Opinion
No. CV 09-4045937-S
May 13, 2011
MEMORANDUM OF DECISION ON MOTIONS FOR SUMMARY JUDGMENT
This is a two-count declaratory judgment (count one) and equitable subrogation (count two) action brought by the plaintiff, Travelers Casualty (Travelers), against four defendants, Netherlands Ins. Co. (Netherlands), Peerless Ins. Co. (Peerless), Lumbermens Mutual Casualty Co. (Lumbermens) and Lombardo Bros. Mason Contractors (Lombardo) seeking to confirm that the defendants have a duty to help defend an underlying lawsuit brought by the State against Lombardo related to the defective construction of the University of Connecticut School of Law library. The underlying lawsuit State of Connecticut v. Lombardo Bros. Mason Contractors, Inc., Superior Court, judicial district of Waterbury, Docket No., CV 08-5010658 (February 23, 2009, Cremins, J.) [ 47 Conn. L. Rptr. 375], seeking damages for the necessary repairs is currently on appeal, having been dismissed at the trial court level on the ground that the claims are time-barred by the applicable statute of limitations.
I
In 1994, the State contracted with Lombardo to perform masonry for the construction of the law library, which was completed in 1996. In the months and years following completion of the Project the State began to experience problems with water intrusion into the library concerning which Lombardo was given notice. Over the years the water intrusion proved to be continuing and progressive, to the point that in the 2000s the State retained forensic engineers to investigate the full extent and likely cause of the problem.
From 1994 to 2008, the following insurance carriers assumed Lombardo's risk:
September 30, 1994 to August 31, 1998 . . . Travelers, Commercial General Liability Policies
August 31, 1998 to August 31, 2000 . . . Lumbermens, Commercial General Liability Policies
August 31, 2000 to June 30, 2006 . . . Netherlands, Commercial General Liability Insurance Policies Peerless, Umbrella General Liability Insurance Policies
In late 2005, Lombardo notified its insurance carriers of the State's potential claim against it and Travelers agreed to participate in the investigation and related defense. Lumbermens and Netherlands, however, have refused to participate in the investigation and defense. To date, Travelers has spent over $482,855 defending Lombardo and will continue to incur costs until the underlying action is resolved.
On October 5, 2010, Travelers filed this motion for summary judgment on the ground that Lumbermens and Netherlands breached their respective duties to defend Lombardos in the underlying lawsuit and are obligated to contribute pro rata with Travelers to the cost of defending Lombardo in the underlying litigation.
-II-
The crux of Travelers' argument is based on language in the Lumbermens and Netherlands policies, which provides that property damage is covered if it "is caused by an occurrence' that takes place in the `coverage territory'" during the policy period. Travelers argues that the alleged property damage occurred during the Lumbermens and Netherlands policy periods because the term "occurrence" is defined in the policies as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."
The defendants on January 4, 2011 filed cross motions for summary judgment on the grounds that they have no duty to defend Lombardos and that the plaintiff has no right to equitable subrogation against the defendants. The defendants argue that the property damage occurred during construction of the law library, between 1994 and 1996, at which time neither company had a policy with Lombardos. Lumbermens and Netherlands also argue that Lombardos knew about the property damage when it applied for policies with them and that they do not have a duty to defend because their policies exclude coverage for the claims at issue.
In the present case, the court recognizes the unique nature of the pending cross motions for summary judgment. Typically, the court would address each motion separately and place the burden of proof on the movant in its respective motion. In the present case, however, neither the plaintiff nor the defendant[s] have differentiated between the grounds for their respective motions for summary judgment and their grounds for objection to the opposing party's motion. In view of the pending cross motions for summary judgment the court will first ascertain whether either party has met the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle it to a judgment as a matter of law. See Travelers Property Casualty Co. Of America v. Continental Casualty Co., Superior Court, judicial district of New London, Docket No. CV 08-4008325 (May 27, 2010, Cosgrove, J.).
-III-
Travelers argues that there is no genuine issue of material fact that, based on the allegations in the underlying complaint, the defendants have a duty to defend Lombardo in the underlying lawsuit because the alleged occurrence took place during their policy periods. In response, Netherlands and Lumbermens first argue that there is no genuine issue of material fact that the "occurrence" happened before their coverage periods began. Next, assuming arguendo that the occurrence happened during their policy periods, the defendants argue that they do not have a duty to defend because the known loss doctrine and other policy exclusions apply.
-IV-
The first issue in dispute is whether there is a genuine issue of material fact that the "occurrence" at issue took place during Lombardos and Netherlands policy periods, triggering their duty to defend. Netherlands and Lumbermens argue that the "occurrence" was the negligent construction that started in 1994 and ended in 1996, before their policy periods began.
Netherlands' and Lumbermens' policies provide in relevant part: "We will pay those sums that the insured becomes legally obligated to pay as damages because of `bodily injury' or `property damage' to which this insurance applies. We will have the right and duty to defend the insured against any `suit' seeking those damages . . ." They further provide, "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 `coverage territory'; and (2) The `bodily injury' or `property damage' occurs during the policy period."
The policies define an "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions during the policy period, resulting in bodily injury or property damage." The term "accident" is not defined in the policy, however, it has been defined by our Supreme Court as an unintended and unforseen injurious occurrence that takes place without one's foresight or expectation. Allstate Ins. Co. v. Barron, 269 Conn. 394, 408 n. 10, 848 A.2d 1165 (2004). Where, as here, the policy contains a continuous exposure clause, it "simply broadens . . . `occurrence' beyond the word `accident' to include a situation where damage occurs (continuously or repeatedly) over a period time, rather than instantly, as the word accident usually connotes." Metropolitan Life Ins. Co. v. Aetna Casualty Surety Co., 255 Conn. 295, 311, 765 A.2d 891 (2001). "[T]he purpose of a continuous exposure clause is to combine claims that occur when people or property are physically exposed to some injurious phenomenon such as heat, moisture, or radiation . . . [at] one location."
"Under the occurrence basis [comprehensive general liability], an action seeking damages against the policyholder is covered if it results from an occurrence and causes damage during the policy period. The triggering point . . . is the time of alleged injury, which triggers the [comprehensive general liability] carrier's duty to defend . . . The key point is the time of precipitating injury. The occurrence (e.g., negligence, defective manufacture) need not take place at the same time as the injury. Consequently . . . occurrence [comprehensive general liability] coverage may obtain today for precipitating events decades old. For example, negligent manufacture may cause harm that does not take place for many years. But when it does, the occurrence [comprehensive general liability coverage] on the risk is triggered. Consequently, occurrence [comprehensive general liability policies] are sometimes described as providing almost unlimited `prospective' coverage. Security Ins. Co. of Hartford v. Lumbermens Mutual Casualty Co., 264 Conn. 688, 692 n. 5, 826 A.2d 107 (2003).
Therefore, the date upon which this unexpected, repeated exposure to water began is fundamental to the court's resolution of these motions. Metropolitan Life Ins. Co. v. Aetna Casualty Surety Co., 255 Conn. 295, 305, 765 A.2d 891 (2001). Travelers asserts that the underlying complaint does not allege a specific date of occurrence, but rather asserts that the State began to experience water intrusion in the months and years following the 1996 completion of the law school library, and that the triggering event is not when Lombardo performed the masonry work but when water leaked through the masonry and caused physical injury to tangible property. There appears to be no genuine issue of material fact, based on the allegations in the underlying complaint, that the triggering event, water exposure, possibly occurred within Netherlands' and Lumbermen's coverage periods.
-V-
The defendants' primary defense is that even if the occurrence took place during their policy periods, the common-law `known loss' doctrine and similar endorsement contained in Netherlands' policies preclude the defendant's duty to defend.
"Insurance is a contract whereby one undertakes to indemnify another against a loss, damage, or liability arising from a contingent or unknown event . . . The `known loss' doctrine has not been addressed by the Connecticut courts. The known loss doctrine is a common law concept that derives from the fundamental concept of fortuity in insurance law. Essentially, the doctrine provides that one may not obtain insurance for a loss that either has already taken place or is in progress . . . Courts recognize that the rule is based on the realization that the purpose of insurance is to protect insured's against unknown risks . . . State courts are divided as to the scope of the known loss doctrine . . . [The Pennsylvania Superior Court has held that the] known loss defense is one that is based in fraud, which requires proof that the insured withheld material information concerning the existence of . . . damage . . . for which the insured subsequently obtained insurance.
Travelers Property Casualty v. H.A.R.T., Inc., Superior Court, judicial district of New Britain, (May 18, 2001, Aurigemma, J.) ( 29 Conn. L. Rptr. 635). This decision held there was no duty to defend.
Consistent with the known loss doctrine, Netherlands' policies include a "Montrose endorsement," which limits the coverage available under a Commercial General Liability policy where the insured had prior knowledge of claimed property damage. It is unclear, from the vague allegations in the underlying complaint, whether Lombardo knew about water damage prior to obtaining insurance from Lumbermens and Netherlands or was given notice. The complaint in the present case alleges that "During the months and years following completion of the Project and occupancy by the State, the State began to experience problems with water intrusion into the library. [Lombardo was] given notice of these problems and frequently visited the library to ascertain the nature and extent of the problem . . ." In the present case, the damage to the library was not instantaneous, but took place over a prolonged period of time, presumably making it more difficult for the State to allege the precise moment that Lombardo became aware of it. It appears that there is a genuine issue of fact as to whether Lombardo knew of the property damage prior to Netherlands' and Lumbermens' policies. This fact is material because the defendants have failed to meet their burden of establishing that the allegations of the complaint fall solely and entirely within other policy exclusions, as discussed below.
-VI-
The defendants further argue that there is no genuine issue of material fact that six other policy exclusions preclude their duty to defend. The burden of proving an exception to a risk is on the insurer. Allstate Insurance Company v. Devin, 50 Conn.Sup. 140, 147, 913 A.2d 1174 (2006). See also, Berdon v. Chicago Title Ins. Co., Inc., Superior Court, judicial district of New Haven, Docket No., 304940 (January 13, 1992, Reilly, J.) [ 5 Conn. L. Rptr. 426]. The defendants argue that the complaint casts the pleadings solely and entirely within the following six policy exclusions: (1) "Expected or Intended Injury" Exclusion; (2) "Contractual Liability" Exclusion; (3) "Property Damage" Exclusion; (4) "Damage to your Work" Exclusion; (5) "Damage to Impaired Property Not Physically Injured" Exclusion and (6) "Recall of Products, Work or Impaired Property" Exclusion. However, the defendants have not satisfied their burden of proof by showing that the allegations of the complaint fall solely and entirely within these policy exclusions and at least these claimed exclusions all present genuine issues of material fact.
In summary, there is a genuine issue of material fact as to whether Lombardo did or did not know of the loss prior to its policies with the defendants. This issue is material because the defendants have failed to establish that the allegations in the underlying complaint fall solely and exclusively within other policy exclusions. The allegations of the complaint fall outside the other policy exclusions because, inter alia, they relate to property damage that occurred to areas of the library upon which the defendant did or did not perform masonry work and to damages that occurred after work was completed and resolution of whether the defendants owe a duty to defend turns on the issue of whether Lombardo was aware of its losses.
According, the plaintiff's motion for summary judgment and defendants' cross motions for summary judgment are denied.