Opinion
No. CV 08-5024631S
December 15, 2010
MEMORANDUM OF DECISION
In this case the three sets of defendant, Doyon defendants, Zurich, and Crawford Company have filed motions for summary judgment. The court will separate out its discussion as to each claim made by the respective defendants. The facts are interrelated and the court will decide the respective motions in one memorandum of decision.
A. Decision on Motion for Summary Judgment By Fatima Doyon and Doyon Insurance Agency
The defendants move for summary judgment as to counts one and two of the revised complaint.
Count one lies against Ms. Doyon. Doyon is alleged to be a licensed insurance producer and agent and at the relevant times to this law suit is stated to have been "acting as the agent" of the Zurich insurance company. It alleges the plaintiff is a limited liability company. It states that by mortgage deed, dated November 14, 2005, Nestor Duque, to secure repayment of a promissory note, mortgaged to the plaintiff certain property in Waterbury. The mortgage deed and the loan, of which it was a part, provided that Mr. Duque was obligated to insure the mortgaged real property, providing evidence thereof to the mortgagee.
To satisfy the requirement Duque arranged for a policy of homeowner's hazard insurance to be issued by the defendant Fatima Doyon "as agent, listing the plaintiff as mortgagee" (according to the complaint). Paragraph 8 then alleges that on November 12, 2005 the defendant Fatima Doyon "issued a document commonly known as an insurance certificate dated November 7th and entitled "Evidence of Personal Property Insurance." This certificate listed the mortgaged property, Duque as the owner, the plaintiff Bluefin as the mortgagee and the defendant Zurich American Insurance Company as the company providing insurance coverage. The certificate was delivered to the plaintiff in connection with the closing of the mortgage loan as evidence of the insurance that the loan required.
After the issuance of the certificate the subject property suffered a property loss due to theft and vandalism. Sometime in January or February 2007 Duque was paid directly for the loss claim by Zurich "without the consent or approval of the plaintiff mortgagee."
Because of the direct payment to Duque the plaintiff could not oversee Duque's use of the proceeds and they were not used to repair or expand the property; in effect Duque liquidated his equity in the property. As result of the loan default the plaintiff had to pursue a foreclosure action. The complaint alleges the loss of value of the plaintiff's collateral due to the improper payment to Duque were caused by Fatima Doyon's negligence by (a) failing to cause the plaintiff to be properly identified as mortgagee and loss payee (b) failing to ensure that the plaintiff would be treated as the mortgagee and loss payee under the issued policy despite the issuance of the certificate of insurance (c) in allowing for the payment of the loss settlement proceeds for the damage to the mortgaged property to one other than the mortgagee; all the while the defendant Fatima C. Doyon knew or should have known that said conduct would cause the plaintiff harm.
Count two is directed against the Doyon Insurance Agency and makes the same general allegations as count one does against Ms. Doyon.
The two Doyon defendants have now filed a motion for summary judgment. It adds various factual considerations, supported by exhibits to the foregoing rendition of facts as narrated by the plaintiff.
Duque bought the property on July 23, 2004; on October 31, 2005 he applied for a Builder's Risk Policy at the Doyon Agency. At this time Duque did not provide information about a mortgagee and thus the application included no reference to a mortgagee. Doyon sent the application to Krar Associates who then obtained a policy from Zurich, which did not list the plaintiff as mortgagee.
In November 11, 2005 Doyon was notified that an updated certificate with Bluefin listed as the mortgagee was needed for the November 14th closing. On November 12 an insurance certificate containing this information and referred to in the complaint was prepared. This certificate, listing Bluefin as mortgagee, was faxed to a lawyer's office in connection with the closing of the mortgage loan as evidence of required insurance.
On November 14, 2005 Duque signed a promissory note in favor of Bluefin which was secured by a mortgage deed and the latter company issued a mortgage to Duque to renovate the property.
On July 8, 2006 Mr. Duque reported the property loss to the Doyon Agency and it faxed a loss notice to Crawford Company which was acting as Zurich's agent for the purpose of investigating the loss. It was investigated by Melvin Hilliand a property claims adjuster employed by Crawford.
On November 16, 2006 the plaintiff by correspondence advised Crawford that it was first mortgage holder and payee and an additional insured and requested a check for insurance proceeds related to the loss be made out to Bluefin.
As noted in count one of the complaint however, Zurich issued a check directly to Duque with no notice being given to Bluefin. Bluefin makes claims against the defendants Doyon Agency and Fatima Doyon in counts one and two in negligence.
(1)
As will be discussed the Doyon defendants claim the plaintiff Bluefin cannot meet its burden to prove all the elements of its negligence claim against them. The standards to be applied on a motion for summary judgment are well known. If a material issue of fact is determinative as to whether the motion should be granted it should not be decided by the court because a party has a constitutional right to a jury trial. However, if no such material fact prevents the granting of the motion it should be granted to spare the litigants the expense and burden of litigation.
(2)
As indicated the Doyon defendants argue that to prevail on a claim of professional negligence against an insurance agent a plaintiff must prove (1) the defendant owed the plaintiff a duty (2) the duty was breached and (3) the breach was the proximate cause of the plaintiff's claimed damages, see RK Constructors, Inc. v. Fusco Corp., 231 Conn. 381, 384 (1994), Roach v. Ivari International Centers, Inc., 77 Conn.App. 93, 99 (2003).
Although the courts appear to use the words interchangeably "a party who negotiates an insurance contract to cover someone else's risk is acting as an agent for either the insurer or the ensured. A representative of the insured is known as an insurance broker. A broker represents the insured by acting as a middleman between the insured and the insurer, soliciting insurance from the public under no employment from any special company, and upon securing an order, places it with a company selected by the broker." Couch on Insurance Third, Vol. 3 § 45:1, P 45.2. As Couch goes on to say: "any negligence or other breach of duty on the agent's part which defeats the insurance the agent procures will render him or her liable for the resulting loss." Id. at § 46:58, p 46-84. Couch cites Ursini v. Goldman, 118 Conn 554 (1934) which says at page 559: "Where he (the broker) undertakes to procure a policy affording protection against a designated risk, the law imposes upon him and obligation to perform with reasonable care the duty he had assumed, and he may be held liable for loss properly attributable to his default."
It seems that here the Doyon defendants acted as brokers. They referred the insurance application to Krar Associates which obtained the policy from Zurich. The policy itself did not list Bluefin as mortgagee and/or loss payee. Does that absolve them from any duty to Bluefin because as brokers they acted for Duque? It was certainly in Duque's interest to be able to go to the closing with an certificate indicating Bluefin's status or the mortgage would not have been consummated along with the attendant loan. But any negligence on their part had the possibility of harming Bluefin and that would be sufficient to create a duty. In Green v. Perry, 62 Conn.App. 338, 341 (2001) the court said: "A duty to use care may arise . . . from circumstances under which a reasonable person, knowing what he knew or should have known, would anticipate that harm of the general nature of that suffered was likely to result from his act or failure to act."
Although the Doyon defendants do not concede they owed any duty to Bluefin or if they had one that it was breached, their argument in the motion for summary judgment is that even if such a duty was owed and was breached any act or omission on their part was not the cause of Bluefin's alleged damages. They argue that prior to issuing the loss payment to Duque they had the information that Bluefin was the mortgagee and/or loss payee. The issuance of the check to Duque under these circumstances is what caused harm to Bluefin.
The Doyon defendants rely on the analysis made by the Ursini court. That reliance, however, is not helpful. It is argued that the court upheld a directed verdict in favor to the insurance company and that it found the plaintiff could not have purchased a policy to protect against burglary thus "any mistake made by the defendant (in not informing the insurer of a prior burglary) was harmless." Similarly, since it is uncontroverted that Zurich was aware of Bluefin's status as mortgagee/loan payee prior to distributing the proceeds to Duque "any failure to advice Zurich regarding Bluefin's status as mortgagee was harmless."
But in Ursini the defendant was not an insurance company but an insurance broker. He procured insurance for a store owner from an insurance company against the risk of burglary. Although he was aware of a prior burglary he did not disclose it to the insurance company. When another burglary occurred the casualty company denied coverage. What that Supreme Court did was find no error in the jury verdict in favor of the store owner and even held that although by reading the policy the plaintiff could have observed the plain language excluding coverage in such circumstances, there were exceptions to the general rule holding that requirement against a party suing on a contract which the jury was free to accept in accordance with the trial Judge's instructions.
Here the court believes there is an issue of material fact on the issue of causation. On or about October 31, 2005 they sent an insurance application to Krar Associates which did not list Bluefin as a mortgagee/loss payee, alleging they were not told. On November 4, 2005 a policy was issued by Zurich to Duque without reference to Bluefin's interests. On November 11, 2005 they received a fax from a lawyer involved in the closing on the mortgage to the effect that Bluefin was the mortgagee/loss payee and an "updated" certificate was needed reflecting its status for the November 14th closing. On November 12th the corrected certificate was sent by the Doyon Insurance Agency. The certificate, which listed Bluefin as the mortgagee was delivered to Bluefin which would naturally be relied upon by it as evidence of the contents of any policy. Doyon of necessity would have been aware of this reliance.
But there is nothing to indicate that the Doyon defendants took any steps to contract Krar Associates to supply the information concerning Bluefin's status thus correcting the incorrect and misleading application they had sent to Krar Associates less than two weeks previously — an application which they knew was the basis of the issuance of any policy by Zurich and which would have determined its contents.
As noted the Doyon defendants argue that even if they were negligent in the foregoing way their negligence was harmless to Bluefin because Zurich was informed of Bluefin's interest before the loss reimbursement check was sent to Duque. But Zurich was not informed of this prior to the date of the loss which possibly could absolve Zurich of liability — a matter which may have to be litigated making Doyon's defense to this motion premature. But even leaving that observation aside why could not both Zurich and Doyon be responsible in different degrees even if Zurich is viewed as responsible at all in negligence by issuing the check to Duque. Zurich's actions or failures to act supporting a claim of negligence were precipitated by the Doyon defendants' failure to correct an error prompted by an initial lack of information from Duque regarding Bluefin's interest which they had the ability to correct by contacting Krar Associates once the proper information was made available to them. The Doyon motion for summary judgment is denied as to both counts.
B Decision on Zurich American Insurance Company's Motion for Summary Judgment
The court will rely on the rendition of facts and standards to be applied in summary judgment procedure made in the preceding section.
The claims against Zurich lie in four counts. Count three alleges Zurich was negligent in failing to ensure that plaintiff was treated as a mortgagee and loss payee. Count five alleges that its agent Crawford failed to ensure Bluefin would be treated as the mortgagee/loss payee despite knowledge of that status. Count six alleges Zurich breached a contract between Bluefin and Zurich in that Bluefin was not paid the insurance proceeds for the loss under the contract count nine alleges that the foregoing conduct constituted a violation of the Connecticut Unfair Trade Practices act and the Connecticut Unfair Insurance Practices Act.
(a)
The court will dismiss count six; as the defendant points out there was no contract between Bluefin and Zurich. Zurich had a policy with Mr. Duque. They are certainly not parties inter se to any agreement, cf Total Property Services, Inc. v. O.S.C.V., 30 Conn.App. 580, 588 (1993), cited by Zurich.
The policy issued to Duque does not mention Bluefin in any capacity or in any way and as written assumes no obligation to Bluefin. The fact that it does not is, in fact, the very predicate of the legal claims that Bluefin advances in other aspects of this case.
(b)
In counts three and five negligence claims are asserted against Zurich. The counts are somewhat different in character. Count three is a claim of negligence which is directly based on the assertion that the Doyon defendants were the agents of Zurich and relies on the so-called updated certificate of November 12, 2005 listing the plaintiff as mortgagee which Bluefin would have received at the closing as a basis of a duty thereby assumed by Zurich through its Doyon agent's actions to act in a non-negligent manner — i.e. by not dishonoring the assumed duty by paying Duque directly for any loss.
But insofar as this is the basis of count three the court refers to its previous discussion on the insurance agent, insurance broker distinction. Whatever the legal fall out of the action and failures to act of the parties here, Doyon was not an agent of Zurich. It can best be defined as an agent of Duque to procure insurance. As noted Doyon sent his application to Krar Associates which is the entity that arranged for the Zurich policy to be issued to Duque. Krar has the contractual relationship with Zurich and Doyon is not an "appointed producer" for Zurich, see generally, Hallas v. Boehmke and Dabozz, Inc. et al., 239 Conn. 658 (1997).
Nor can a claim be made that Doyon was acting with Zurich's apparent authority.
Connecticut has long recognized the doctrine of apparent authority Quint v. O'Connell, 89 Conn. 353, 357; Beckenstein v. Potter Carrier, Inc., 191 Conn. 120, 140 (1983). The latter case states "apparent authority is that semblance of authority which a principal, through his own acts or inadvertence, causes or allows a third person to believe his agent possesses," The Restatement (2d) Agency at § 27 states that
. . . apparent authority to do an act is created as to a third person by written or spoken words or any other conduct of the principal, which, reasonably interpreted, causes the third person to believe that the principle consents to have the act done on his (sic) behalf by the person purporting to act for him (cf Restatement (2d) Torts section 249)
In our state the doctrine is said to have two elements (1) the principal held the agent out as possessing sufficient authority to embrace the act in question or knowingly permitted the agent to act as having such authority and (2) the party seeking to bind the principal must have acted in good faith reliance on the appearance of authority. The courts have developed the doctrine to protect, under appropriate circumstances, a third person in dealing with an agent lacking express authority, Nowak v. Captive Motors, 158 Conn. 65, 69 (1989), Keller v. General Products, Inc., 137 Conn. 247, 251 (1950), also see Tomlinson v. Board of Education, 226 Conn. 704, 735-30 (1993).
Under certain circumstances, an insurance broker may become an agent of the insurer and the doctrine of apparent authority or estoppel can be applied where appropriate, when, for example, the broker's authority to bind the principal is at issue Reserve Ins. Co. v. Duckert, 214 A.2d 754, 759 (Md, 1965), see also Taylor v. U.S. Casualty Co., 92 SE 2d 647, 652 (S.C, 1956).
But there has been nothing produced here to indicate Doyon was acting with Zurich's apparent authority which could be the basis of allowing Bluefin to resort to a reliance argument against Zurich as a result of the updated certificate of November 12th submitted by Doyon for the mortgage closing. The Zurich policy was issued November 3, 2005 which made no reference to Bluefin as mortgagee and/or loss payee. Doyon never provided Bluefin with documents or any other indirection that it was acting under Zurich's auspices. True the November 12th document submitted by Doyon listed Blufin as mortgagee/loss payee and Zurich as the insurer but apparent authority is established by the actions of the purported principal not of the purported agent, here Doyon, who it is claimed acted with apparent authority. Count three is dismissed.
ii
Count five as regards Zurich adds an additional fact pattern to support its negligence claim beyond that set forth in count three which relies on the promise that the Doyon defendants were agents of Zurich.
It notes facts which are apparently not disputed that, after the loss, Crawford Associates employed a Mr. Hilliard to investigate and inspect the loss. It is claimed Crawford was acting as the agent of Zurich which is not surprising since the company responsible under the policy to at least someone, would need to know the ambit of its responsibilities. The claim is made that Bluefin notified Mr. Hilliard by letter that it was the mortgagee/loss payee and any check for the loss should be made out and sent to Bluefin. This was done prior to the disbursement of the check to Duque.
If Crawford was the agent of Zurich to perform an assessment of the loss, a characterization, which Zurich does not seem to contest, it would seem that notifying Crawford of its status would now allow Bluefin to claim Zurich would have had notice of that status as mortgagee/loss payee. An agent has a duty to disclose information to a principal "and an agent must give the principal any information that the latter would desire and which can be communicated to him (or her) without violating a superior duty to a third person" — an agent has a duty "to make full disclosure to the principal of all material facts relevant to the agency." 3AmJur. 2d, "Agency," § 206 pp. 595-96 (see numerous cases cited, also see Restatement (2d) Agency Volume 2, § 381). If you are investigating a loss to determine what it should be and aware of the fact that the entity you are doing the investigation for would disburse funds based on your investigation, it would seem commonsensical to communicate to your principal that an identifiable party was claiming it should receive any loss payment despite policy provisions.
An affidavit attached to its motion is instructive; it is authored by Rachele Holden with apparent authority to speak for Zurich. Paragraph 5 seems to indicate Crawford through Hilliard did communicate Bluefin's information that it was the mortgagee and also appears to recognize that if Zurich had been informed of Bluefin's status prior to the loss it would have had a duty to reflect that by an endorsement to the policy. Paragraph 5 reads as follows "5. if Assurance Company (Zurich) had been advised that Bluefin was mortgagee on the property prior to loss, Assurance Company would have attempted issue an endorsement to the policy indicating Bluefin's status as mortgagee." What other duty could they have had in such a situation? The endorsement would have assured any loss disbursement would have gone to Bluefin, something not communicated to Doyon and Krar Associates when the policy was first issued because Duque apparently improperly failed to communicate the information. Zurich could not rightfully participate what in effect would be a fraudulent and/or unjust distribution of these monies based on some argument that Bluefin was after all only a "stranger" to the original insurance contract.
What creates a problem for the court as to dismissing the Fifth count is the issue of whether, armed with knowledge of Bluefin's status after the loss but prior to issuing the check to Duque, Zurich was at all negligent or more to the point whether these facts created a material issue as to whether Duque was negligent. The parties did not directly address this point, although there was some reference in argument that, upon loss, time constraints required quick action on disbursement of checks for loss and the policy made no mention of Bluefin. A section of the policy covers the company's obligations upon reporting of a loss. A loss will be made good within thirty days after an agreement is reached with the claimant or after an appraisal. award. But the loss here occurred July 6, 2006. Checks were not issued to Duque until late January or February 2007. A simple phone call to Bluefin or Krar Associates, its broker after the loss would still have permitted Zurich to still conduct its loss investigation seemingly without any prejudice to its being done in a professional or accurate manner. There is no evidence before the court that Zurich contacting Bluefin or Krar Associate would have led for example, to an inexact calculation of loss or inability to comply with time constraints set forth in the contract. Even after the loss and even though Bluefin was a "stranger" to the insurance contract who could have objected to Zurich' staking account of Bluefin's interest — Duque?
The court dismisses count three but not count five.
iii
The Zurich motion also seeks to have count nine dismissed. There it is alleged that the actions of Zurich constitute a violation of the Connecticut Unfair Trade Practices Act (§ 42-110b) based on a violation of the Connecticut Unfair Insurance Practices Act (§ 38a-815 and § 38a-816(1)).
The whole premises of the claim is summed up in a portion of paragraph 21 of count nine. There it says the just mentioned CUIPA Sections were Violated.
In that the defendants, Zurich American Insurance Company and or Zurich American Insurance Company of Illinois, violated Conn. Gener. Stat. Sect. 38a-816(1) by failing to treat the plaintiff as mortgagee and loss payee although it had been designated and known to be as such by its agents; and by failing to ensure that the insurance proceeds were distributed to the plaintiff, as mortgagee and loss payee despite plaintiff's warning and demand that it be treated as such;
But the "agents" referred to are the Doyon defendants as direct reference is made to count three whose first twenty paragraphs are incorporated in count nine. As Zurich notes § 38a-816(1) involves misrepresentation and false advertising of insurance policies. Zurich itself at the time the policy was issued did not misrepresent to Bluefin anything in issuing the policy. And Doyon itself did not know Bluefin's status until after the policy was issued. Even apart from that, for reasons previously discussed, Doyon was not the agent of Zurich. Krar Associate was but even that entity did not receive any information about Bluefin's status as mortgagee until after the Zurich policy was issued. Beyond that none of the proscribed practices in the twenty twosubsections of § 38-816 appear to apply to the loss disbursement here even if Zurich learned of Bluefin's mortgagee status prior to actually sending the check to Duque. Count Nine is dismissed.
C Crawford Associates Motion for Summary Judgment
Crawford has been sued in two counts. Count four lies in negligence and Count Ten alleges a CUIPA/CUTPA violation.
(i)
The court will first discuss the claim under count four. Crawford was retained by Zurich after the loss to investigate it. Crawford in turn hired a Mr. Hilliard to act as a claim adjustor in the matter. The fourth count asserts in paragraph 13 that Blufin gave Hilliard oral and written notice of its status and "expectation to be treated as the loss payee" because it was the mortgagee, "With regard to the investigation, resolution and payment for the claimed loss." The complaint goes on to say that despite the foregoing the check for the loss was made out to and sent to Mr. Duque with resulting harm to Bluefin. Crawford in paragraph 22 is claimed to be negligent as a result of all this in the following respects:
(a) failing to cause the plaintiff (Bluefin) to be properly identified as mortgagee and loss payee to ensure that the plaintiff would be treated as the mortgagee and loss payee
(b) failing to ensure that the plaintiff would be treated as the mortgagee and loss payee under the issued policy despite the issuance of the certificate of insurance upon which the plaintiff rehed and despite knowledge of the plaintiff's status of mortgagee.
(c) in paying or allowing payment of the loss settlement proceeds for the damage to the mortgaged property to one other than the mortgagee.
The paragraph ends with the assertion that Crawford "should have known that said conduct would cause the plaintiff to suffer harm."
The court has an initial evidential difficulty with the plaintiff's position. Paragraph 14 states the obvious that Zurich issued the loss payment check to Duque not Crawford; Zurich was the principal Crawford the agent which hired just to make a loss investigation as claims adjustor. It had no duty or responsibility to issue checks for any loss. Perhaps more to the point there has been nothing submitted to indicate Hilliard, after the loss, did not communicate to Zurich Bluefin's assertions as to its status without that link how can a direct negligence claim be made against Crawford? Where does it say in the case law that the agent is responsible for the actions or failures to act of the principal where there is no indication the agent caused those actions or failures to act? Also there is reason to think that Hilliard communicated Bluefin's claim to Zurich, again after the loss. The affidavits of Holden and Roberts, who are the agents of Zurich by its lawyer's own admission, are interesting in that the respect. They advance the stranger to the policy theme then both in effect say if Zurich had been informed prior to the loss an endorsement to that effect could have been added to the policy — i.e. Bluefin's interests would have been protected. Why frame it exactly that way, if Zurich did not receive the Bluefin information even after the loss? The observation to that effect would be irrelevant. If Hilliard did pass the information to Bluefin's status is true, how is Crawford negligent?
Apart from the foregoing it is also true as stated in Couch on Insurance Vol. 3d at § 45: 25, page 45-21 that the majority view is that "an adjustor or investigator owes a duty only to the insurance company that hired it. However, a minority of jurisdictions have found that an adjustor owes a duty to the insured in the event of the adjuster's negligence." The court has examined three cases cited by Couch, Charleston Dry Cleaners v. Zurich Am Ins., 586 SE 2d 586 (SC, 2003) Mineke v. GAB Business Services, Inc., 991 P.2d 267 (Ariz. At App. 1999), for the majority view and Morvay v. Hanover Ins. Companies. See also discussion by Judge Adams in Grossman v. Homesite Ins. Co., 48 Conn. L. Rptr. 160 (2009). Given the facts of this case the court does not believe these cases are really on point. They involve situations where it is claimed the adjustor negligently performed his or her job in ascertaining the loss. As said in the Meineke case "Creating a separate duty form the adjustor to the insured would thrust the adjuster into what could be an irreconcilable conflict between such duty and the adjuster's contractual duty to follow the instructions of its client," 991 P.2d at p. 271. That is not the problem here — there is no claim that the adjuster was negligent in performing his duties of investigating the loss as such. What contractual duty of the adjuster to follow the instructions of the insurer would have anything to do with who should receive a check for the loss? The instructions referred to are instructions as to how and to what extent various loss claims are investigated.
The court specifically then does not rely on the majority view set forth in Couch and referred to previously.
Finally the court would note that here there is no evidence to indicate the adjuster did anything or failed to do anything or had the power to do anything which harmed an entity in Bluefin's position. The remedy against anyone lies, if it lies against anyone, lies against the insurer and/or the insurance agent who procured the insurance in the first place.
The court dismisses count four.
ii
The court also dismisses the CUTPA/CUIPA claim for the same reasons it dismissed this claim against Zurich. Nothing in § 38a-816 has any application to the facts of this case and especially the claims against Crawford. Misrepresentation and false advertisement are the objects aimed at in that statutory subsection. Crawford had nothing to do with the procurement of the policy at issue or its actual contents. Nor did any of its actions continue some misrepresentation regarding the contents, protections, or appropriate claimants under the policy after the loss. What is the CUIPA/CUTPA claim? That Crawford purposely concealed the communications it received from Bluefin regarding its status so Zurich its principal could issue a check to Duque or perhaps that it in fact gave the information to Zurich but did nothing further after that to prevent Zurich from sending a check to Duque? To ask these questions, at least in the court's opinion, provides the answer.
Count ten is dismissed.