Opinion
No. CV09 40 11366
February 25, 2010
MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT
On March 16, 2009, the plaintiff, Colony Insurance Company (Colony) commenced this action seeking a declaratory judgment to the effect that it has no duty to defend or indemnify its insured, Walnut Beach, LLC (Walnut Beach), in a separate lawsuit currently pending before the Superior Court. Colony has now filed a motion for summary judgment. For the following reasons, the motion is denied.
I. Background
The following facts are not in dispute. On September 27, 2003, Colony issued Walnut Beach a commercial general liability insurance policy for a property owned by the defendant at 54 Naugatuck Avenue, Milford, Connecticut (the property). Subsequently, five renewal policies were issued on an annual basis (hereinafter referred to collectively along with the original policy as "the policy"), meaning Walnut Beach was insured by Colony from September 27, 2003 until September 27, 2009.
The provisions relevant to the matter now before the court are identical in each policy.
Certified copies of each of these policies were provided to the court, along with the affidavit of Stacey Donovan, an underwriter for the plaintiff, which identifies the policies.
Since at least December 2003, Walnut Beach has leased the property to Antonio, John and Michael Amoratis (collectively, "the Amoratis tenants"), who, since that time, have operated a business on the property known as Alfa's Pizza Pub. On November 6, 2008, an action was commenced in the Superior Court against the Amoratis tenants and Walnut Beach by Michael Urban, who owns and resides at a home near the property. The complaint in that action ("the underlying complaint") contains four counts. Three of those counts, which are captioned as "Violations of Connecticut Noise Pollution Control Act," "Private Nuisance," and "Negligent Infliction of Emotional Distress," are directed at the Amoratis tenants. The fourth count, which is not captioned, is directed at Walnut Beach.
The crux of the allegations found in the underlying complaint is that, from the time the Amoratis tenants began operating their bar and restaurant, they have shown no regard for the neighbors, including Urban, and that Urban has suffered harm as a result. To this end, the underlying complaint alleges that the Amoratis tenants have continuously "caus[ed] extremely loud noises and vibrations to emanate throughout the area"; have "operate[d] their bar into the early morning hours, without regard to how the noise and vibration caused by [the] business will negatively impact [Urban]"; have "host[ed] live rock music, and . . . blast[ed] recorded music from amplified speakers, often even after closing time"; and have otherwise "operated their business in a lewd and dangerous manner . . ." The underlying complaint further alleges the Amoratis tenants have "promot[ed] drug dealing, prostitution, public urination, vomiting, unsanitary garbage accumulation, and obnoxious motorcycle revving to take place in and around the [property]." Because of these activities, Urban claims he has suffered routine loss of sleep; chronic fatigue; headaches; body aches and muscle pain; irritability; loss of the use, quiet enjoyment, seclusion and comfort of his home; diminution in the property value of his home; and anxiety.
The fourth count of the underlying complaint, which is relevant to the matter now before the court, alleges that Walnut Beach "chose to rent" the property to the Amoratis tenants, and that it "knew or should have known that its tenant[s] [were] operating the bar in a way that would be likely to inflict severe emotional distress upon" those that lived nearby, including Urban. Count four also alleges that Walnut Beach "knew or should have known that its tenants were operating their bar in [the same] lewd and dangerous manner" described in the counts against the Amoratis tenants. It then claims that Walnut Beach's conduct constitutes "negligent infliction of emotional distress," and cites the aforementioned harm this conduct has caused Urban.
Colony is currently representing Walnut Beach under a reservation of rights in the underlying lawsuit, but has since brought this action seeking a declaratory judgment stating that, under the terms of the policy, it has no duty to defend or indemnify Walnut Beach. In addition to Walnut Beach, this action also names the Amoratis tenants and Urban as defendants. However, on May 22, 2009, the Amoratis tenants were each defaulted for failure to appear, and motions for default judgment are currently pending.
On July 7, 2009, Colony filed the motion for summary judgment that is now before the court, seeking a judgment in its favor as to Urban and Walnut Beach. Colony has provided the court with two memoranda of law in support of its motion. Walnut Beach and Urban oppose the motion for summary judgment, contending that the allegations of the underlying complaint do trigger the duties to defend and indemnify. Both have provided the court with a memorandum of law.
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." (Internal quotation marks omitted.) Provencher v. Enfield, 284 Conn. 772, 790-91, 936 A.2d 625 (2007). "[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 the case." (Citation omitted; internal quotation marks omitted.) Buell Industries, Inc. v. Greater New York Mutual Ins. Co., 259 Conn. 527, 556, 791 A.2d 489 (2002).
III. Discussion
"[T]he duty to defend is considerably broader than the duty to indemnify . . . [A]n 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 . . . 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 . . . Moreover, [i]f an allegation of the complaint falls even possibly within the coverage, then the insurance company must defend the insured . . . In contrast to the duty to defend, the duty to indemnify is narrower: while the duty to defend depends only on the allegations made against the insured, the duty to indemnify depends upon the facts established at trial and the theory under which judgment is actually entered in the case . . . Thus, the duty to defend is triggered whenever a complaint alleges facts that potentially could fall within the scope of coverage, whereas the duty to indemnify arises only if the evidence adduced at trial establishes that the conduct actually was covered by the policy. Because the duty to defend is significantly broader than the duty to indemnify, where there is no duty to defend, there is no duty to indemnify." (Citations omitted; emphasis in original; internal quotation marks omitted.) DaCruz v. State Farm Fire Casualty Co., 268 Conn. 675, 687-88, 846 A.2d 849.
Thus, to determine whether Colony has a duty to defend and therefore potentially to indemnify — the court must interpret both the language of the policy, and the allegations of the underlying complaint. Turning first to the policy, Namerow, 257 Conn. 812, 827, 778 A.2d 168 (2001). The relevant provisions provide: "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. However, we will have no duty to defend the insured against any 'suit' seeking damages for 'bodily injury' or 'property damage' to which this insurance does not apply." The policy further provides that, "[t]his insurance applies to 'bodily injury' and 'property damage' only if . . . [t]he 'bodily injury' or 'property damage' is caused by an 'occurrence' that takes place in the 'coverage territory' . . ."
"The [i]nterpretation of an insurance policy, like the interpretation of other written contracts, involves a determination of the intent of the parties as expressed by the language of the policy . . . The determinative question is the intent of the parties, that is, what coverage the . . . insured expected to receive and what the [insurer] was to provide, as disclosed by the provisions of the policy . . . It is axiomatic that a contract of insurance must be viewed in its entirety, and the intent of the parties for entering it derived from the four corners of the policy . . . The policy words must be accorded their natural and ordinary meaning . . . [and] any ambiguity in the terms of an insurance policy must be construed in favor of the insured because the insurance company drafted the policy . . . A necessary predicate to this rule of construction, however, is a determination that the terms of the insurance policy are indeed ambiguous . . . The fact that the parties advocate different meanings of the [insurance policy] does not necessitate a conclusion that the language is ambiguous Moreover, [t]he provisions of the policy issued by the [insurer] cannot be construed in a vacuum . . . They should be construed from the perspective of a reasonable layperson in the position of the purchaser of the policy." (Internal quotation marks omitted.) Community Action for Greater Middlesex County, Inc. v. American Alliance Ins. Co., 254 Conn. 387, 399-400. "[C]onstruction of a contract of insurance presents a question of law . . ." (Internal quotation marks omitted.) Travelers Insurance Co. v. Namerow, 257 Conn. 812, 827, 778 A.2d 168 (2001).
The term "bodily injury" is defined by the policy as follows: "'Bodily injury' means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time."
In relevant part, the term "property damage" is defined by the policy as: "(a) Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or (b) Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the 'occurrence' that caused it . . ."
Thus, Colony only has a duty to defend Walnut Beach if the underlying complaint alleges that Urban's injuries were caused by an "occurrence." The definitions section of the policy states that the term "occurrence" means "an accident, including continuous or repeated exposure to substantially the same general or harmful conditions." While the term "accident" is not further defined by the policy, our Supreme Court recently directed that, in such situations, the word "accident" should be "afforded . . . its ordinary meaning, as reflected in dictionary definitions. A typical definition of the term 'accident' is 'a lack of intention or necessity, often opposed to design; an unforeseen unplanned event; [a] sudden event or change occurring without intent or volition . . . and producing an unfortunate result.'" Vermont Mutual Ins. Co. v. Walukiewicz, 290 Conn. 582, 594, 966 A.2d 672 (2009). Additionally, and relying on a definition of the term "accident" as used in the Workers' Compensation Act, General Statutes § 31-275 et seq., the Court also offered that an "accident" is "an unlooked-for mishap or an untoward event or condition not expected." (Internal quotation marks omitted.) Id. Finally, the Supreme Court has long since clarified that an "accident" is "the event causing injury, not the cause of that event." Commercial Contractors Corp. v. American Ins. Co., 152 Conn. 527, 541, 791 A.2d 489 (1964).
Although the Supreme Court included the phrase "sudden event or change" in defining "accident," the court notes that the policy now before it expressly states that an occurrence is "an accident, including continuous or repeated exposure to substantially the same general or harmful conditions." (Emphasis added.) Thus, the relevant policy provision expressly contemplates that an occurrence may be the result of an accident that itself results from "continuous or repeated exposure to substantially the same general or harmful conditions," meaning that the type of accident contemplated by the policy is not necessarily one that occurs "suddenly."
We turn now to the allegations made in the underlying complaint. Colony argues that the injuries claimed by Urban cannot be fairly construed as having been caused by an "accident," and that they therefore were not caused by an "occurrence." Although it is unclear precisely what legal theory Urban seeks to rely upon in extending liability to Walnut Beach, such determinations are largely irrelevant in determining the question of an insurer's duty to defend; rather, it is the facts alleged in the underlying complaint that are dispositive. See DaCruz v. State Farm Fire Casualty Co., supra, 268 Conn. 687 ("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" (emphasis added)). To this end, the gravamen of the allegations made against Walnut Beach in the underlying complaint is that Urban was harmed by Walnut Beach because it "chose to rent" the property to the Amoratis tenants even though it "knew or should have known that [the Amoratis tenants] were operating their bar in a lewd and dangerous manner . . ." The clear and natural import of these allegations is that Walnut Beach was negligent in renting the property to the Amoratis tenants because it "knew or should have known" of the manner in which they were operating the bar, but ignored the risk such behavior posed to neighbors like Urban and rented the property to them anyway.
As such, it is important to note what the underlying action is not about. It does not involve a situation in which it is alleged that the injured party was harmed when the insured or an agent of the insured committed an intentional tort. It is also not a case in which the injured party seeks to collect from the insured merely by virtue of a vicarious liability theory. Rather, the underlying action deals with a situation in which the insured is accused of acts or omissions that constitute ordinary negligence.
As an initial matter, then, the court observes that there does not appear to be agreement — within Connecticut or the many jurisdictions — as to whether harm caused by a simple act of ordinary negligence allegedly committed by the insured will constitute an "accident" and therefore an "occurrence" in any given instance. While courts generally agree "that the mere fact that damage or loss resulted from the negligence of the insured or his agent does not necessarily exclude liability . . . from the coverage of policies . . . [t]here is a definite split of authority . . . as to what acts of negligence result in liability covered by the terms of such a policy." (Emphasis added.) Annot., 7 A.L.R.3d 1262 § 1. Generally speaking, however, most courts seem to adopt the view that while injuries caused by a negligent act or omission of the insured may also be said to have been caused by an accident, damage caused by the insured's negligence is not necessarily the result of an accident, and therefore an occurrence. See id., §§ 3-6 (summarizing case law from various jurisdictions). What is clear, however, is that "courts are . . . required to tailor the definition [of occurrence] to the facts of the case and the nature of the claim." 20A E. Holmes, Appleman on Insurance (2d Ed. 2002) § 129.2, p. 123.
Again, the policy at issue here defines an occurrence as an accident, and, in Connecticut, an accident is an "unlooked-for mishap or an untoward event or condition not expected." Vermont Mutual Ins. Co. v. Walukiewicz, supra, 290 Conn. 594. Stated slightly differently, it is "an unforseen unplanned event," and is characterized by "a lack of intention or necessity, often opposed to design . . ." Id. Additionally, it is well established that in gauging intention and expectation, the analysis must be conducted from the standpoint of the insured. See, e.g., id. (where underlying complaint alleged intentional battery committed by insured, but insured claimed self-defense, question of whether an accident had occurred was to be resolved by determining whether injuries were caused by "the intentional design of the insured, or rather, by a sudden, unforeseen event" (emphasis added)); Covenant Ins. Co. v. Sloat, Superior Court, judicial district of Fairfield, Docket No. 385786 (May 23, 2003, Levin, J.) ( 34 Conn. L. Rptr. 687) ("Whether there is an accident, and hence an occurrence, must be determined from the standpoint of the insured seeking coverage"). The question before the court, then, is whether Walnut Beach would have expected or intended that the harm suffered by Urban would result from its decision to rent the property to the Amoratis tenants. Given the allegations of the underlying complaint, the court cannot definitively answer this question in the affirmative. This being so, the court cannot say that, as a matter of law, the underlying complaint fails to allege that Urban's injuries were caused by an "accident," and therefore an "occurrence."
The Court finds Carney v. Darien, 60 F.2d 1273 (7th Cir. 1995), instructive in that it illustrates why this conclusion is appropriate. In Carney, the plaintiffs brought a 42 U.S.C. § 1983 action against a village police officer, alleging that, upon being pulled over during a traffic stop, the officer arrested the plaintiffs for having open intoxicants in their vehicle, then "harassed, threatened and attempted to coerce them into performing sexual acts in exchange for voiding the citations." Id., 1275. In addition, the plaintiffs named various village officials as defendants in separate counts, alleging: "1) that several village officials had knowledge of previous acts by [the officer] of abusiveness and sexual misconduct, including a [previous] complaint . . . alleging sexual coercion against [the officer]; 2) that the subsequent failure of these officials to investigate [the officer's] fitness to serve as a police officer or to supervise his activities was done with total disregard for the safety of innocent citizens; 3) that the . . . officials also had notice of [the officer's] unexplained voidance of several tickets, and never investigated such misconduct; 4) that each of these acts and omissions were done with deliberate indifference and total disregard for the constitutionally protected rights of citizens who may come in contact with [the officer], including the plaintiffs; and 5) that 'the . . . officials knew or should have known' that [the officer] was unfit to be a police officer and that he would engage in tortious, offensive unconstitutional conduct with citizens while on duty as a . . . police officer.'" (Emphasis added.) Id., 1279.
The complaint also named the Village of Darien itself as a defendant. Carney v. Darien, supra, 60 F.2d 1275.
The trial court found that, based on these allegations, there was no accident and therefore no occurrence, and that the insurer thus had no duty to defend. Id., 1276. On appeal, the officials contended that because the underlying complaint alleged "that they 'knew or should have known' about [the officer's] prior occurrences," it was unclear whether they would have expected the officer to cause the alleged harm when they failed to more actively intervene. (Emphasis added.) Id., 1280. Given that "[a]ny existing doubt as to whether an insurer owes a duty to defend is resolved in favor of the insured"; id., 1277; the officials argued that the trial court thus erred in finding that the insurer had no duty to defend them. Id., 1280.
The Circuit Court disagreed because it found that the officials' interpretation of the underlying complaint was faulty: "We disagree with the [officials'] belief that the complaint asserts alternative allegations regarding the knowledge of the prior occurrences. The only 'should have known' language in the complaint is within the allegation that the [officials] should have known that [the officer] was unfit to be a police officer; no such language appears regarding the [officials'] knowledge of past misconduct. In fact, a careful review of the complaint reveals a consistent assertion of actual knowledge or notice of [the officer's] previous conduct by the [officials]." Id. The Circuit Court concluded that "[t]he allegations that the [officials] were aware of numerous complaints against [the officer] regarding his prior abusive nature, sexual misconduct and regular unexplained voidance of traffic tickets constitute[d] sufficient indications to warn the . . . officials that [the officer] would probably commit similar acts in the future. Accordingly, any injury resulting from a later act would not be an accident or occurrence, and therefore not within the coverage provision on bodily injury of the . . . policy." Id.
Returning to the present matter, it is clear that, unlike in Carney, the allegations of the underlying complaint here do not specifically allege that Walnut Beach had actual knowledge of the manner in which the Amoratis tenants were operating the bar when it chose to rent the property to them. Nor does the underlying complaint allege facts that would lead one to conclude that Walnut Beach did have such prior knowledge. Rather, the underlying complaint alleges only that Walnut Beach "knew or should have known that its tenant was operating the bar in" such a manner. (Emphasis added.) Certainly, if Walnut Beach did have actual knowledge of the "lewd and dangerous manner" in which the Amoratis tenants were operating the bar when it chose to rent the property to them, then, from the perspective of Walnut Beach, the injuries Urban alleges he suffered may well have been reasonably expected and therefore not the result of an "accident."
However, as pled, the allegations of the underlying complaint leave open the probability that Walnut Beach did not have actual knowledge or notice of such events when it chose to rent the property to the Amoratis tenants, and that it instead was merely negligent in that it was not sufficiently vigilant in monitoring what was happening at the property. If this reading of the underlying complaint is to prevail, one would be hard pressed to conclude that Walnut Beach expected or intended that Urban would suffer the alleged injuries because it chose to rent the property to the Amoratis tenants. Thus, under this interpretation and from Walnut Beach's perspective, the harm caused to Urban was the result of "unforeseen, unplanned events," was an "accident," and therefore an "occurrence."
While discussing the definition of "occurrence" that is at issue in the present case, a leading authority in the field of insurance has provided an additional example that is helpful in understanding how the concept of an insured's alleged knowledge is central to the determination of whether there is an "accident" and therefore an "occurrence": "If an insured's employee intentionally washes a floor and intentionally leaves it in a wet condition, with resulting injury to a person who slips and falls on the floor, obviously the intentional nature of the acts in question should not preclude coverage for the unintended result. If, however, the employee leaves the floor in a wet condition knowing that a blind or infirm person is about to walk over it, the resulting injury may be intentional because it can be reasonably expected to occur." (Emphasis in original.) 16 E. Holmes, Appleman on Insurance (2d Ed. 2000) § 117.5, p. 394. Similarly, in the present case, although Walnut Beach intentionally rented the property to the Amoratis tenants, coverage should not necessarily be denied for want of an "occurrence." The duty to defend is apparent unless the allegations of the underlying complaint also demonstrate that Walnut Beach was aware that in renting the property to the Amoratis tenants, the injuries alleged by Urban were likely to ensue.
This being so, and because "the duty to defend is triggered whenever a complaint alleges facts that potentially could fall within the scope of coverage"; DaCruz v. State Farm Fire Casualty Co., supra, 268 Conn. 688; the court concludes that Colony has failed to demonstrate that, as a matter of law, the allegations of the underlying complaint at issue here fall outside the scope of coverage established by the policy. Colony has not, therefore, demonstrated that it has no duty to defend Walnut Beach as a matter of law. Furthermore, because Colony has failed to establish that it has no duty to defend, and because "the duty to indemnify depends upon the facts established at trial and the theory under which judgment is actually entered in the case"; id.; Colony is not entitled to summary judgment with regard to its duty to indemnify. Colony's motion for summary judgment is therefore denied.