Opinion
No. CV 09 6000516
October 20, 2009
MEMORANDUM OF DECISION RE MOTION TO DISMISS ACTION FOR BREACH OF CONTRACT AND GOOD FAITH AND FAIR DEALING
Issues
The issues in this case are whether a spouse of a named insured under a home fire-restoration policy has standing in an action for breach of the fire-insurance policy contract, as well as standing in an action predicated upon breach of an implied covenant of good faith and dealing implicit in the contract.
Factual Background
The plaintiffs, Marguerite Komondy (Mrs. Komondy) and Christopher Komondy (Mr. Komondy), bring a two-count revised complaint against the defendant Middlesex Mutual Insurance Company, for breach of contract and breach of the implied covenant of good faith and fair dealing. In their first count, they allege that the defendant breached the contract by failing to pay the restoration cost of the residence, and that the restoration has been delayed as a result. The plaintiffs allege additional facts as hereinafter articulated.
Prior to March 5, 2005 the plaintiffs resided in a Greek Revival home at 29 Liberty Street in Chester. They purchased a standard fire insurance policy to insure the property. Also prior to March 5, 2005, the defendant contacted Mrs. Komondy and told her that it offered a Restorationist Policy which she should purchase because it would provide more insurance coverage for her antique and historic home than would her existing policy, and would allow her to completely rebuild her house. In reliance on the defendant's promises and representations to Mrs. Komondy, she agreed to purchase the policy over the phone. The Komondys' home was destroyed by a fire on March 5, 2005. The defendant has not paid the lesser of either the restoration cost or the necessary amount actually spent to restore the premises or replace the damaged building as indicated in its brochure and policy provisions.
However, the defendant demanded Mrs. Komondy submit to arbitration. Despite policy language that the defendant will pay within 60 days after receiving proof of loss, and despite the provisions of General Statutes § 38a-307, the defendant stated that it will not pay further amounts to Mrs. Komondy until construction of her residence is complete, and instead, that they would be required to pay for restoring their home. The defendant also informed Mrs. Komondy that only after such restoration will it review and inspect the residence and reimburse for costs and expenses which it approved.
When loss payable. The amount of loss for which this Company may be liable shall be payable sixty days after proof of loss, as herein provided, is received by this Company and ascertainment of the loss is made either by agreement between the insured and this Company expressed in writing or by the filing with this Company of an award as herein provided.
In count two, the plaintiffs allege that they expected to be compensated by the defendant in a timely fashion for their losses according to the terms of the policy, which contains an implied covenant of good faith and fair dealing. They allege that the defendant breached this covenant in a number of ways, including by intentionally refusing to pay costs to restore the residence according to the clear policy language; intentionally refusing to pay the appraisal award despite the language of the policy and the dictates of the Connecticut General Statutes; and by forcing them to spend thousands of dollars to attempt to recover the benefit promised by the defendant in its policy. The plaintiffs further allege that the defendant intentionally delayed and denied payments to force them to accept lesser amounts to resolve their claims. They claim judgment and money damages.
Defendant Middlesex Mutual Assurance Company has filed a motion to dismiss Mr. Komondy from the action for lack of subject matter jurisdiction on the ground that he does not have standing to sue. The defendant has filed a memorandum in support but has not offered any evidence with its motion. Mr. Komondy filed his objection, a memorandum in opposition, and he submitted the personal affidavit of Mrs. Komondy as well as a copy of the Restorationist Policy. He argues that he was the intended beneficiary of the insurance contract between Mrs. Komondy and the defendant.
Standard
The Court must decide whether Christopher Komondy has standing inasmuch as standing implicates subject matter jurisdiction. St. George v. Gordon, 264 Conn. 538 (2003). It is clearly established that "a lack of standing deprives the court of subject matter jurisdiction . . ." Id., 545. The issue of standing may be raised by a motion to dismiss. Conn. Prac. Bk § 10-31(a).
Analysis CT Page 16694
In its motion to dismiss, the defendant argues that Mr. Komondy lacks standing to pursue his claims, and therefore, the court lacks subject matter jurisdiction over them. Specifically, the defendant asserts that there are no allegations in the Revised Complaint that Mr. Komondy is a party to the contract. The Revised Complaint asserts that Mrs. Marguerite Komondy is the owner of the property, and the person who discussed the terms of the insurance policy with the defendant. It is further alleged in the Revised Complaint that Marguerite Komondy submitted to arbitration of the contract dispute, the results of which are the subject of an appeal. The defendant maintains that the contract at issue is between Marguerite Komondy and it alone. The defendant points out further, that she — not her husband — appealed the arbitrator's decision.
According to the Revised Complaint, the plaintiffs obtained an estimate of $2,087,454 to restore their property. The Arbitration figure for restoration is $1,794, 919.76.
In addition, the plaintiffs argue that it is not alleged that Mr. Komondy is an intended third-party beneficiary of the contract because the intent of the parties to the contract was not that the defendant would assume a direct obligation to him. Mr. Komondy disagrees.
As restated by our Supreme Court in Tomlinson v. Board of Education, 266 Conn. 704 (1993), "[i]t is well settled that one who [is] neither a party to a contract nor a contemplated beneficiary thereof cannot sue to enforce the promises of the contract . . ." (Internal quotation marks omitted.) Id., 718. Therefore, in order for Mr. Komondy to have standing to raise his claims, he must show that he is a party to the contract between Mrs. Komondy and the defendant or that he was a contemplated third-party beneficiary of the contract between them.
A. Breach of Contract Claim
Mr. Komondy has not alleged that he was a named party to the contract, and based on the policy, the defendant contracted solely with Mrs. Komondy. The declarations page of the policy reveals that "Marguerite A. Komondy" is the only named insured on the policy. However, Mr. Komondy comes under the definition of an "insured" under the general "Definitions" section on page 1 of the policy. An "insured" is defined as "you [which is defined as "the named insured and the spouse if a resident of the same household"] and residents of your household who are: a. your relatives . . ." Although he qualifies as an "insured" under the homeowners policy, Mr. Komondy is not a party to the contract, so he cannot meet the first part of the standing test.
Mr. Komondy's standing to raise a breach of contract claim in the revised complaint, therefore, depends on whether he can be considered a third-party beneficiary of the contract. "A third party beneficiary may enforce a contractual obligation without being in privity with the actual parties to the contract . . . Therefore, a third party beneficiary who is not a named obligee in a given contract may sue the obligor for breach . . ." (Citations omitted; internal quotation marks omitted.) Rapaport Benedict, P.C. v. Stamford, 39 Conn.App. 492, 497, 664 A.2d 1193 (1995).
"The law regarding the creation of contract rights in third parties in Connecticut is . . . well settled . . . [T]he ultimate test to be applied [in determining whether a person has a right of action as a third party beneficiary] is whether the intent of the parties to the contract was that the promisor should assume a direct obligation to the third party [beneficiary] and . . . that intent is to be determined from the terms of the contract read in the light of the circumstances attending its making, including the motives and purposes of the parties . . . Although we explained that it is not in all instances necessary that there be express language in the contract creating a direct obligation to the claimed third party beneficiary . . . we emphasized that the only way a contract could create a direct obligation between a promisor and a third party beneficiary would have to be, under our rule, because the parties to the contract so intended." (Citations omitted; internal quotation marks omitted.) Dow Condon, Inc. v. Brookfield Development Corp., 266 Conn. 572, 580-81, 833 A.2d 908 (2003).
The plaintiff argues in his opposition that he is an "insured" under the terms of the policy and, therefore, its contemplated, intended beneficiary. While it is true that he is an "insured," it is not his status alone as "insured" that makes him an intended beneficiary. The court must look to the contract language to determine the intent of the parties to confer a direct benefit on Mr. Komondy.
Under the "Definitions" section on page 1 of the policy, it is stated that "[i]n this policy, `you' and `your' refer to the `named insured' shown in the Declarations and the spouse if a resident of the same household. `We,' `us' and `our' refer to the Company providing this insurance." (Emphasis added.) The affidavit of Mrs. Komondy states that "Christoper Komondy has been my husband since July 1, 1997 and has resided with me at 29 Liberty Street in Chester, Connecticut since that time," thereby establishing that the policy refers to both Mrs. Komondy and Mr. Komondy when it uses the terms "you" and "your."
The terms "you" and "your" appear several times throughout the policy, which suggests that the policy was intended to benefit both plaintiffs. For example, under "Section 1 — Property Coverages," subsection "Coverage B — Other Structures," on page 2 of the policy, it is stated that "[y]our limit of liability for Coverage B — Other Structures automatically included in your Restorationist policy is 15% of the Estimated Replacement Cost of the Dwelling as shown on the Declarations page." (Emphasis added.) Under the subsection "Coverage C — Personal Property," on page 3 of the policy, it is stated that "[a]t your request, we will cover personal property owned by others while the property is on the part of the residence premises occupied by an insured . . ." (Emphasis added.) Further, under subsection "Additional Coverages, 2. Reasonable Repairs" on page 5 of the policy, it is stated that "we will pay the reasonable cost incurred by you for necessary measures taken solely to protect against further damage." (Emphasis added.) It is important to note that the policy does not specifically limit the definition of "you" and "your" to the "named insured." Therefore, while Mrs. Komondy is the owner of the policy, in terms of the insurance policy language, Mr. Komondy is viewed as more than a mere "insured" because, by virtue of the contractual definition of "you" and "your," he has the ability to do such things as be paid for reasonable costs and to make decisions such as what personal property will be covered. The contract language establishes Mr. Komondy's role as similar to that of the named insured.
At least one Connecticut case lends support to Mr. Komondy's argument that as the husband of the named insured, he has standing to prosecute the action. In Williams v. Associates Financial, Superior Court, judicial district of New Haven, Docket No. CV 00 0444545 (April 8, 2002, Robinson, J.), the Superior Court found that the wife of a disability policy holder qualified as a third-party beneficiary and had standing to bring suit. The court determined that the complaint, construed broadly and realistically, showed that the plaintiff-wife had standing, even though she did not explicitly state that she was either a party or a party beneficiary to the contract. Id.
Similarly in the present case, although there is no specific factual allegation in the revised complaint that Mr. Komondy, in his individual capacity, was an intended beneficiary of the policy, the plaintiffs allege facts to support an inference that the defendant intended Mr. Komondy to benefit from the contract. On page 2 of the revised complaint, the plaintiffs allege that "[i]n order to further entice the Komondys to purchase a Restorationist policy, the defendant, through its agents, servants and/or employees, told Mrs. Komondy that her previous policy was inadequate to insure her house . . ." (Emphasis added.) On page 3, the plaintiffs allege that "[t]he defendant, through its agents, servants and/or employees, provided the Komondys with an easy to read brochure entitled, "Restorationist. Coverage and Service Tailored to the Needs of Antique Homes and Their Owners . . . from the Specialists at Middlesex Mutual Assurance." (Emphasis added.) On page 6 of the revised complaint, the plaintiffs allege that "[t]hereafter the Komondys contacted H.P Broom of Hadlyme, Connecticut to discuss restoration of her home. The Komondys found Mr. Broom's contact information within the directory of Connecticut Restoration Contractors and Resources provided to her by the defendant as a Restorationist policyholder." (Emphasis added.) On page 9, the plaintiffs allege that "[the] defendant, through its agents, servants and/or employees, told the Komondys that they would be required to provide the funds to restore their home, on their own, without reimbursement for construction loan interest. The defendant, through its agents, servants and/or employees, told the Komondys that, upon restoration of the Komondy residence, the defendant would review and inspect the completed residence and would only reimburse the Komondys for costs and expenses approved by the defendant." (Emphasis added.)
The defendant argues in its motion that "[a]ll communications with respect to purchasing the policy are alleged to have taken place between Mrs. Komondy and Middlesex." In fact, based on the allegations of the Complaint it is only Mrs. Komondy who has filed an appeal over the amount of money Mrs. Komondy is entitled to under the policy. There is nothing to support Mr. Komondy's status as an intended third party beneficiary. (Empahsis in original.) While it is true that Mrs. Komondy alone filed the appeal, the plaintiffs' other allegations suggest that there is support for Mr. Komondy's status as third-party beneficiary to the policy.
New York case law illuminates the issue as well. In Shorey v. Merchants Mutual Insurance Company, 72 A.D.2d 558 (1979), a husband and wife co-owned property. The husband alone was the named insured under the policy, while the wife was merely an "insured," or "someone whose person and property are covered by the policy in specified ways." (Emphasis added.) Id. The court determined that the plaintiff-wife "ha[d] no direct interest in either the policy or in its proceeds under the terms of the contract." However, the policy in Shorey differs in important respects from the insurance policy in the present case. The Shorey policy did not once make reference to the spouse of the named insured as the subject policy does. In addition, the court in Shorey points to the contract's "Loss Payable Clause" which provides: "Loss, if any, shall be adjusted with the Named Insured and shall be payable to him unless other payee is specifically named hereunder." By contrast, the Loss Payment clause on page 16 of the policy in the present case states that: "We will adjust all losses with you. We will pay you unless some other person is named in the policy or is legally entitled to receive payment." (Emphasis added.) By definition in the policy, "you" means "the named insured and the spouse if a resident of the same household." At bottom, the contract states that Mr. Komondy and Mrs. Komondy can be paid for losses under the policy. This contract language demonstrates the defendant's consideration of Mr. Komondy as an intended beneficiary of the contract.
More specifically, Mr. Komondy satisfies the test for classical aggrievement in that he has shown a specific, personal and legal interest in his right as a third-party beneficiary of the contract. Further, he has been specially and injuriously affected by the defendant because it has failed to pay him for his losses as a result of the fire. This conclusion is further supported by the differences between the present case and Shorey v. Merchants Mutual Insurance Company, supra, 72 A.D.2d 559. In Shorey, the court found that the plaintiff-wife's interest was "tangential and derivative at best. While Mrs. Shorey is an `Insured' under the policy, she is not a `Named Insured.' A reading of the insurance contract indicates that under it, an `insured' is merely someone whose person and property are covered by the policy in specified ways. It is the `Named Insured' who owns the policy and is its beneficiary under the section protecting against fire loss." Id. In the present case, judging by the policy language, Mr. Komondy is more than merely an "insured" who qualifies for coverage because he fits within the policy's definition of "you" and "your" and stands beside the "named insured" in many respects as discussed above. While Mr. Komondy's claim for breach of contract does not rest on a direct contractual relationship, the language of the contract, and certain facts alleged by the plaintiffs, indicate the intent of the parties to extend to Mr. Komondy a direct benefit. Since every presumption favors the jurisdiction of the court, Mr. Komondy has legal standing to raise his claim for breach of contract. It is therefore submitted that the court should DENY the defendant's motion to dismiss with regard to count one of the plaintiff's revised complaint.
B. Breach of Implied Covenant of Good Faith and Fair Dealing
With respect to the second count for breach of implied covenant of good faith and fair dealing, a third party cannot bring an action to enforce an insurer's duty of good faith and fair dealing. "[T]he existence of a contract between the parties is a necessary antecedent to any claim of breach of the duty of good faith and fair dealing." (Emphasis in original.) Macomber v. Travelers Property Casualty Corp., 261 Conn. 620, 638, 804 A.2d 180 (2002). "It is axiomatic that the . . . duty of good faith and fair dealing is a covenant implied into a contract or a contractual relationship." Id. "The covenant of good faith and fair dealing presupposes that the terms and purpose of the contract are agreed upon by the parties and that what is in dispute is a party's discretionary application or interpretation of a contract term." (Emphasis in original; internal quotation marks omitted.) Id. See also Gates v. Geico, Superior Court, judicial district of New Haven, Docket No. CV 06 5004852 (April 18, 2008, Cosgrove, J.); Sweinberg v. Isom, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 01 40152 (December 26, 1995, Lewis, J.); Grass v. Perez, Superior Court, judicial district of Hartford, Docket No. CV 06 5004493 (February 4, 2008, Bentivegna, J.). But see 701 Main Street, LLC v. RLS Design Build, LLC, Superior Court, judicial district of Fairfield, Docket No. CV 08 5016969 (November 20, 2008, Tobin, J.) (holding that "[s]o long as a plaintiff has adequately alleged third party beneficiary status under the . . . contract . . . [the] breach of implied covenant of good faith and fair dealing . . . [claim is] legally sufficient" and finding that although the complaint does not directly allege such status, such an allegation "can . . . be inferred from the circumstances surrounding the contract's development").
In this case, Mr. Komondy is not in privity of contract with the defendant, and has no legal interest in the insurance contract between Mrs. Komondy and the defendant. There is no allegation that the defendant owed such a duty to Mr. Komondy, nor can one be implied. As such, he does not have legal standing to raise a claim for breach of implied covenant of good faith and fair dealing. Accordingly, this count must be dismissed.
Conclusion
For all the foregoing reasons, that aspect of the Motion to Dismiss Christopher Komondy's claim for Breach of Contract is denied. However, the aspect of the Motion to Dismiss Christopher Komondy's claim for Breach of the Implied Covenant of Good Faith and Fair Dealing is granted.