Equity's Exhibit C, where DeMartino describes his role in DND as "shareholder." As a principal and a shareholder of DND, DeMartino stood in the shoes of DND who did occupy the premises. American Equity Policy Section II, "Who is an Insured," (1) (c).
The amended answer raises this defense. While the plaintiffs objected to the amended answer, the court will allow it. It is the court's duty to review the allegations of the counterclaim in light of the policy provisions. Community Action v. American Alliance Ins. Co., supra, at 399.
These very issues were discussed in the case of Cle Elum Bowl, Inc. v. North Pacific Insurance Co., 981 P.2d 872 (Wash.App. 1999). Cle had rented a premises to open a bowling alley, and obtained general liability insurance. After the roof of the building collapsed during a heavy snowstorm, the landlord commenced a civil damage suit against Cle. Cle thereupon brought a declaratory judgment action against the liability insurance company to determine its duty to defend Cle. The trial court CT Page 5987-i granted summary judgment for the insurance company. Because Cle should have removed the snow from the roof, there was no "occurrence" where "occurrence" is defined as an "accident." The collapse was not "unexpected." The trial court also relied upon the policy exclusion for damage to property "you own, rent or occupy."
On appeal the appellate court, applying law identical to that in Connecticut, affirmed the trial court's decision. The appellate court had some concern with the "occurrence" because the record did not show whether Cle could have "expected" the roof to fall if it were not properly maintained. 981 P.2d 876. Here, of course, ARIC's special defense alleged that DND failed to maintain the burglar alarm system and that this was the cause of the damages. In any event, the appellate court specifically found that the exclusion for injury to one's rental property applied. Id. In addition, it rejected the claim of Cle, similar to that made in this case, that claims made against an officer or director of a corporation do not fall within the "owned, rented, or occupied" property exclusion. Id. at 877.
The court concludes that the American Equity policy did not cover the allegations of the ARIC counterclaim and that summary judgment in favor of American Equity is appropriate on the plaintiffs' complaint. QSP, Inc. v. Aetna Casualty and Surety Co., supra, at 351.
The defendant has raised a further defense that the counterclaim presented an unscheduled loss. In light of the above ruling finding that American Equity did not breach its duty to defend, the court does not discuss this defense. Further the "personal injury" provisions of the policy are not applicable to the ARIC counterclaim which alleged, at most, the destruction of personal property. See American Equity Policy at V. (10), definitions. See also the thorough discussion of this point in Cle Elum, 981 P.2d 877-78.
So ordered.
Henry S. Cohn, J.