Opinion
No. HHD X04 CV-03-4034596 S
February 19, 2009
MEMORANDUM OF DECISION
This matter is before the court concerning the defendant Hartford Underwriters Insurance Company's motion for summary judgment (#235) with respect to the first, second, and fourth counts of the plaintiffs' complaint of May 22, 2003. The court heard oral argument on the motion on January 7, 2009. After consideration of the parties' written submissions and oral arguments, the court issues this memorandum of decision.
I. FACTS AND PROCEDURAL HISTORY
The background of this matter is stated in the court's (Quinn, J.) April 6, 2005 memorandum of decision (#139) on the parties' previous motions for partial summary judgment: "The plaintiffs, Joseph Fortin (`Fortin'), Samuel Kofkoff (`S. Kofkoff), Robert Kofkoff (`R. Kofkoff') and Kofkoff Egg Farm, LLC (`Kofkoff Egg'), commenced this breach of contract and declaratory judgment action against Hartford Underwriters Insurance Company (`Hartford') and North River Insurance Company (`North River'), for their failure to defend them under certain policies of insurance in an underlying action commenced against them in May of 1988. These plaintiffs were cited in as third-party defendants by Julius Rytman and Dora Rytman in the case of Connecticut National Bank v. Julius Rytman et al., Docket No. CV-87-505741-S (` CNB action'), filed in the Connecticut Superior Court for the Judicial District of New London at New London.
For ease of reference, the court refers to Judge Quinn's memorandum of decision as "Decision."
"The plaintiffs claim that they promptly notified the defendant insurance companies of the action and requested coverage under the liability insurance policies issued to them. The Rytmans filed additional claims against these plaintiffs in the CNB action between 1988 and 1991, and the plaintiffs notified the defendants of the additional claims. Hartford retained counsel to provide a defense for the plaintiffs in March of 1991, and appeared to take control of the defense of the CNB action. In January of 2002, after the filing of an amended cross complaint in November of 2001, Hartford notified the plaintiffs that it would provide no further coverage under the policy, that it would provide no counsel to the plaintiffs, and that it would provide no monies toward any settlement of the claims. This notification came at the time of an approaching mediation and trial date. North River, which carried the umbrella insurance coverage over the underlying policy issued by the Hartford, refused to defend the plaintiffs or participate in the settlement discussions when informed of the coverage dispute with the Hartford.
"Plaintiffs were compelled to retain separate counsel. At the conclusion of the mediation in 2002, plaintiffs reached a monetary agreement with the Rytmans to settle all claims related to the CNB action. Neither of the defendant insurance companies contributed monies toward the settlement. The plaintiffs commenced the present action seeking a declaratory judgment and claiming breach of contract and breach of the covenant of good faith and fair dealing." See Decision.
All parties filed motions for partial summary judgment on the issue of the duty to defend. As to Hartford, the court concluded that the allegations in count twelve of the second revised amended third-party complaint in the CNB action, dated April 24, 2002, triggered Hartford's duty to defend. It is undisputed that the allegations concerning slanderous statements which had been deleted in the November 2001 pleading were not realleged or added back in subsequent complaints. The court granted the plaintiffs' motion for partial summary judgment as to Hartford's duty to defend set forth in the first and fourth counts of the plaintiffs' complaint in this action. See Decision.
Since they were not at issue in the previous motions for summary judgment, Judge Quinn's decision did not address the plaintiffs' bad faith allegations. In the second count of their complaint, the plaintiffs allege that Hartford's desire, from when it first provided coverage in 1991, was to discover an avenue by which it could walk away from its coverage obligations to the plaintiffs. See complaint, second count, ¶ 46. The plaintiffs allege that Hartford's conduct violated the fiduciary duty it owed the plaintiffs, was motivated by malice, and constitutes a breach of the implied covenant of good faith and fair dealing. See complaint, second count, ¶ 47. The plaintiffs argue that Hartford exercised bad faith when it intentionally chose to honor its duty to its shareholders and its "bottom line" at the plaintiffs' expense.
In its motion for summary judgment, Hartford contends that, since there was no bad faith as a matter of fact or law, it is entitled to summary judgment in its favor on the second count (bad faith) and as to the plaintiffs' claim for extra contractual damages under the first count (breach of contract) and the fourth count (declaratory judgment). In addition, it asserts that the plaintiffs are not entitled to attorneys fees under any count.
In response, the plaintiffs argue that the motion should be denied because there are genuine issues as to material facts regarding bad faith and Hartford is not entitled to judgment as a matter of law. The plaintiffs also assert that, if the court denies the motion on bad faith, the remaining issues are moot.
Additional references to facts and arguments are set forth below.
II. STANDARD OF REVIEW
"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 . . . 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 . . . A material fact . . . [is] a fact which will make a difference in the result of the case." (Internal quotation marks omitted.) Deming v. Nationwide Mutual Insurance Co., 279 Conn. 745, 756-57, 905 A.2d 623 (2006).
"When documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the nonmoving party has no obligation to submit documents establishing the existence of such an issue . . . Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue . . . It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue. Mere assertions of fact . . . are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court under Practice Book § [17-45]." (Internal quotation marks omitted.) Socha v. Bordeau, 277 Conn. 579, 586, 893 A.2d 422 (2006).
"[O]nly evidence that would be admissible at trial may be used to support or oppose a motion for summary judgment." (Internal quotation marks omitted.) New Haven v. Pantani, 89 Conn.App. 675, 678, 874 A.2d 849 (2005). A preliminary showing of genuineness is required. See id., 679, citing Conn. Code of Evidence § 9-1. However, the Supreme Court has stated that parties may "knowingly waive . . . compliance with the procedural provisions of the Practice Book relating to motions for summary judgment." (Footnote omitted.) Krevis v. Bridgeport, 262 Conn. 813, 824, 817 A.2d 628 (2003). Also, the Supreme Court has stated, "[w]e previously have afforded trial courts discretion to overlook violations of the rules of practice and to review claims brought in violation of those rules as long as the opposing party has not raised a timely objection to the procedural deficiency." Schilberg Integrated Metals Corp. v. Continental Casualty Co., 263 Conn. 245, 273, 819 A.2d 773 (2003).
Here, no objection was raised to any exhibit. Accordingly, the court deems such objections to have been waived. In the exercise of its discretion, the court has considered the exhibits which were presented.
III. DISCUSSION A. Bad Faith
The court first considers the plaintiffs' bad faith claim, as alleged in the second count, and as to which Hartford moves for summary judgment. "[I]t is axiomatic that the . . . duty of good faith and fair dealing is a covenant implied into a contract or a contractual relationship . . . In other words, every contract carries an implied duty requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement . . . The covenant of good faith and fair dealing presupposes that the terms and purpose of the contract are agreed upon by the parties and that what is in dispute is a party's discretionary application or interpretation of a contract term . . . To constitute a breach of [the implied covenant of good faith and fair dealing], the acts by which a defendant allegedly impedes the plaintiff's right to receive benefits that he or she reasonably expected to receive under the contract must have been taken in bad faith." (Citations omitted; internal quotation marks omitted.) De La Concha of Hartford, Inc. v. Aetna Lfe Insurance Co., 269 Conn. 424, 432-33, 849 A.2d 382 (2004).
As noted above, in the second count, the plaintiffs allege that Hartford had a fiduciary duty to them arising from the insurance contract. As presented, the parties briefed the issues in the context of bad faith, rather than focusing on fiduciary duty. For example, as stated above, the plaintiffs argue that material issues of fact exist concerning their allegations that Hartford acted in bad faith.
"[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." (Internal quotation marks omitted.) PSE Consulting, Inc. v. Frank Mercede and Sons, Inc., 267 Conn. 279, 305, 838 A.2d 135 (2004). "Bad faith in general implies both actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights or duties, but by some interested or sinister motive." (Internal quotation marks omitted.) Habetz v. Condon, 224 Conn. 231, 237, 618 A.2d 501 (1992).
"Whether a party has acted in bad faith is a question of fact . . ." Renaissance Management Co. v. Connecticut Housing Finance Authority, 281 Conn. 227, 240, 915 A.2d 290 (2007). "The plaintiff further claims that bad faith is a factual question and as such it is not appropriately determined by a motion for summary judgment . . . [E]ven with respect to questions of motive, intent and good faith, a party opposing summary judgment must present a factual predicate for his argument in order to raise a genuine issue of fact." (Citations omitted; internal quotation marks omitted.) Wadia Enterprises, Inc. v. Hirschfeld, 224 Conn. 240, 250, 618 A.2d 506 (1992).
"A `genuine' issue has been variously described as a `triable,' `substantial' or `real' issue of fact; . . . and has been defined as one which can be maintained by substantial evidence . . . Hence, the `genuine issue' aspect of summary judgment procedure 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." (Citations omitted; internal quotation marks omitted.) United Oil Co. v. Urban Redevelopment Commission, 158 Conn. 364, 378-79, 260 A.2d 596 (1969).
"Because [t]he only kind of an inference recognized by the law is a reasonable one . . . any such inference cannot be based on possibilities, surmise or conjecture . . . It is axiomatic, therefore, that [a]ny [inference] drawn must be rational and founded upon the evidence. However, [t]he line between permissible inference and impermissible speculation is not always easy to discern. When we `infer,' we derive a conclusion from proven facts because such considerations as experience, or history, or science have demonstrated that there is a likely correlation between those facts and the conclusion. If that correlation is sufficiently compelling, the inference is `reasonable.' But if the correlation between the facts and the conclusion is slight, or if a different conclusion is more closely correlated with the facts than the chosen conclusion, the inference is less reasonable. At some point, the link between the facts and the conclusion becomes so tenuous that we call it `speculation.' When that point is reached is, frankly, a matter of judgment . . . [P]roof of a material fact by inference from circumstantial evidence need not be so conclusive as to exclude every other hypothesis. It is sufficient if the evidence produces in the mind of the trier a reasonable belief in the probability of the existence of the material fact . . . Thus, in determining whether the evidence supports a particular inference, we ask whether that inference is so unreasonable as to be unjustifiable . . . In other words, an inference need not be compelled by the evidence; rather, the evidence need only be reasonably susceptible of such an inference. Equally well established is our holding that a jury may draw factual inferences on the basis of already inferred facts." (Citations omitted; footnote omitted; internal quotation marks omitted.) State v. Copas, 252 Conn. 318, 338-40, 746 A.2d 761 (2000).
An inference may not be drawn when there is no evidence to support it; rather, it would amount to impermissible speculation to do so. See Eichman v. JJ Building Co., 216 Conn. 443, 456-57, 582 A.2d 182 (1990). Where the link between the evidence and the proposed inference is "attenuated and speculative," a jury may not draw a reasonable inference. DiStefano v. Milardo, 276 Conn. 416, 426, 886 A.2d 415 (2005).
With these principles in mind, the court considers the parties' contentions as to the evidentiary support for plaintiffs' bad faith claims. Hartford argues that the evidence shows that in its coverage determinations, after the amendments to the Rytmans' third-party complaint in the CNB action, and based on its adjuster's (Kuhn) reviews, were limited to its consideration of the four corners of the amended complaint, and did not consider any extrinsic evidence.
Chief Justice Rogers, then a judge of the Superior Court, explained the "four corners rule" in Times Fiber Co. v. Travelers Indemnity Company of Illinois, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV X05 CV 03 0196619 (February 2, 2005) ( 38 Conn. L. Rptr. 642). "In Connecticut it has long been recognized that the duty to defend is determined solely by reference to the allegations of the underlying claims against the insured. The `insurer's duty to defend is measured by the allegations of the complaint.' DaCruz v. State Farm Fire and Casualty Co., 268 Conn. 675, 687-88 (2004), quoting Security Insurance Co. of Hartford v. Lumbermens Casualty Co., 264 Conn. 688, 711-12 (2003). This rule has been recognized as the so called `four corners rule' under which the duty to defend is determined solely on the basis of what is found within the four corners of the complaint and is not affected by facts disclosed by independent investigation, including those which undermine or contradict the injured party's claim. Stamford Wallpaper Company, Inc. v. TIG Insurance, 138 F.3d 75, 79 (2d Cir. 1998), quoting Cole v. East Hartford Estates Ltd. Partnership, 1996 WL202135 (Conn.Super.Ct. May 15, 1996) (Sheldon, J.) ( 16 Conn. L. Rptr. 579)[.]" Times Fiber Co. v. Travelers Indemnity Company of Illinois, supra, Superior Court, Docket No. CV X05 CV 03 0196619.
The plaintiffs' statement of "Undisputed Issues of Material Facts," see plaintiffs' objection (#239), p. 6, agrees that Kuhn's coverage decision was "a decision based solely on the contents of the operative complaint." Hartford contends that there is no evidence to show that it engaged in bad faith conduct.
In response, the plaintiffs raise several arguments concerning the evidence. Even after considering these arguments as a group, no material issue of fact is presented.
The plaintiffs' objection, pp. 11-25, contains 126 numbered paragraphs of what they term are "Disputed Issues of Material Fact." The court addresses the legal arguments made by the plaintiffs, set forth in their objections, beginning at p. 25. "We repeatedly have stated that [w]e are not required to review issues that have been improperly presented to this court through an inadequate brief . . . Analysis, rather than mere abstract assertion, is required in order to avoid abandoning an issue by failure to brief the issue properly . . . Where a claim is asserted in the statement of issues but thereafter receives only cursory attention in the brief without substantive discussion or citation of authorities, it is deemed to be abandoned." Taylor v. Mucci, 288 Conn. 379, 383 n. 4, 952 A.2d 776 (2008).
The plaintiffs argue that Hartford resisted providing a defense in the CNB action from December 1, 1989 to January 17, 1991 and that, when it acknowledged its duty to defend it also documented its desire to "walk away from the case," and explored with retained defense counsel, in a "plan to abandon" the plaintiffs, the possibility of filing a partial motion for summary judgment as to the libel counts. See plaintiffs' objection, p. 26.
This is apparently the plaintiffs' second effort to persuade the court that the events of January 1991 provide evidence of bad faith. Having reviewed the cited documentation, this court agrees with the previous assessment of the plaintiffs' bad faith claim made by the court (Beach, J.) when a similar presentation, involving the same Hartford internal memorandum was made by the plaintiffs in the context of a motion to compel. See ruling, dated October 16, 2007 (#204) (Ruling).
In his Ruling, Judge Beach stated, "[p]rior to the time of this memorandum, the insurer claimed that no allegation of the underlying complaint triggered coverage under the policy. A recent amendment had provided more specific allegations regarding allegedly slanderous conduct, and the memorandum [from the home office] directed the field office to provide a defense. The defense attorney was supposed to be instructed by the field office claims person to depose witnesses regarding the slander; when the factual situation was clear a second attorney was supposed to be hired to move for partial summary judgment, in which case the insurer `could walk away from the case.'" (Footnote omitted.) Ruling, p. 2.
The Ruling then notes that Hartford provided a defense for many years, until 2002, when, after the cross complaint in the CNB action was amended, it disclaimed coverage in a detailed letter to the plaintiffs, claiming that the amended pleading in the underlying case essentially withdrew the allegations which had compelled coverage. See Ruling, pp. 2-3.
The court disagreed that there was probable cause to believe that the insurer used counsel to facilitate bad faith conduct. See Ruling, p. 3. The court found that the insurer's attitude was conveyed in a straightforward, "upfront" manner. "Its rationale was grounded in policy interpretation rather, than, for example, a failure to investigate or fraudulent representations. Grumpiness does not necessarily equate to bad faith." Ruling, p. 4.
Just as Judge Beach concluded that there was no evidence of bad faith use of counsel, this court concludes that these materials provide no evidentiary basis for the plaintiffs' proposed inference, that "Hartford's initial reluctance to provide a defense . . . and desire to walk away from the case on the day it concluded it must provide a defense likely resulted from a concern that the cost of defending . . . would be unduly burdensome." See plaintiffs' objection, p. 27. Presenting this evidence a second time, now in the context of opposing a motion for summary judgment, does not make the proposed inference of self-interested, bad faith conduct any less speculative in nature. Moreover, the attempt to link long-past events to the eventual decision to disclaim coverage, after Hartford provided a defense for many years, also is based on speculation.
Similarly unpersuasive is the plaintiffs' reference to October 2001 correspondence from defense counsel in the CNB action concerning settlement. See Hartford Exhibit 30. The plaintiffs note that she advised Kuhn that the Rytmans "may settle" for less than $5.2 million. There is no dispute that the plaintiffs' policy limit under the Hartford insurance policy was less than one-tenth of that amount, $500,000. While this letter pre-dated the amendment to the pleadings in the CNB action upon which Kuhn based his coverage analysis, neither it nor a related memorandum containing an estimate of projected defense costs provides evidence of bad faith.
The Rytman third-party complaint in the CNB action was amended on November 30, 2001. By memorandum, Kuhn recommended that Hartford disclaim coverage and withdraw from defending. See Hartford Exhibit 32. In particular, he noted that the previous complaint was vague as to specific dates, while the new pleading provided specific dates. He concluded that "[i]t is clear that any events that led to the claimant's alleged damages and/or injuries all happened on or after February 17, 1987. This is well after our coverage expired." See Hartford Exhibit 32.
Further on, Kuhn stated that he based his recommendation on the following: "1. The plaintiff does not allege any offense that occurred within the policy terms. 2. The plaintiff does not allege an occurrence, bodily injury, personal injury or advertising injury as defined in the policy. (An argument might be made for Bodily Injury as to Counts 11 and 12 but I would not concede it.)" See Hartford Exhibit 32.
Unfortunately, the plaintiffs misquote and mischaracterize this statement in their objection. They state that "Kuhn documents his belief that the operative pleading might include a "Bodily Injury claim in Counts 11 and 12, but [he] would not concede it." See objection, p. 27. Kuhn's memorandum merely stated that an "argument might be made" for bodily injury coverage, which he would not concede, not that he believed that the operative pleading might include such a claim. Plaintiffs argue that "Kuhn admits in his December 6, 2001 memorandum that Count 12 of the operative complaint may include a Bodily Injury allegation, an admission that necessarily creates the possibility of coverage." See objection, p. 28. Noting that an argument for coverage might be made is not the same as admitting the possibility of coverage or that the argument had merit.
The plaintiffs note that Hartford asserts that it did not commit bad faith when it withdrew its coverage in January 2002 (see Hartford Exhibit 33), and afterwards when it declined to participate further, because Hartford reasonably relied on the four corners rule as it existed at the time. The plaintiffs note that Hartford interpreted that rule to mean that it could not consider extrinsic evidence to conclude that it had a duty to defend. See Times Fiber Co. v. Travelers Indemnity Company of Illinois, supra, Superior Court, Docket No. CV X05 CV 03 0196619.
In connection with Hartford's position on the four corners rule, the plaintiffs make four arguments to show that Hartford engaged in bad faith, which the court addresses below, in the order in which they are presented in the plaintiffs' objection, pp. 29-30. First, the plaintiffs assert that Hartford's position was contrary to its earlier application of the four corners rule, over ten years before, when it sought to exclude coverage by relying on extrinsic evidence, asserting that "Hartford examined extrinsic evidence during its initial investigation to determine coverage," when the operative complaint's allegations were silent as to the date of occurrence. See objection, p. 29, n. 18. Hartford sought extrinsic evidence in 1990 to determine whether the claim fell within the policy period. See Plaintiffs' Exhibit 15.
Resorting to extrinsic evidence to determine whether a claim was within the policy period was not inconsistent with the four corners rule as it reasonably may have been interpreted at the time of the events in question. For example, in one of its reiterations of the rule, the Supreme Court stated, "it is well settled that an insurer's duty to defend, being much broader in scope and application than its duty to indemnify, is determined by reference to the allegations contained in the [underlying] complaint. See, e.g., Keithan v. Massachusetts Bonding Ins. Co., 159 Conn. 128, 138, 267 A.2d 660 (1970) [ Keithan]. The obligation of the insurer to defend does not depend on whether the injured party will successfully maintain a cause of action against the insured but on whether he has, in his complaint, stated facts which bring the injury within the coverage. If the latter situation prevails, the policy requires the insurer to defend, irrespective of the insured's ultimate liability . . . It necessarily follows that the insurer's duty to defend is measured by the allegations of the complaint . . . Hence, if the complaint sets forth a cause of action within the coverage of the policy, the insurer must defend . . . On the other hand, if the complaint alleges a liability which the policy does not cover, the insurer is not required to defend." (Internal quotation marks omitted.) Springdale Donuts, Inc. v. Aetna Casualty Surety Co., 247 Conn. 801, 807, 724 A.2d 1117 (1999).
In its 1970 decision in Keithan, the Supreme Court also reiterated that "[w]here a complaint in an action against one insured under such a policy of liability insurance states a cause of action against the insured which appears to bring the claimed injury within the policy coverage, it is the contractual duty of the insurer to defend the insured in that action . . ." Id., 159 Conn. 138. Nevertheless, the court also approved resort to extrinsic evidence to determine who was an insured under the applicable insurance policy. The Supreme Court stated that the insurer was "under no contract duty to provide a defense for an uninsured stranger to the contract . . . simply because a third party had alleged facts which, if true, would have given Keithan the status of an insured. The insurer contracted to defend the insured against a suit even if such suit is groundless, false or fraudulent, and a breach of that agreement is the basis for liability . . . The insurer . . . did not, however, contract to defend any party who is not in fact an insured, and since, as the [trial] court properly determined, Keithan was not an insured, [the insurer] owed him no duty of defense." (Citation omitted; internal quotation marks omitted.) Id., 159 Conn. 142.
Resort to extrinsic evidence to determine whether a claim fell within the contractual period is similar. It is undisputed that the policy at issue here covered a specific time period. The contracting parties did not contract to cover claims which were outside of the policy period. Using extrinsic evidence to determine that question, as opposed to whether the complaint stated a cause of action which was within the coverage, was not inconsistent with the four corners rule as it existed during the conduct at issue. "With respect to the implied covenant of good faith and fair dealing, `[a] party to a contract is entitled to take reasonable positions to protect its interests and to resist efforts that would compromise its legal rights.' Elliot v. Staron, 46 Conn.Sup. 38, 48 (1997), affirmed, 54 Conn.App. 532 (1999), appeal dismissed, 255 Conn. 18 (2000)." Derosia v. Treadwell, Superior Court, judicial district of Tolland at Rockville, Docket No. CV 076000269 (March 27, 2008, Sferrazza, J.) ( 45 Conn.L.Rptr. 251).
Second, the plaintiffs argue that Hartford's position as to the four corners rule is contrary to a Superior Court decision, Conway v. Travelers Casualty Surety Co. of America, Superior Court, judicial district of Hartford, Docket No. CV99 0588119 (December 15, 2000, Rubinow, J.) ( Conway). In essence, the plaintiffs assert that Hartford acted in bad faith by not following the reasoning of this trial court decision from December 2000.
In Conway, the court discussed the "exclusive pleading rule." "The exclusive pleading rule states that `the duty to defend does not depend on facts disclosed by the insurer's independent investigation where the third party's complaint appears to be within the coverage . . . As Judge Learned Hand has stated, the duty to defend means that the insurer will defend the suit, if the injured party states a claim, which, qua claim, is for an injury covered by the policy; it is the claim which determines the insurer's duty to defend; and it is irrelevant that the insurer may get information from the insured, or from any one else, which indicates, or even demonstrates, that the injury is not in fact covered.' (Quotation marks omitted.) Missionaries of Mary, Inc. v. Aetna Casualty Surety Co., 155 Conn. 104, 112, 230 A.2d 21 (1967) [ Missionaries]." (Internal quotation marks omitted.) Conway v. Travelers Casualty Surety Co. of America, supra, Superior Court, Docket No. CV99 0588119.
The court also stated, "it should be noted that the exclusive pleading rule has never been used in Connecticut to defeat an insurer's duty to defend. This court has undertaken an exhaustive review of relevant Connecticut law and the law of other jurisdictions, and has found no case that applies the exclusive pleading rule in the manner that the defendant suggests . . . The Connecticut Supreme Court, thus, intended the exclusive pleading rule to expand, not contract, the insurer's duty to defend." (Citations omitted; emphasis in original; footnote omitted.) CT Page 3708 Id. (citing Moore v. Continental Casualty Co., 252 Conn. 405, 409, 746 A.2d 1252 (2000), and Missionaries).
"Trial court cases do not establish binding precedent." McDonald v. Rowe, 43 Conn.App. 39, 43, 682 A.2d 542 (1996) (where commissioner of income maintenance's policy concerning motorized wheelchairs was declared invalid by one Superior Court decision and upheld by another, commissioner had substantial justification in continuing to rely on policy).
Subsequent to Conway, in June 2001, before Hartford sent the plaintiffs its letter of withdrawal (based on Kuhn's analysis) in January 2002, the Supreme Court affirmed a trial court's finding, on summary judgment, that no duty to defend was invoked, in QSP, Inc. v. Aetna Casualty Surety Co., 256 Conn. 343, 773 A.2d 906 (2001). The Supreme Court reiterated the four corners rule. "As stated previously, the duty to defend does not arise only when the injured party can successfully maintain a cause of action against the insured. That duty arises when the complaint states facts that bring the injury within the policy coverage. See Moore v. Continental Casualty Co., [ supra] (`[i]f an allegation of the complaint falls even possibly within the coverage, then the insurance company must defend the insured'). On the other hand, if the complaint alleges a liability which the policy does not cover, the insurer is not required to defend." QSP, Inc. v. Aetna Casualty Surety Co., supra, 256 Conn. 354. After comparing the allegations of the operative complaint to the policy provisions, the Supreme Court affirmed. See id., 256 Conn. 382.
A subsequent trial court decision, likewise issued after Conway and before January 2002, also utilized the four corners rule and found that there was no duty to defend. See Nationwide Mutual Insurance Co. v. McHugh, Superior Court, judicial district of New Haven, Docket No. 448929 (December 19, 2001, Blue, J.).
Thus, there were at least two subsequent Connecticut decisions, cited above, including one by the Supreme Court, which were issued after Conway and before the issuance of Hartford's January 2002 withdrawal letter, which reasonably could be read to contradict Conway. An insurer's reasonable interpretation of unsettled law does not amount to bad faith. See R.E.O., Inc. v. The Travelers Companies, Superior Court, judicial district of New Haven at New Haven, Docket No. CV 950372522 (May 20, 1998, Silbert, J.) n. 17. The fact that Hartford did not follow Conway provides no evidence of bad faith conduct.
Third, the plaintiffs argue that Hartford's position on the four corners rule was contrary to the contemporaneous position which it took in Hartford Casualty Insurance Co. v. Litchfield Mutual Fire Insurance Co., 274 Conn. 457, 876 A.2d 1139 (2005) ( Litchfield). In particular, the plaintiffs cite an appellate brief filed by Hartford in that litigation (see plaintiffs' Exhibit 22), in which Hartford argued that facts outside the underlying dog bite complaint triggered the duty of another insurer to defend. There, as in Keithan, 159 Conn. 128, the issue was whether an individual was an insured. Hartford argued, citing Keithan, "[i]n regard to a determination whether Mr. Wylie qualified as an insured under the terms of the policies at issue, as opposed to whether the alleged cause of action was covered by either policy, case law is clear that the parties were not limited to a review of the allegations of the complaint." See plaintiffs' Exhibit 22, p. 18. The cited position taken in the Litchfield litigation was not inconsistent with the position it took here in 2002. See discussion above concerning Keithan. The position taken by Hartford in the Litchfield litigation provides no evidence of bad faith conduct.
The plaintiffs also argue that Tom Baker, a law professor designated as an expert witness by Hartford, opined in a deposition that Hartford's position in the Litchfield litigation was inconsistent with Kuhn's four corners approach. See objection, p. 30 n. 20; plaintiffs' Exhibit 4, pp. 73-74, 76 (excerpts of deposition). Plaintiffs earlier argued that the court should not consider Baker's "personal opinions about the status of the law . . . Courts, not expert witnesses, define the law." See plaintiffs' objection, p. 7 n. 7. Putting aside whether such testimony would be admissible at trial, it is clear, as a matter of law, as discussed above, that there is no inconsistency. No material issue of fact is created by Baker's view.
What is clear is that Connecticut law evolved over time. In Litchfield, 274 Conn. 467, which was issued on July 19, 2005, years after the events at issue here, the Supreme Court stated, "[w]e agree with the New York Court of Appeals that we should not employ a wooden application of the `four corners of the complaint' rule [that] would render the duty to defend narrower than the duty to indemnify and that the sounder approach is to require the insurer to provide a defense when it has actual knowledge of facts establishing a reasonable possibility of coverage." (Internal quotation marks omitted.)
Fourth, the plaintiffs argue that Hartford's position on the four corners rule was contrary to insurance industry practices and procedures which existed during the pendency of the CNB litigation. In particular, the plaintiffs argue that a comparison of the deposition testimony of proposed expert witnesses (two designated by Hartford, including Baker, referred to above, and one by the plaintiffs) shows that genuine issues of material fact remain concerning whether Hartford acted in bad faith. The plaintiffs refer to practices which existed at other insurers, such as Travelers and Aetna, concerning consideration of extrinsic evidence.
What other insurance companies might have done or would have done at the time does not provide evidence from which an inference may reasonably be drawn that Kuhn and Hartford acted in bad faith. The court has addressed above examples of Connecticut decisional law which pre-dated the conduct at issue here and which pre-dated Litchfield. The evidence presented by the plaintiffs does not present a genuine issue of material fact as to whether Hartford's application of the four corners rule, as Hartford interpreted it, was done in bad faith.
The plaintiffs also argue that Hartford's bad faith refusal to defend included its later refusal, after disclaiming coverage, to participate in mediation and contribute monies toward settlement. See, for example, Kuhn's letter, dated March 20, 2002 (Hartford Exhibit 36), declining to participate in a mediation scheduled for the next day. Mediations occurred in March 2002 and September 2002. Since there is no evidence showing that Hartford acted in bad faith in disclaiming coverage, its related refusal to participate in mediation and to contribute to settlement does not raise a genuine issue of material fact.
In a footnote, the plaintiffs add the following conclusory argument: "Kuhn failed to conduct a reasonable investigation when he chose not to read any of the Rytman depositions, a violation of C.G.S. § 38a-816(c-d). Ex. 22, p. 19 [again citing Hartford's appellate brief in Litchfield]. Kuhn, without conducting a reasonable investigation, refused to contribute monies toward the CNB settlement. Such conduct constitutes unfair settlement practices. Ex. 22, p. 19." See objection, p. 31 n. 22.
"Where an issue is merely mentioned, but not briefed beyond a bare assertion of the claim, it is deemed to have been waived." (Internal quotation marks omitted.) Jackson v. Water Pollution Control Authority, 278 Conn. 692, 712, 900 A.2d 498 (2006).
The court notes also that, in addressing the alleged bad faith refusal to settle, Hartford's reply (#245), p. 9, contains an inaccurate quotation from Couch on Insurance.
In summary, the plaintiffs have not presented evidence on which a finding of bad faith conduct reasonably could be based. As a matter of law, since there is no genuine issue of material fact, Hartford has shown that it is entitled to judgment as to the plaintiffs' second count.
B. Damages
Hartford also moves for summary judgment as to the plaintiffs' request for extra contractual damages under the first count (breach of contract) and the fourth count (declaratory judgment). Hartford asserts that, under Connecticut law, absent bad faith, plaintiffs cannot recover damages in excess of the $500,000 policy limit. Hartford contends that, since it is undisputed that, after it withdrew from the defense, the plaintiffs continued to receive a complete defense paid for by their other primary insurance carrier, and the plaintiffs incurred no defense costs, the most that they can recover for breach of contract is $500,000, which was the policy limit.
Hartford seeks a ruling from the court to narrow the issues and streamline the trial, in essence charging the claim for extra contractual damages out of the case. The plaintiffs did not object on procedural grounds to this aspect of the motion. In the absence of such an objection, the court, in the exercise of its discretion, has considered the argument. See Schilberg Integrated Metals Corp. v. Continental Casualty Co., supra, 263 Conn. 273; Krevis v. Bridgeport, supra, 262 Conn. 824.
In response, the plaintiffs do not contend that there is a material factual issue in dispute as to this aspect of Hartford's motion. Instead, they assert that when an insurer breaches its duty to defend its insured, the insurer must reimburse the insured the full amount of the obligation reasonably incurred by the insured as a result of the breach. They argue that the insurer is liable for the amount of judgment obtained by the insured or the settlement paid, provided that the amount paid in settlement is reasonable and paid in good faith. They do not assert that they are seeking to recover any defense costs from the CNB litigation.
In this part of their argument, the plaintiffs refer to decisional law outside Connecticut. Since the court views this aspect of Hartford's motion as subject to settled Connecticut law, as determined by the Supreme Court, there is no need to refer to decisional law from elsewhere.
The Supreme Court reiterated, in Litchfield, that "[w]here an insurer is guilty of a breach of its contract to defend, it is liable to pay to the insured not only his reasonable expenses in conducting his own defense but, in the absence of fraud or collusion, the amount of a judgment [or settlement] obtained against the insured up to the limit of liability fixed by its policy." (Internal quotation marks omitted.) Hartford Casualty Insurance Co. v. Litchfield Mutual Fire Insurance Co., supra, 274 Conn. 470. See also R.T. Vanderbilt Co. v. Continental Casualty Co., 273 Conn. 448, 470-71, 870 A.2d 1048 (2005) (same), citing Keithan, 159 Conn. 139, and Missionaries, 155 Conn. 114. As in Litchfield, Keithan and Missionaries were based on situations in which the insurer refused to defend. See Keithan, 159 Conn. 140; Missionaries, 155 Conn. 106, 114.
In view of the Supreme Court's recent statements of the law, the plaintiffs' references to earlier decisions are unavailing. For example, Black v. Goodwin, Loomis and Britton, Inc., 239 Conn. 144, 681 A.2d 293 (1996) ( Black) is not contrary to the Supreme Court's decisions in 2005 in Litchfield and R.T. Vanderbilt Co. v. Continental Casualty Co., supra, 273 Conn. 470-71. In Black, the consequence of the failure to defend was a judgment of policy limits, plus statutory interest. See Black, 239 Conn. 147-48, 150-51. The court there did not address awarding damages above the policy limits where an insurer has not acted in bad faith. Also, Black, 239 Conn. 160, quoted Schurgast v. Schumann, 156 Conn. 471, 491, 242 A.2d 695 (1968), where the Supreme Court also stated that where an insurer refuses to defend, it is under a duty to pay a judgment obtained against the insured "up to the limit of liability fixed by its policy."
Accordingly, the most that the plaintiffs can recover on the first and fourth counts is the principal amount of $500,000, the policy limit.
C. Attorneys Fees
Hartford also argues that the plaintiffs may not recover attorneys fees under any count of the complaint. Again, since the plaintiffs did not raise any procedural objection to this aspect of the motion, the court has considered the arguments. In response, the plaintiffs again refer the court to Hartford's position concerning the consideration of extrinsic evidence in the Litchfield litigation, see objection, p. 35 n. 26, which the court discussed above, and found to be unpersuasive.
In ACMAT Corp. v. Greater New York Mutual Insurance Co., 282 Conn. 576, 592, 923 A.2d 697 (2007), the court stated, "we conclude that, even without an authorizing contractual or statutory provision, a trial court may award attorneys fees to a policy holder that has prevailed in a declaratory judgment action against an insurance company only if the policyholder can prove that the insurer has engaged in bad faith conduct prior to or in the course of the litigation."
As discussed above, summary judgment has been granted against the plaintiffs' bad faith claim. Here, in the absence of bad faith, the plaintiffs may not be awarded attorneys fees. Accordingly, this aspect of the motion is granted also. Of course, if Hartford were to engage in bad faith conduct in the future, in the course of this litigation, the court would revisit the issue.
CONCLUSION
For the reasons stated above, Hartford has shown that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law as to the second count. In addition, plaintiffs may not recover contractual damages in excess of the policy limit of $500,000, and may not recover attorneys fees. Hartford's motion for summary judgment is granted. It is so ordered.