Opinion
No. CV05 400 87 36
November 29, 2005
MEMORANDUM OF DECISION RE MOTION FOR DECLARATORY JUDGMENT ( #104) MOTION FOR INTERLOCUTORY JUDGMENT OF INTERPLEADER ( #105)
The plaintiff, Government Employees Insurance Company (GEICO), filed a two-count complaint on May 20, 2005 seeking an interlocutory judgment of interpleader pursuant to General Statutes § 52-484 and a declaratory judgment pursuant to General Statutes § 52-29. The named defendants are: Huat Lao, Kim Yin, Kenny Chang, Nila Pengsky, Mudupe Ojeniyi and Anthony Lao. This cause of action stems from a three-vehicle accident that occurred on February 15, 2002, on Route 25 in Bridgeport. One of the vehicles was owned by Kim Yin and insured by GEICO through her husband, Huat Lao. GEICO alleges that the insurance policy provided bodily injury coverage in the amount of $20,000 per person and $40,000 per occurrence. GEICO has paid a total of $37,500 in claims to various individuals involved in the accident. By a complaint dated February 13, 2004, defendants Nila Pengsky and Anthony Lao, who did not settle with GEICO earlier, brought suit against Kenny Chang, Kim Yin, Alexis Vasquez and Mudupe Ojeniyi for injuries stemming from the accident. The pending matter is entitled Pengsky v. Chang, Superior Court, judicial district of Fairfield, Docket No. CV 04 0410500. In that matter GEICO has retained counsel to defend its insured.
General Statutes § 52-484 provides: "Whenever any person has, or is alleged to have, any money or other property in his possession which is claimed by two or more persons, either he, or any persons claiming the same, may bring a complaint in equity, in the nature of a bill of interpleader, to any court which by law has equitable jurisdiction of the parties and amount in controversy, making all persons parties who claim to be entitled to or interested in such money or other property. Such court shall hear and determine all questions which may arise in the case, may tax costs at its discretion and, under the rules applicable to an action of interpleader, may allow to one or more or the parties a reasonable sum or sums for counsel fees and disbursements, payable out of such fund or property; but no such allowance shall be made unless it has been claimed by the party in his complaint or answer.
General Statutes § 52-29 provides: "(a) The Superior Court in any action or proceeding may declare rights and other legal relations on request for such a declaration, whether or not further relief is or could be claimed. The declaration shall have the force of a final judgment; (b) The judges of the superior court may make such orders and rules as they deem necessary or advisable to carry into effect the provisions of this section."
Plaintiff's motion to cite in party defendant Anthony Lao was granted on June 22, 2005 by the court, Doherty, J.
On August 5, 2005 GEICO filed a motion for declaratory judgment and a motion for interlocutory judgment of interpleader. In its motion for interlocutory judgment of interpleader GEICO is asking pursuant to Practice Book § 23-44 that: the court order that GEICO be dismissed from this case; the court order that GEICO is fully and finally discharged from any further liability as to the funds due under the terms of the insurance policy; the defendants are restrained from levying execution or instituting or prosecuting any suit or proceedings involving the insurance funds; GEICO is directed to deposit the insurance funds with the court pending the outcome of the case; the parties have a reasonable time within which to state their claim, and; the plaintiff be awarded costs and attorneys fees. In its motion for declaratory judgment, GEICO is asking the court to declare that: GEICO is not legally or contractually obligated to provide a defense or pay any judgment rendered from the Pengsky matter; and that the court prohibit Nila Pengsky and Anthony Lao from bringing a direct action against GEICO under General Statutes § 38-175. Since none of the defendants have filed an appearance, there are no opposing memoranda of law.
Practice Book § 23-44 states: "No trial on the merits of an interpleader action shall be had until (1) an interlocutory judgment of interpleader shall have been entered; and (2) all defendants shall have filed statements of claim, been defaulted or filed waivers. Issues shall be closed on the claims as in other cases."
Section 38-175 was transferred to § 38a-321 in 1991. The court will assume that GEICO intended to cite to § 38a-321. Section 38a-321 provides: "Each insurance company which issues a policy to any person, firm or corporation, insuring against loss or damage on account of the bodily injury or death by accident of any person, or damage to the property of any person, for which loss or damage such person, firm or corporation is legally responsible, shall, whenever a loss occurs under such policy, become absolutely liable, and the payment of such loss shall not depend upon the satisfaction by the assured of a final judgment against him for loss, damage or death occasioned by such casualty. No such contract of insurance shall be cancelled or annulled by any agreement between the insurance company and the assured after the assured has become responsible for such loss or damage, and any such cancellation or annulment shall be void. Upon the recovery of a final judgment against any person, firm or corporation by any person, including administrators or executors, for loss or damage on account of bodily injury or death or damage to property, if the defendant in such action was insured against such loss or damage at the time when the right of action arose and if such judgment is not satisfied within thirty days after the date when it was rendered, such judgment creditor shall be subrogated to all the rights of the defendant and shall have a right of action against the insurer to the same extent that the defendant in such action could have enforced his claim against such insurer had such defendant paid such judgment."
I MOTION FOR INTERLOCUTORY JUDGMENT OF INTERPLEADER #105
"An interpleader proceeding typically involves two distinct parts, the first of which is an interlocutory judgment of interpleader." State v. Burnaka, 61 Conn.App. 45, 50 n. 11, 762 A.2d 485 (2000). "The interlocutory judgment of interpleader determines the propriety of the interpleader procedure." Yankee Miliwork Sash Door Co. v. Bienkowski, 43 Conn.App. 471, 473, 683 A.2d 743 (1996). "The historical and still the primary purpose of interpleader is to enable a neutral stakeholder, usually an insurance company or a bank, to shield itself from liability for paying over the stake to the wrong party." (Internal quotation marks omitted.) Guilford v. Cristini, 45 Conn.Sup. 235, 236, 708 A.2d 979 (1997). "The basis for an action of interpleader is the existence of conflicting claims to property in the hands of the stakeholder. In the absence of evidence of conflicting claims, no basis for an interpleader action exists." Commercial Discount Co. v. Plainfield, 120 Conn. 274, 278-79, 180 A.2d 311 (1935).
In their motion for an interlocutory judgment of interpleader GEICO requests, pursuant to Practice Book § 23-44, that the court dismiss them from this case, discharge them from further liability and that the defendants be restrained from levying execution or instituting or prosecuting any suit or proceedings involving the insurance funds. GEICO has not filed a memorandum of law in support of their motion.
It appears to the court that the goal of GEICO in the present matter is to have the court receive the $2500 remaining in insurance coverage in order for GEICO to withdraw from their contractual obligation of defending their insured. This is not the purpose of an interlocutory judgment for interpleader which, according to § 52-484, arises out of equity. "It is a fundamental principle of equity jurisprudence that for a complainant to show that he is entitled to the benefit of equity he must establish that he comes into court with clean hands . . . The clean hands doctrine is applied not for the protection of the parties but for the protection of the court . . . It is applied not by way of punishment but on considerations that make for the advancement of right and justice." (Internal quotation marks omitted; emphasis added.) Redding v. Elfire, LLC, Superior Court, judicial district of Danbury, Docket No. CV 99 0337512 (December 1, 2004, Axelrod, J.T.R.) GEICO is bound to defend their insured under the terms of the contract. Since GEICO apparently anticipates that its remaining amount of coverage will be exceeded if judgment is rendered for the plaintiffs in the Pengsky matter, it is trying to avoid its obligation to defend its insured by exhausting the coverage through this action. The purpose of an action in interpleader is to protect a party from liability for paying over the stake to the wrong party; see Guilford v. Cristini, supra, 45 Conn.Sup. 236; it is not intended to release an insurer from its contractual obligation of defending its insured. In the interests of justice the court is not willing to set such a precedent and have the court flooded with motions for interlocutory judgments of interpleader when the expected liability of the insured exceeds the amount of coverage available. Justice requires that GEICO fulfills its requirements under their contract with the insured.
In their complaint GEICO refers to section 38a-334-5(b) of the Regulations of Connecticut State Agencies in order to support their claim that they are not required to defend their insured upon deposit of the remaining insurance funds with the court. Section 38a-334-5(b) provides in relevant part that: "The insurer shall defend the insured against any suit seeking damages covered by the policy, and may make such settlement of any claim or suit as it deems expedient, but the insurer shall not be obligated to defend any suit after the exhaustion of its liability by payment of judgments or settlements."
MOTION FOR DECLARATORY JUDGMENT #104
"An action for declaratory judgment is a special proceeding under General Statutes § 52-29, implemented by Practice Book §§ 17-54 and 17-55 . . . It provides a valuable tool by which litigants may resolve uncertainty of legal obligations." (Citation omitted; internal quotation marks omitted.) ACMAT Corp. v. Greater New York Mutual Ins. Co., 88 Conn.App. 471, 475-76, 869 A.2d 1254, cert. denied, 274 Conn. 903, 876 A.2d 11 (2005).
"[A] declaratory judgment action is not a procedural panacea for use on all occasions but is a special statutory proceeding to be used only in accordance with the statute and rules adopted to implement the statute . . ." (Internal quotation marks omitted.) CT Page 15399 ACMAT Corp. v. Greater New York Mutual Ins. Co., supra, 88 Conn.App. 476. The sole function of the trial court in a declaratory judgment action is to "ascertain the rights of the parties under existing law." (Internal quotation marks omitted.) Preston v. Connecticut Siting Council, 21 Conn.App. 85, 89, 571 A.2d 157, cert. denied, 215 Conn. 805, 574 A.2d 221 (1990). "The declaration shall have the force of a final judgment." General Statutes § 52-29; See also St. George v. Gordon, 264 Conn. 538, 554 n. 17, 825 A.2d 90 (2003).
In their motion for declaratory judgment, GEICO cites Practice Book § 17-54 and requests that this court grant them the remedies listed in their motion. Specifically they seek a judgment declaring that they have no duty to defend or indemnify their clients in the Pengsky matter and a judgment prohibiting the plaintiffs in the Pengsky matter from bringing suit directly against the insurer. Again, GEICO has not filed a memorandum of law in support of their motion.
Practice Book § 17-54 states that: "The judicial authority will, in cases not herein excepted, render declaratory judgments as to the existence or nonexistence (1) of any right, power, privilege or immunity; or (2) of any fact upon which the existence or nonexistence of such right, power, privilege or immunity does or may depend, whether such right, power, privilege or immunity now exists or will arise in the future."
A Duty to Defend
"[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." (Internal quotation marks omitted.) DaCruz v. State Farm Fire Casualty Co., 268 Conn. 675, 687, 846 A.2d 849 (2004).
GEICO has not provided the court with the complaint in the underlying action. However GEICO has alleged that the underlying complaint is based upon the February 15, 2002 accident allegedly caused by their insured. GEICO has further alleged that they have settled with four individuals injured in that accident. Based on these allegations the court can conclude that the GEICO insurance contract with the insured required them to defend the insured. GEICO is now asking the court to relieve them of that duty to defend their insured against the claims of two individuals involved in the February 15, 2002 accident who have not settled. The court is not persuaded. "If an allegation of the complaint falls even possibly within the coverage, then the insurance company must defend the insured." (Emphasis in original; internal quotation marks omitted.) Hartford Casualty Ins. Co. v. Litchfield Mutual Fire Ins. Co., 274 Conn. 457, 463, 876 A.2d 1139 (2005). Based on their actions and pleadings, GEICO has demonstrated that the underlying complaint falls within the coverage.
In paragraph 22 of the first and second counts GEICO alleges that: "By a Complaint dated February 13, 2004 and returnable to Bridgeport Superior Court March 23, 2004, the defendants herein Nila Pengsky and Anthony Lao have brought suit against Kenny Chang, Kim Yin, Alexis Vasquez, Carmen Vasquez, Mudupe Ojeniyi claiming they suffered bodily injury in the car collision on February 15, 2002 on Route 25."
B Duty to Indemnify and General Statutes § 38a-321
"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." (Internal quotation marks omitted.) DaCruz v. State Farm Fire Casualty Co., supra, 268 Conn. 688. "To the extent that the issue of an insurer's duty to indemnify may be more appropriately addressed in an action brought under § 38a-321 rather than in an action for a declaratory judgment brought prior to the resolution of the underlying action against the insured, that principle . . . is only operative in cases [in which] . . . the insurer's duty to defend its insured has arisen." (Internal quotation marks omitted.) Id., 689.
In the present action GEICO has alleged that they have already settled four claims arising from the accident on February 15, 2002. Furthermore, they have obtained counsel for their insured in the Pengsky matter. Based on the allegations contained in their complaint this court has determined that the duty to defend has arisen. Therefore, the proper vehicle to determine GEICO's duty to indemnify would be better addressed in an action brought under General Statutes § 38a-321. Determining the liability of the insured and the damages suffered by the non-settling parties is a matter that is currently pending. It would be premature to determine which of those parties is entitled to the insurance funds when the insured has not been adjudged liable. "In cases . . . in which the insurer's duty to defend has not been the subject of a successful challenge, there remains the possibility that the facts adduced in the underlying action will demonstrate that the insurer also has a duty to indemnify. In such circumstances, if the plaintiff in the underlying action obtains a judgment against the insured, the plaintiff's action against the insurer under § 38a-321 provides the insurer with an appropriate forum in which to raise the defense that it has no duty to indemnify." Id.
For the foregoing reasons the court denies both GEICO's motion for declaratory judgment and motion for interlocutory judgment of interpleader.