Opinion
No. FST CV 08 5008779 S
June 17, 2010
MEMORANDUM OF DECISION RE DEFENDANTS CASE AND PC INSURANCE GROUP'S MOTION FOR SUMMARY JUDGMENT (#110.00)
I. Background
In this insurance dispute the plaintiff, Robert Trez, cited in as defendants Walter Case and PC Insurance Group (PC) and, in the Fifth Count of the Amended Complaint, claimed these two defendants were liable to him personally pursuant to General Statutes § 38a-703 for placing insurance on his boat with insurance carriers not licensed to do business in Connecticut.
The remainder of the Amended Complaint alleges that Trez purchased boat insurance from defendants International Water Safety Foundation (IWSF) and North American Marine General Insurance Company (North American), and received a binder on or about August 1, 2007. The Trez boat was involved in an accident after sunset on August 18, 2007. Trez received a copy of the policy about September 1, 2007, and the policy excluded coverage for events taking place after sunset. It is alleged this exclusion was not mentioned in the binder.
IWSF and North American denied coverage of the accident in September 2007. Trez commenced an arbitration against the insurers in accordance with the insurance policy with Insurance Arbitration Bureau International, Inc., and a decision was rendered in favor of IWSF and North American on the basis of the after sunset exclusion.
Case and PC have moved for summary judgment dismissing the claim against them. They contend that General Statutes § 38a-703 does not provide a legal remedy to plaintiffs and therefore this court does not have subject matter jurisdictions They further contend that they did not refer the plaintiffs to any insurance company, that there is no insurance coverage in any event because the Trez boat had a top speed exceeding the coverage limits of the policy and finally, that the incident occurred after sunset and therefore the Trez claim is barred by the policy exclusion, and Trez is collaterally estopped from pursuing this claim on the basis of the arbitration decision.
II. Scope 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." Appleton v. Board of Education, 254 Conn. 205, 209 (2000). Summary judgment "is appropriate only if a fair and reasonable person could conclude only one way." Miller v. United Technologies Corp., 233 Conn. 732, 751 (1985). "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 judgment as a matter of law." Appleton v. Board of Education, supra, 254 Conn. 209. "A material fact has been defined adequately and simply as a fact which will make a difference in the result of the case." (Internal quotation marks omitted.) United Oil Co. v. Urban Development Commission, 158 Conn. 364, 379 (1969). The trial court, in the context of summary judgment motion, may not decide issues of material fact, but only determine whether such genuine issues exist. Nolan v. Borkowski, 206 Conn. 495, 500 (1988).
"Although the party seeking summary judgment has the burden of showing the nonexistence of any material fact [question] . . . 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). "[T]he party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact." Appleton v. Board of Education, supra, 254, Conn. 209.
III. Discussion
Case and PC, the moving defendants, are clearly right when they argue that General Statutes § 38a-703 does not provide Trez a private cause of action against them. The statute calls for penal sanctions and does not provide a civil remedy. Trez concedes as much and has moved to amend the complaint to allege that the claim arises under General Statutes § 38a-275. Dkt Entry 114.00. That statute provides as follows:
Section 38a-703 states: "Soliciting business for unlicensed insurance or surety company prohibited. No person shall, within this state, solicit or procure insurance except with regard to his own property or person, with or by any insurance company that does not hold a certificate then in force from the commissioner authorizing such insurance company to do such insurance business in this state, or deliver policies or collect premiums of or for any such company; nor shall any person aid in any way in the transaction in this state of any insurance business with or by any insurance company not thus authorized, except to obtain insurance upon his own property or person. Any person who aids any corporation, association or person not authorized to do insurance business in this state in soliciting such business from residents of this state, by means of any advertisement published in this state or by any other means, shall be fined not more than two thousand dollars or imprisoned not more than six months, or both."
Contracts entered into by unauthorized insurers are unenforceable. Any contract effective in this state and entered into by an unauthorized insurer in violation of sections 38a-27 and 38a-271 to 38a-278, inclusive, shall be unenforceable by such insurer. If any such unauthorized insurer fails to pay any claim or loss within the provisions of such insurance contract, any person who assisted or in any manner aided directly or indirectly in the procurement of such insurance contract shall be liable to the insured for the full amount of such claim or loss pursuant to the provisions of such insurance contract.
While the law is not as clear as it might be, this court concludes that if Trez's loss was "within the provisions" of the insurance policy issued by IWSF and underwritten by North American and not paid by the insurer, the statute does provide authority for a claim for damages against the moving defendants. Case and PC have objected to the proposed amendment (Dkt. Entry 121.00) and the objection has not been ruled upon. At oral argument on summary judgment, counsel for Case and PC requested that the court put aside the issue of the amended complaint and proceed with the rest of the motion. The court treats this request as a temporary abandonment by the moving defendants of their arguments regarding Section 38a-703. Therefore, the motion for summary judgment based on Section 38a-703 is denied.
Because the allegations of the Amended Complaint, while citing § 38a-703, actually track the language of § 38a-275 the court believes there is some likelihood the amendment would be granted to correct an apparent scrivener's error.
The moving defendants contend that they did not refer Trez to the insurance companies in question. Summary judgment cannot be granted on this contention because the issue is rife with unresolved material facts. In an affidavit and in deposition testimony submitted by the moving defendants, Trez claims that Case's daughter, Tomiko, worked out of Case's office, and offered to obtain boat insurance for him. Trez called her at the PC office; she gave him a referral number, discussed the nature of the policy and the insurers, and provided information to IWSF. Through these efforts Trez was able to arrange to purchase the insurance in one day. Trez Deposition, 47-50; Ex. A to Motion for Summary Judgment; Trez Affidavit, April 7, 2010, ¶¶ 5-11. The moving defendants also contend that summary judgment should be granted because the policy did not cover boats with a water speed capability exceeding 67 miles per hour according to the binder. Ex. A to Amended Complaint. In his affidavit Trez, a mechanic, arguably states that he made adjustments to the boat's engine prior to purchasing insurance so that the maximum speed was reduced to approximately 55-60 miles per hour. Trez Affidavit, ¶¶ 19-22. The moving defendants contest Trez's credibility on this issue, but this is an issue of fact not suitable for determination by summary judgment.
Case and PC have moved to strike portions of the Trez Affidavit, specifically ¶¶ 4, 5, 7, 8, 10, 11, 23 and 30-32 on the basis of being conclusory or not within Trez's personal knowledge. Dkt. Entry 119.00. There are perhaps grounds to strike ¶¶ 5, 7, 30-32, but the essential information contained in ¶¶ 5 and 7 relied on by the court is contained in Trez's sworn deposition testimony submitted by the moving defendants themselves. Therefore, the motion to strike is denied.
Trez has alleged in the Amended Complaint that he commenced an arbitration pursuant to Part XIV of the insurance policy which called for mandatory binding arbitration of "any claim or dispute" arising from insurance coverage provided by the part. The policy stated the arbitration was to be decided by a single "umpire" to be an attorney selected by the International Arbitration Bureau International, Inc. (IABI) with its offices in Montreal, Canada.
Trez submitted his claim by Notice of Arbitration dated November 5, 2007, choosing to arbitrate by written communication rather than attending a hearing. The IABI selected Peter Georges-Louis to be the umpire. Exhibit F to motion for Summary Judgment. The umpire ruled against Trez on June 2, 2008, applying Section 10.5 of the Policy which read: "We will not pay any claim for any reason whatsoever: . . . For any loss or damage or liability resulting from any insured even that occurs between the time of official sunset and official sunrise unless indicated otherwise on the declaration page." The umpire's award went onto say "[t]he Claimant argues that the Insurer failed to inform him of the exclusion, but also admits that the exclusion was part of the policy. In addition, ignorance is not an excuse or a defense. It is the insured['s] entire responsibility to read the whole certificate, policy and especially the exclusions in order to acknowledge the full extent of the policy." Id.
The court now turns to the moving defendants' contention that Trez is collaterally estopped from claiming against Case and PC because the issue whether Trez had a claim under the insurance policy has been decided against him in the arbitration proceeding. The moving defendants have properly raised the defense of collateral estoppel by pleading it as a special defense. Wilcox v. Webster Insurance, Inc., 294 Conn. 206, 222 (2009); c.f. Practice Book § 10-50 (res judicata to be pleaded as a special defense). In Wilcox the Connecticut Supreme Court described collateral estoppel.
The common-law doctrine of collateral estoppel, or issue preclusion, embodies a judicial policy in favor of judicial economy, the stability of former judgments and finality . . . Collateral estoppel . . . prohibits the relitigation of an issue when that issue was actually litigated and necessarily determined in a prior action between the same parties [or those in privity with them] upon a different claim . . . For an issue to be subject to collateral estoppel, it must have been fully and fairly litigated in the first action. It also must have been actually decided and the decision must have been necessary to the judgment.
Id. [quoting Birnie v. Electric Boat Corp., 288 Conn. 392, 405 (2008)]. The Connecticut Supreme Court has been somewhat inconsistent in describing the elements of the collateral estoppel doctrine. Although one would not know it by reading the above-quoted portion of Wilcox, the Connecticut Supreme Court made absolutely no mention in Birnie that parties in privity with a party in a prior action could invoke the collateral estoppel doctrine because the bracketed portion set forth in Wilcox does not appear in Birnie. Other appellate decisions in this state besides Birnie have also omitted any reference that parties in privity with a party that had fully litigated an issue may be entitled to invoke the doctrine of collateral estoppel. E.g. State v. Collazo, 115 Conn.App. 752, 757 (2009); Lyons v. Jones, 291 Conn. 384, 406 (2009); Gray v. Weinstein, 110 Conn.App. 763, 772 (2008). Despite the inconsistency, this court concludes that the correct statement of the law of collateral estoppel is that it prohibits relitigation of an issue that was actually litigated and necessarily determined in a prior action between the same parties, or those in privity with them, upon a different claim. Liability Mutual Insurance Co. v. Lone Star Industries, Inc., 290 Conn. 767, 789 n. 29 (2009); Powell v. Infinity Insurance Co., 282 Conn. 594, 601 (2007).
Case and PC were not parties to the insurance arbitration proceeding. Nevertheless, they contend that they are entitled to use the arbitration award to bar Trez's claim against them because Trez was a party to the arbitration. There is ample authority that arbitration awards may be the basis for employment the doctrines of res judicata or collateral estoppel. See Haynes v. Yale New Haven Hospital, 243 Conn. 17, 21 n. 5 (1997); Busconi v. Dighello, 39 Conn.App. 752, 768 (1995) cert denied 236 Conn. 903 (1996). However, the moving defendants have not offered any appellate authority than an arbitration award not confirmed as a judgment by the judicial system may be used for collateral estoppel purposes.
Assuming that an award not judicially confirmed may be a basis for collateral estoppel, the question before the court is whether there is sufficient privity between the moving defendants, Case and PC, on the one hand, and the insurance company defendants IWSF and North American on the other hand, to permit the former to use the arbitration award to collaterally estop Trez from proceeding against them. The Connecticut Supreme Court has found privity to be "a difficult concept to define precisely." Mazziotti v. Allstate Insurance Co., 240 Conn. 799, 813 (1997). Privity is not established merely because certain persons have an interest in proving or disproving the same set of facts. Id., 814; Mount Vernon Fire Insurance Co. v. Morris, 95 Conn.App. 525, 536 (2005), appeal dismissed, 281 Conn. 544 (2007).
It has long been recognized that "fairness" is the "crowning consideration" in collateral estoppel cases. Aetna Casualty Surety Co. v. Jones, 220 Conn. 285, 306 (1991); see also Mazziotti, supra, 818. On more than one occasion the Connecticut Supreme Court has held that the interest of an insurer and a tortfeasor are not sufficiently close enough to find privity and to allow the use of collateral estoppel. See Aetna Casualty Surety, supra; Mazziotti, supra. In this case, the court determines there is not sufficient privity between Case and PC, and the insurance defendants to permit Case and PC to bar Trez's claims against them through the doctrine of collateral estoppel on the basis of the arbitration award. Indeed, the interests of Case and PC are substantially different from those of the insurance companies. For one, under the circumstances alleged, Case and PC purportedly represented Trez in his efforts to procure insurance and their interests would not be aligned with those seeking to deny coverage. Second, under Connecticut law, Case and PC had an obligation to place the business of a prospective insured with insurance companies licensed to do business in Connecticut. It is only speculation since significant facts are unknown and unproven, but if the policy sold to Trez, with its rather unique exception for after sunset activities, was not a policy approved in Connecticut, then the interests of the insurance defendants and the moving defendants are quite disparate indeed, and there would be no privity. This second point also bears directly on the issue of fairness. The moving defendants have not established the policy sold to Trez met Connecticut requirements for policies sold to Connecticut residents, nor have they proven that Connecticut would allow a policy containing the after sunset exclusion to be sold to a Connecticut resident. It would be unfair, to say the least, to allow the moving defendants to benefit from a decision holding that a policy not permitted to be sold to Trez could effectively bar Trez's claim. Finally, the moving defendants seek to employ collateral estoppel to defeat the plaintiff's effort to hold them responsible for their alleged involvement in the sale of an illegal policy. The issue of the legality of the policy was never considered in the arbitration proceeding. Therefore, the moving defendants may not employ the arbitration decision as collateral estoppel to defeat Trez's claim.
IV. Conclusion CT Page 13242
For the reasons stated above, the motion for summary judgment is denied.