Opinion
No. FST CV 07 5004865 S
April 29, 2011
MEMORANDUM OF DECISION
Presently before the court is a motion for summary judgment filed by the defendant, United Services Automobile Association ("USAA") (#109.00) and a cross motion for summary judgment filed by the plaintiff. (#111.00.)
The plaintiff, Charles V. Sonson, a domiciliary of Virginia, commenced the present declaratory judgment action against the defendant, (USAA), an inter-insurance exchange organized under the laws of Texas and having a principal place of business in the city of San Antonio, by a summons and complaint filed on August 31, 2007.
The plaintiffs' complaint alleges the following facts germane to the defendant's motion for summary judgment and the plaintiff's cross motion for summary judgment. The defendant issued to the plaintiff "a Virginia personal auto [insurance] policy, effective for the period August 24, 2006 to February 2007, and renewed thereafter for the period effective February 24, 2007 to August 24, 2007 . . . which . . . provided automobile insurance coverage for four different vehicles owned and/or operated by [the] plaintiff." "Among the four vehicles to which coverage extended under the policy was a 2006 Ferrari F430." The coverage of which automobile under the policy is the subject of the present action.
"As of January 24, 2007, the vehicle was in lawful possession of [the] plaintiff, having been leased by [the] Putnam Leasing Co., Inc., located at 279 West Putnam Avenue, Greenwich, [Connecticut], to a Delaware limited liability company, of which [the] plaintiff was . . . the sole member, the lease obligations having been personally guaranteed by [the] plaintiff." "On January 24, 2007, [the] plaintiff was lawfully operating the vehicle at a location in Sonoma, California, when an accident occurred resulting in severe damage to the vehicle." Thereafter, the plaintiff "timely reported the loss to the defendant and otherwise complied in all respects with the terms and conditions of the policy."
"[O]n or about May 30, 2007, [the defendant] informed [the] plaintiff in writing that coverage on the vehicle `will be rescinded and void effective March 21, 2006,' and later informed the plaintiff that `because of the rescission, there is no coverage for the damage which occurred on [January 1, 2007]."
The plaintiff claims that the defendant breached the terms of the policy and seeks, inter alia, declarations that the policy was in effect on January 24, 2007, and that the policy covers the loss suffered by the plaintiff.
The plaintiff also prays for economic damages in the amount of the loss suffered, the sum necessary for the plaintiff to obtain replacement coverage, lease payments that the plaintiff claims are due under the terms of the policy, and attorneys fees and costs.
The defendant filed an answer and special defenses on December 7, 2007. Therein, the defendant raised two salient special defenses: misrepresentation of a material fact and that the plaintiff's conduct fell within an exclusion from coverage stated in the policy.
On December 10, 2010, the defendant filed the present motion for summary judgment and a memorandum of law in support, together with, inter alia, the following exhibits: excerpts from a deposition of the plaintiff; the lease agreement for the automobile; the defendant's call records for February 23, 2006, March 20, 2006 and February 24, 2007; excerpts from a deposition of Maria Higgins-Burke, an attorney-employee of the defendant; an amended declaration page to the policy; the policy agreement; a loss claim made by the plaintiff on January 29, 2007; a reservation of rights letter made by the defendant on February 22, 2007; and a rescission letter made by the defendant on May 30, 2007.
The plaintiff filed an objection to the defendant's motion for summary judgment and cross motion for summary judgment, together with a memorandum of law in support on January 13, 2011. In opposition to the defendant's motion for summary judgment, the plaintiff submitted his affidavit made on January 12, 2011, and an affidavit made by the plaintiffs' attorney on January 12, 2011.
On January 31, 2011, the defendant filed a reply memorandum and an objection to the plaintiff's cross motion along with a memorandum of law in support thereof, together with an affidavit of Higgins-Burke in support. The plaintiff filed a reply memorandum in support of his cross motion for summary judgment on February 16, 2011.
The court heard oral argument on the defendant's motion and the plaintiff's cross motion at short calendar on February 28, 2011.
DISCUSSION
"Summary judgment is a method of resolving litigation when 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." Wilson v. New Haven, 213 Conn. 277, 279 (1989); Practice Book § 17-49. "[T]he moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law . . . To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact." Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 11 (2008).
"[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 . . . It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue." Maffucci v. Royal Park Ltd., Partnership, 243 Conn. 552, 554 (1998). "On a motion by [the] defendant for summary judgment, the burden is on [the] defendant to negate each claim as framed by the complaint . . . It necessarily follows that it is only [o]nce [the] defendant's burden in establishing his entitlement to summary judgment is met [that] the burden shifts to [the] plaintiff to show that a genuine issue of fact exists justifying a trial." (Citation omitted; internal quotation marks omitted.) Vitale v. Kowal, 101 Conn.App. 691, 696-97, cert. denied, 284 Conn. 904 (2007).
"In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party." Appleton v. Board of Education, 254 Conn. 205, 209 (2000). "In ruling on a motion for summary judgment, the court's function is not to decide issues of material fact, but rather to determine whether any such issues exist." Nolan v. Borkowski, 206 Conn. 495, 500 (1988). "[T]he genuine issue aspect of summary judgment requires the parties to bring forward before trial evidentiary facts, or substantial evidence outside the pleadings, from which the material facts alleged in the pleadings can warrantably be inferred . . . A material fact has been defined adequately and simply as a fact which will make a difference in the result of a case." (Citation omitted; internal quotation marks omitted.) Buell Industries, Inc. v. Greater New York Mutual Ins. Co., 259 Conn. 527, 556 (2002).
As a threshold matter, the court must address the conclusion asserted by both parties, that Virginia substantive law shall apply to the disposition of the legal issues raised by the present motion and cross motion, and that the Connecticut rules of practice shall govern the procedure for their disposition. The policy proffered by the defendant in support of its motion for summary judgment does not contain a choice of law clause.
"[I]n the absence of an effective choice by the parties . . . [t]he rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties . . ." Reichhold Chemicals, Inc. v. Hartford Accident Indemnity Co., 243 Conn. 401, 409 (1997), rev'd on other grounds, 252 Conn. 774, 782 (2001) (adopting the choice of law analysis set forth in the Restatement (Second), Conflict of Laws §§ 188 and 193).
"Section 193 of the Restatement (Second) . . . provides that [t]he validity of a contract of fire, surety or casualty insurance and the rights created thereby are determined by the local law of the state which the parties understood was to be the principal location of the insured risk during the term of the policy, unless with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the transaction and the parties, in which event the local law of the other state will be applied. Thus, § 193 establishes a special presumption in favor of application, in liability insurance coverage cases, of the law of the jurisdiction that is the principal location of the insured risk." (Internal quotation marks omitted.) Id., 411.
"The commentary to § 193 notes that [a]n insured risk, namely the object or activity which is the subject matter of the insurance, has its principal location, in the sense here used, in the state where it will be during at least the major portion of the insurance period. In the great majority of instances, the term of a contract of fire, surety or casualty insurance will be relatively brief, and it will usually be possible to predict with fair accuracy where the risk will be located, or at least principally located, during the life of the policy . . . So, in the case of an automobile liability policy, the parties will usually know beforehand where the automobile will be garaged at least during most of the period in question . . . The Restatement (Second) considers the principal location of the insured risk to be a matter of intense concern to the parties to the insurance contract because [it] has an intimate bearing upon the risk's nature and extent and is a factor upon which the terms and conditions of the policy will frequently depend. So the cost of automobile liability or of collision insurance will probably be higher if the place where the automobile will be principally garaged during the term of the policy is an urban, as opposed to a rural, community." (Citations omitted; emphasis omitted; internal quotation marks omitted.) American States Ins. Co. v. Allstate Ins. Co., 282 Conn. 454, 462-43 (2007).
"In order to overcome this presumption, another state's interest must outweigh those of the state where the insured risk is located and must be sufficiently compelling to trump the § 193 presumption. Section 6(2) of the Restatement (Second) . . . provides the criteria by which that overriding interest should be evaluated. It must be remembered that even if another state has a substantial interest under § 6(2), that interest will not defeat the § 193 presumption unless it is sufficiently compelling." Reichhold Chemicals, Inc. v. Hartford Accident lndemnity Co., 252 Conn. 774, 782 (2001).
"[Section] 6(2) of the Restatement (Second), which is applicable to all substantive areas, sets forth seven overarching considerations in determining which state has the most significant relationship: (a) the needs of the interstate and international systems, (b) the relevant policies of the forum, (c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue, (d) the protection of justified expectations, (e) the basic policies underlying the particular field of law, (f) certainty, predictability and uniformity of result, and (g) ease in the determination and application of the law to be applied." American States Ins. Co. v. Allstate Ins. Co., supra, 282 Conn. 467-68.
In the present case, the plaintiff is a domiciliary of Virginia, the policy that is the subject of this litigation was issued in Virginia, and the proof submitted by the parties indicates that the insured risk was to be located in that commonwealth. The defendant, USAA, is incorporated in Texas and maintains its principal place of business in that state.
As hereinafter discussed, the exact location as to where the automobile was to be garaged remains in dispute.
The lessor of the vehicle, a Connecticut corporation with its principal place of business in the town of Greenwich, is not party to the present case.
Since Virginia is the place where the parties understood that the insured risk would reside, a presumption inures in favor of the application of Virginia law. Neither party has offered a "sufficiently compelling showing necessary to overcome the presumption already established by § 193 of the Restatement (Second) in favor of [Virginia] . . . by demonstrating that the application of [Virginia] law would violate a fundamental public policy" of another jurisdiction. Id., 469-70. Accordingly, the court will apply the substantive law of Virginia and the Connecticut rules of practice.
The defendant, USAA, moves for summary judgment on two grounds that it raised as special defenses in its answer to the plaintiff's complaint: (1) because "the subject automobile insurance policy was void ab initio due to misrepresentations of material facts by the plaintiff regarding the location where the subject vehicle would be garaged and the fact that it would not be raced"; and, (2) because "even if the policy were in effect, USAA is entitled to judgment as a matter of law because the claimed loss is excluded from coverage under the policy's racing exclusion."
The plaintiff opposes the defendant's motion for summary judgment by asserting in his memorandum in opposition that: (1) the defendant waived its right to raise the racing exclusion in the present case when it failed to state the exclusion as a ground for rescission in its letter of May 30, 2007; (2) the defendant has failed to present competent proof of the plaintiff's alleged misrepresentations; (3) the defendant did not suffer a material harm; and, (4) the racing exclusion does not apply.
Initially, the plaintiff argues that the defendant "has no legal right to seek to avoid its policy obligations on the two additional grounds it . . . includes in its motion. [Therefore] the court should not . . . consider [the defendant's] motion based on: (a) the claim . . . that [the] plaintiff represented that the car would not be raced, or (b) the contention that the loss was excluded [from coverage] by the racing exclusion contained in the policy."
In its objection to the plaintiff's cross motion, the defendant maintains that it has adequately pleaded those grounds that are not stated in the May 30, 2007 rescission letter as special defenses to the plaintiff's complaint. Furthermore, the defendant claims that its reservation of rights letter of February 22, 2007, preserved its right to assert the alleged misrepresentation as to racing and the racing exclusion.
"The office of a motion for summary judgment is not to test the legal sufficiency of the [special defense], but is to test for the presence of contested factual issues." Burke v. Avitable, 32 Conn.App. 765, 772, cert. denied, 228 Conn. 908 (1993). Nevertheless, "[t]he proper way to . . . [test] the legal sufficiency of [a special defense] . . . . after an answer [has] been filed [is] by a motion for summary judgment." Boucher Agency, Inc. v. Zimmer, 160 Conn. 404, 409 (1971). In the present case, the defendant filed an answer and special defenses on December 7, 2007, in which it raised misrepresentation as the first special defense and the limitation of liability per the racing exclusion as the second special defense. Thus, the court may address the legal sufficiency of the defendant's second special defense upon the plaintiff's objection to the defendant's motion for summary judgment.
In support of his argument, the plaintiff relies upon Virginia Code Ann. § 38.2-510 (2010), which is titled Unfair Claim Settlement Practices, and provides: "A. No person shall commit or perform with such frequency as to indicate a general business practice any of the following . . . 14. Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement." The plaintiff also relies upon Corpus Juris Secundum (Insurance) § 1187, which provides: "Where an insurance company denies liability, asserts a defense, or refuses to pay a loss on a specified ground, it waives, or is estopped to assert, other grounds relieving it from liability of which it had full knowledge where the insured has acted on the insurer's position, as announced, and suffered resultant detriment . . . The foregoing rule has its limitations and exceptions, however, one of which is that before the rule can apply it must appear that the claimant relied on such conduct and suffered injury or detriment. Where the first denial of a claim is stated in such a way that it reasonably implies the subsequently, but more specifically stated, consistent reason for denial, the insured cannot claim that he or she has changed her position or that there has been detrimental reliance on the initial denial."
Virginia Code Ann. § 38.2-510(B) (2010) provides: "No violation of this section shall of itself be deemed to create any cause of action in favor of any person other than the commission; but nothing in this subsection shall impair the right of any person to seek redress at law or equity for any conduct for which action may be brought."
In the present case, the record contains two letters from the defendant to the plaintiff. The first letter, of February 22, 2007, stated that the plaintiff's claimed loss may not be covered based on the fraud and racing clauses contained in the insurance policy. The letter of February 22, 2007, went on to state that it was not intended to waive any other right. The rescission letter of May 30, 2007, relies upon the fraud clause, and rescinds the plaintiff's coverage as of March 21, 2006 based on two alleged misrepresentations. Thus, the plaintiff had knowledge of the grounds asserted by the defendant prior to commencing the present suit.
The plaintiff has not provided the court with Virginia case law that extends the provisions of § 38.2-510 to facts analogous to those of the present case, and the court's own research has revealed none. The plaintiff has also failed to allege a "frequency as to indicate a general business practice" of the defendant. Furthermore, the plaintiff's reliance on Corpus Juris Secundum (Insurance) § 1187 as persuasive authority is self-defeating because the record does not reflect that the plaintiff both relied upon the defendant's rescission letter and suffered injury as a result. Accordingly, the grounds upon which the defendant seeks summary judgment are legally sufficient and properly before the court.
With respect to the first ground upon which it moves for summary judgment, the defendant asserts in its memorandum of law in support that the plaintiff misrepresented the following material facts when negotiating the policy: (1) the principal location at which the automobile would be garaged; (2) that the automobile would be registered for use on the public roads; and (3) that the automobile would not be raced.
The defendant maintains that Virginia law renders the insurance policy void ab initio due to these alleged misrepresentations. Specifically, the defendant relies upon Virginia Code Ann. § 38.2-309 (2010), which provides, in part: "All statements, declarations and descriptions in any application for an insurance policy . . . shall be deemed representations and not warranties. No statement in an application or in any affidavit made before or after loss under the policy shall bar a recovery upon a policy of insurance unless it is clearly proved that such answer or statement was material to the risk when assumed and was untrue."
The plaintiff argues, in its objection to the defendant's motion for summary judgment that the defendant has failed to meet the burden imposed by § 38.2-309, because the defendant's affiant, Higgins-Burke, "admittedly did not have the relevant conversation with [the plaintiff] . . . admittedly did not speak [with] the person who did" and gleaned all of her knowledge of the negotiation of the insurance policy from "her examination of computer records which she . . . admitted were incomplete." Instead, the plaintiff claims that his own affidavit reflects the actual communication between the parties during the negotiation. Furthermore, the plaintiff insists that "it is not the case that both the motion and cross motion should be denied" because of the existence of an issue of material fact. Rather, the plaintiff urges that "this conflict [in proof] must be considered in light of the source and quality of the evidence."
In its objection to the plaintiff's cross motion for summary judgment, the defendant argues that "[i]t is not disputed that [the plaintiff] knew that [the defendant] was listing the location of garaging as Williamsburg. It is not disputed that the [d]eclaration [p]age for the policy lists the Williamsburg address. And it is not disputed that the plaintiff never contacted [the defendant] to notify it that the Ferrari was being garaged in Dulles and not in Williamsburg, which is some 150 miles away." The defendant concludes that the plaintiff "is not entitled to summary judgment on his cross motion because he cannot establish as a matter of law that his misrepresentation as to the location of garaging was not material." Thus, neither party believes that the truthfulness of the plaintiff's representations during the negotiation of the policy as to where the automobile would be garaged and whether it would be raced should preclude the court from rendering judgment as a matter of law. The court disagrees.
"Materiality of a misrepresentation is an affirmative defense, and the burden is on the insurer to prove it." Hawkeye-Security Ins. Co. v. Government Employees Ins. Co., 207 Va. 944, 947 (1967). "[A] false representation of a material fact is, according to well settled principles, sufficient to void a policy of insurance undertaken on the faith thereon, whether the false representation was by mistake or design . . . [W]hen the insurer is induced to enter into the contract through a misapprehension as to a material matter occasioned by the conduct or declarations of the opposite party, he is entitled to be relieved whether the misapprehension be produced by fraud or innocent mistake; the result is the same in either case." Inter-Ocean Ins. Co. v. Harkrader, 193 Va. 96, 101-02 (1951).
It is Connecticut practice to refer to such defenses as special defenses. Practice Book § 10-50.
Nevertheless, "[o]ne of the purposes of [§ 38.2-309] is to relieve against the rigorous consequences of the common law rule that answers to questions in applications for insurance imply that the subject matter of the questions and answers is material, and that if such statements and answers are not true the policy is voidable." Harrell v. North Carolina Mutual Ins. Co., 215 Va. 829, 831 (1975) (analyzing statutory predecessor of § 38.2-309). "Under the explicit mandate of the statute, the insurer had the burden of clearly proving that the insured's answers in her application were material to the risk assumed and were untrue." Id., 831. "Whether a representation is made and the terms on which it is made are `questions for the trier of fact; but when . . . a misrepresentation is proved, its materiality is a question of law for the court." Id., 831-32; Inter-Ocean Ins. Co. v. Harkrader, supra, 193 Va. 102.
The defendant relies on Brant v. Pariso, 27 Va. Cir. 339 (Va. Cir.Ct. 1992). In that case, the plaintiff obtained a New York automobile insurance policy from the defendant, which did not provide for underinsured motorist coverage, prior to moving to Virginia. Id. The plaintiff was involved in a collision and sued the defendant for declaratory judgment, in which she sought a declaration from the court that Virginia law required her policy to include underinsured motorist coverage. Id., 340.
The defendant in Brant raised material misrepresentation under § 38.2-309 as an affirmative defense. Id., 347. There, the court found that the plaintiff's representations to the defendant that her address remained in New York on two subsequent renewal applications after her relocation to Virginia were untrue, and the defendant was unaware that these representations were false. Id., 349. The court then went on to assess the materiality of those misrepresentations to the defendant's decision to insure the risk. Id.
The present case is distinguishable from Brant because the defendant relies upon representations made by the plaintiff in the initial negotiation of the policy, and has not offered proof regarding its renewal. The plaintiff testified at his deposition on April 2, 2009, that he procured the policy that is the subject of the present litigation by telephone before the automobile arrived in the United States. The plaintiff admitted at the same deposition that the vehicle was never garaged at his home in Williamsburg after it entered the United States. Nevertheless, the plaintiff testified in his affidavit of January 13, 2011, that "I did not know where I would garage the [automobile] and I said so. The response of the agent [was] `[w]e'll just put down Williamsburg, Virginia. Williamsburg is where I reside, and it is where all other cars on the policy at that time were in fact garaged. I thought nothing of [the representative's] response . . . as I had not decided where to keep the car, and Williamsburg . . . was an actual possibility."
This statement is not excluded by the hearsay rule because it qualifies as a statement of a person authorized by a party opponent "to make a statement concerning the subject" under Connecticut Code of Evidence § 8-3(1)(C).
The plaintiff further testified at his deposition that he told the defendant's representative that the vehicle would be titled in Delaware but neither registered nor operated on public roads. The plaintiff also testified that he told the representative that he planned to "do some fun things" with the car, including operating it "at motor sports complexes, these tracks, [which] sometimes . . . have events and things or other driving experiences." The plaintiff testified, however, that "I did not tell [the representative] that I was going to race it. I wasn't real sure that I was going to be racing it at that time."
The defendant's affiant, Higgins-Burke, testified in her affidavit of January 27, 2011, that she "participated in the investigation" of the plaintiff's claim. Higgins-Burke also testified that she is "familiar with [the defendant's] underwriting process and the procedures by which a vehicle is added to an automobile insurance policy by [the defendant]." Higgins-Burke also testified in her affidavit and in her deposition on April 2, 2009, as to the inquiries that the defendant makes before an automobile is added to a policy, including, the intended use of the vehicle and the principal place of garaging.
It is of note that the affidavit of Higgins-Burke does not reveal the regular business practice of the defendant, such that her affidavit would refute the plaintiff's recitation of the defendant's representative's statements during their telephone call.
Under Virginia law, the affirmative defense of materiality of a misrepresentation requires that a defendant prove clearly two elements. First, it is the exclusive purview of the trier of fact to determine whether a representation occurred and if it was untrue. Second, if an untrue representation is proven, the materiality of the representation is a question of law for the court. The defendant's rejoinder to the plaintiff's objection, that the materiality of the plaintiff's statements is the only issue before the court, is incorrect. The record reflects that the defendant has failed to prove clearly the falsity of the plaintiff's representations. Without first doing so, there is no legal issue for the court to decide. Accordingly, the defendant has failed to meet its burden to demonstrate the absence of an issue of material fact. Therefore, the court will not entertain the second ground upon which the defendant seeks summary judgment.
Having concluded that the truthfulness of the plaintiff's representations during the negotiation of the insurance policy with the defendant presents an issue of material fact for trial, the plaintiff cannot be said to have met his burden on his cross motion for summary judgment.
For the foregoing reasons, the court denies both the defendant's motion for summary judgment (#109) and the plaintiff's cross motion for summary judgment (#119).