Opinion
No. DBD CV 10-6002381 S
November 23, 2010
RULING ON MOTION FOR SUMMARY JUDGMENT AND CROSS MOTION FOR SUMMARY JUDGMENT (#102.00 107.00)
On January 20, 2010, the plaintiffs, Misiti, LLC (Misiti) and the Netherlands Insurance Company (Netherlands) commenced this action against the defendants, Travelers Property Casualty Company of America (Travelers), Church Hill Tavern LLC (Church Hill), Christopher Ghista, E. Gaynor Brennan, Melissa DeMeglio, Elias Reynolds, Sarah Middeleer, Geoffrey Middeleer (collectively Middeleer) and Porco Construction Company, Inc. seeking a determination that Misiti is an additional insured entitled to the protection of an insurance policy issued by Travelers with respect to an underlying action against Misiti brought by Middeleer. Netherlands provided a defense to Misiti with respect to that underlying action. Subsequent to the filing of the present action, Netherlands settled Middeleers' underlying claim within the limits of its policy. As of this time, Netherlands seeks reimbursement from Travelers for its defense costs and the amount paid in indemnification to settle the claim against Misiti. Misiti seeks to shift this loss away from its policy history.
On March 9, 2010, Travelers filed the operative motion for summary judgment on the ground that there is no coverage for the Netherlands and Misiti based on the policy's additional insured endorsement, which provides for coverage "only with respect to liability arising out of the ownership, maintenance or use of that part of the premises leased to [Church Hill]." (Emphasis added.) On August 16, 2010, Netherlands and Misiti filed the operative objection to Traveler's motion for summary judgment and cross motion for partial judgment as to liability. It is the Netherlands' and Misiti's position that the underlying incident is one "arising out of" Church Hill's use of that part of the premises leased to it, that Travelers therefore had a duty to defend the underlying Middeleer action, and that as a result of its wrongful failure to do so, Travelers is liable to indemnify Netherlands up to the limits of its policy.
FACTS
The facts underlying this insurance coverage dispute are not contested. However, the parties dispute the legal question of the extent to which the court should consider facts outside the pleadings in the underlying negligence claim of Middeleer. At the request of the court the parties have provided the following stipulation of facts.
Plaintiff's Misiti, LLC ("Misiti") and The Netherlands Insurance Company, and Defendant Travelers Property Casualty Company of America ("Travelers"), by and through their attorneys, hereby stipulate to the following undisputed facts:
1. Plaintiffs seek the costs of defense and indemnity from Travelers with respect to the claims in an underlying lawsuit brought by Sarah and Geoffrey Middeleer against Misiti, LLC. That underlying suit has now settled.
2. The Third Revised Amended Complaint in the underlying action, Sarah Middeleer et al. v. Misiti et al., No. CV 08 5006163 S (Conn.Super.Ct. Danbury), contains the following pertinent allegations:
2. Defendant Misiti, LLC was at all times relevant herein and is the owner of record of the real property, structures and improvements situated at, behind and adjacent to the commercial buildings located at 1, 3 and 5 Glen Road, Sandy Hook, Connecticut ("Premises").
3. A portion of the Premises . . . consisted of a steep retaining wall of over six (6) feet in height. Beneath the retaining wall located on the Premises is the riverbed of the Pootatuck River.
4. There was at all times relevant herein and is a wood guard consisting of a wooden fence of split-rail design located along the top of the above-described retaining wall.
5. On July 22, 2008, plaintiff Sarah Middeleer was a business invitee upon the Premises.
6. While Ms. Middeleer leaned against the top rail of the wood guard, the top rail collapsed into pieces, causing Ms. Middeleer to fall off the retaining wall onto the rocks situated on the riverbed located below the retaining wall . . .
* * *
9. The purpose of the Premises involved persons being invited onto the Premises to do business with its commercial tenants.
10. Defendant Misiti, through its officers, employees, agents and/or servants, including defendant Porco Construction Co., Inc. as its agent or servant, managed, operated, possessed and/or controlled the Premises where the injury occurred at all times relevant herein.
3. Travelers issued Policy No. I-680-3924C62A-TIL-08 to Church Hill Tavern LLC dba Red Brick Tavern, 1 Glen Road, Sandy Hook, CT 06482, for the period May 3, 2008 to May 3, 2009.
4. The policy contains the following additional insured endorsement that is the subject of the parties' motions:
ADDITIONAL INSURED — MANAGERS OR LESSORS OF PREMISES
This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY COVERAGE PART
SCHEDULE
1. Designation of Premises (part Leased to You):
1 GLEN ROAD
SANDY HOOK CT 06482
2. Name of Person or Organization (Additional Insured):
MISITI, LLC
PO BOX 69
CT Page 22846
NEWTOWN CT 06470
3. Additional Premium: INCLUDED
(If no entry appears above, the information required to complete this endorsement will be shown in the Declarations as applicable to this endorsement.)
WHO IS AN INSURED (Section II) is amended to include as an insured the person or organization shown in the Schedule but only with respect to liability arising out of the ownership, maintenance or use of that part of the premises leased to you and shown in the Schedule and subject to the following additional exclusions:
This insurance does not apply to:
1. Any "occurrence" which takes place after you cease to be a tenant in that premises.
2. Structural alterations, new construction or demolition operations performed by or on behalf of the person or organization shown in the Schedule.
Policy No. I-680-3924C62A-TIL-08 at the additional insured endorsement.
5. The parties agree that the following language from the Policy's additional insured endorsement determines whether Misiti's status as an additional insured under the Travelers policy extends to the claim of Sarah Middeleer:
WHO IS AN INSURED (Section II) is amended to include as an insured the person or organization shown in the Schedule but only with respect to liability arising out of the ownership, maintenance or use of that part of the premises leased to you [Church Hill Tavern].
6. The parties dispute the legal question of the extent to which the Court should consider facts outside the pleadings in deciding the Cross Motions for Summary Judgment, but do not dispute those facts. The remaining paragraphs of this stipulation [paragraphs 7 through 25] are derived from facts outside the pleadings, the sources for which are exhibits attached to the parties' summary judgment papers.
7. Sarah Middeleer met her boss in the early evening of July 22, 2008 at Mocha Cafe; located at 3 Glen Road, part of Misiti's property, to prepare for a business presentation related to their work in the field of landscape design.
8. Middeleer left her car in a parking lot on the Misiti property while she went to the business presentation.
9. After the business presentation, Middeleer and her boss went back to the Misiti property where her car was located and decided to get something to eat at the Red Brick Tavern at 1 Glen Road (operated by Travelers' Named Insured, Church Hill Tavern LLC).
10. Middeleer ate food and drank wine at the Tavern.
11. Upon leaving the Tavern, Middeleer and her boss walked down a path along a river toward the parking area.
12. As they approached the parking area, Middeleer and her boss did not take the branch of the path that led directly to where her car was parked, instead continued to walk along the river in an open area beside the parking area, past a stage area, to look at the river and to look at a waterfall.
13. Middeleer and her boss walked along the river until they reached the location of her fall through a fence.
14. At the location of the fall, Middeleer was not on the paved path.
15. Middeleer did not fall in the parking lot.
16. The fall occurred on the "Premises," that is, on 1, 3 and 5 Glen Road, as defined in the Middeleer complaint.
17. Misiti owns the commercial buildings and property located at 1, 3 and 5 Glen Road, Sandy Hook, Connecticut.
18. At the time of the incident, the Red Brick Tavern operated in a building located at 1 Glen Road pursuant to a Lease with Misiti.
19. The premises leased by Misiti to the Tavern were the first floor of 1 Glen Road, together with a parking area to be used in common with others.
20. The fence through which Middeleer fell was not located on the part of the premises leased to the Tavern.
21. The Tavern had no control over and was not responsible for maintenance of the fence that gave way.
22. The Newtown Police Department's Medical Assist Report states, in part, the following:
Holmes stated that he and Middeleer had been walking through the park discussing potential renovations to the property after a business meeting at the Red Brick Tavern. He stated that when Middeleer leaned against the top rail of the wooden fence it broke and she fell down into the water.
23. A Microsoft Photo of the Misiti property, showing the Tavern, parking lots and the path along the river, contains a distance measure showing the distance from the Tavern, and from the parking area, to the site of the accident.
24. A Google Photo of the Misiti property area, which was an exhibit to the Middeleer Deposition in the underlying case, and was an exhibit to Travelers Motion, shows the Tavern, parking lots and the path along the river.
25. A map of the Misiti property area, which was an exhibit to the Middeleer Deposition in the underlying case, and was an exhibit to Travelers Motion, shows the Tavern, parking lots and the path along the river.
DISCUSSION
"Summary judgment is a method of resolving litigation when 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 . . . The motion for summary judgment is designed to eliminate the delay and expense of litigating an issue when there is no real issue to be tried." (Citations omitted.) Wilson v. New Haven, 213 Conn. 277, 279, 567 A.2d 829 (1989).
I
The principles governing the construction of insurance contracts are settled and also not in dispute between Netherlands and Travelers: "Under well-settled Connecticut law, it is the function of the court to construe the provisions of the contract of insurance . . . The interpretation of an insurance policy . . . involves a determination of the intent of the parties as expressed by the language of the policy [including] what coverage the . . . [insured] expected to receive and what the [insurer] was to provide, as disclosed by the provisions of the policy . . . [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 [giving the] words . . . [of the policy] their natural and ordinary meaning . . . Although any ambiguity in the terms [of the policy must be construed] in favor of the insured . . . [a] necessary predicate to this rule of construction, . . . is a determination that the terms of the insurance policy are indeed ambiguous . . . A contract is not ambiguous merely because different interpretations are advocated by the parties . . . Rather, it is ambiguous only when it is reasonably susceptible to more than one reading . . . Where the terms of an insurance policy are unambiguous, the policy language must be given its natural and ordinary meaning . . . Terms that are not defined in the policy but are nonetheless clear must [be] give[n] effect in accordance with the reasonable and natural interpretation of such language . . . The determination of whether an insurance policy is ambiguous is a matter of law for the court." (Citations omitted; internal quotation marks omitted.) State Farm Fire Casualty Ins. Co. v. Sayles, 289 F.3d 181, 185 (2d Cir. 2002) (applying Connecticut law). Questions involving the construction and interpretation of the terms of a contract of insurance are questions of law.
II
The parties agree that the resolution of this matter will turn entirely upon this court's interpretation of the phrase "arising out of" in the additional insured provisions of the subject insurance policy and whether there existed sufficient facts known to Travelers to give rise to a duty to defend on its part.
"[I]t is generally understood that for liability for an accident or an injury to be said to arise out of [an occurrence or offense], it is sufficient to show only that the accident or injury was connected with, had its origins in, grew out of, flowed from, or was incident to [that occurrence or offense], in order to meet the requirement that there be a causal relationship between the accident or injury and [that occurrence or offense]. Hogle v. Hogle, 167 Conn. 572, 577, 356 A.2d 172 (1975), and cases cited therein. To arise out of means to originate from a specified source. Webster's Third New International Dictionary (1961); see also Black's Law Dictionary (7th Ed. 1999) (defining arise as 1. [t]o originate; to stem [from] . . . 2. [t]o result [from]). The phrase arising out of is usually interpreted as indicat[ing] a causal connection. Coregis Ins. Co. v. American Health Foundation, [ 241 F.3d 123 (2d Cir. 2001)]; see also McGinniss v. Employers Reinsurance Corp., 648 F.Sup. 1263, 1267 (S.D.N.Y. 1986). Simply because we recognize, however, the breadth of the term arising out of and often interpret coverage ambiguities in favor of the insured does not mean that we will obligate an insurer to extend coverage based . . . [upon] a reading of the complaint that is . . . conceivable but tortured and unreasonable. New York v. AMRO Realty Corp., 936 F.2d 1420, 1428 (2d Cir. 1991)." (Internal quotation marks omitted.) QSP, Inc. v. Aetna Casualty Surety Co., 256 Conn. 343, 374, 773 A.2d 906 (2001). Thus, the term "arising out of" in Connecticut law is to be given a very broad interpretation. Simply stated, it requires a "causal connection" that is not "conceivable but tortured and unreasonable."
Consistent with this interpretation are a number of cases cited in the plaintiff's brief from around the country which have held that an additional insured is entitled to coverage when there is a minimal causal relationship between the liability of the additional insured and the business of the named insured and without regard as to who was allegedly at fault or whether the incident occurred within the leased premises. A good example is found in the matter of Harrah's Atlantic City, Ins. v. Harleysville Inc. Co., 288 N.J.Super. 152, 671 A.2d 1122 (App. Div. 1996). In Harrah's, the plaintiffs were walking across the public street between the Harrah's building, where they had eaten at a restaurant and shopped at the leased premises within the Harrah's building, and a Harrah's garage where they had parked their car. The court found coverage for Harrah's as an additional insured under the policy issued to the tenant, finding that the circumstances established a substantial nexus between the use of the leased premises and the injury despite the locus of the accident in a public street. The court, noting its past precedent in Franklin Mut. Ins. Co. v. Security Indem., Inc. Co., 275 N.J.Super. 235, 646 A.2d 443 (App. Div.), cert. denied, 139 N.J. 185, 652 A.2d 173 (1994), observed: "By using the `rising out of . . .' phrase, the insurer in Franklin necessarily understood that it was providing coverage to the landlord against accidents occurring outside of the leased premises . . . It is also clear that by wording the endorsement as it did, the insurer did not make coverage contingent on whether the tenant had any liability for the accident." (Citation omitted.) Harrah's City, Inc. v. Harleysville Ins. Co., supra, 288 N.J.Super. 157. The court further observed that the physical proximity was not controlling, so long as the landlord can trace the risk creating its liability directly to the tenant's business presence. Id., 158.
III
Under Connecticut law, there exists a significant distinction between a duty of an insurer to defend and a duty to indemnify, the duty to defend being much broader in scope. "As we repeatedly have stated, the 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 . . . [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 . . ." (Citations omitted; internal quotation marks omitted.) DaCruz v. State Farm Fire Casualty Co., 268 Conn. 675, 687-88, 846 A.2d 849 (2004). In addition to the facts as alleged in the complaint a duty to defend will arise when an insurer has "actual knowledge of facts establishing a reasonable possibility of coverage" outside of the complaint. (Internal quotation marks omitted.) Hartford Casualty Ins. Co. v. Litchfield Mutual Fire Ins. Co., 274 Conn. 457, 467, 876 A.2d 1139 (2005).
An insurer who maintains that a claim is not covered under its insurance policy can "either refuse to defend or it defend under a reservation of its right to contest coverage under the various avenues which would subsequently be open to it for that purpose." Missionaries of the Company of Mary, Inc. v. Aetna Casualty Surety Co., 155 Conn. 104, 113, 230 A.2d 21 (1967). An insurer who chooses not to provide its insured with a defense and who is subsequently found to have breached its duty to do so must bear the consequences of its decision, including the payment of any reasonable settlement agreed to by the plaintiff and the insured. Alderman v. Hanover Ins. Group, 169 Conn. 603, 611, 363 A.2d 1102 (1975). An insurer who breaches its duty to defend waives its defenses to the duty to indemnify and must pay up to the limit of its policy. Black v. Goodwin, Loomis Britton, Inc., 239 Conn. 144, 152-53, 681 A.2d 293 (1996); Schurgast v. Schumann, 156 Conn. 471, 491, 242 A.2d 695 (1968).
IV
As the court has noted, the parties have submitted a stipulation of undisputed facts, the first six paragraphs of which set forth the existence of, and the pertinent provisions of, the policy of insurance issued by Travelers to Church Hill d/b/a Red Brick Tavern under which Misiti claims coverage as an additional insured, as well as the relevant allegations of the underlying Middeleer complaint. The remainder of the stipulation, paragraphs seven through twenty-five, consist of facts outside of the pleadings but are otherwise undisputed and adequately supported by affidavits. In fact, most of the information in these paragraphs, with the exception of an excerpt from the Newtown Police Department Medical Assist report indicating that Sarah Middeleer had been a patron at the Red Brick Tavern prior to the incident, appears to have come from the deposition of Sarah Middeleer taken in the underlying action against Misiti. Counsel for Travelers affirmed at oral argument before the court that all of the information in paragraphs seven through twenty-five of the stipulation, including the Newtown Police Department Medical Assist report, were within the actual knowledge of Travelers either at the inception or during the pendency of the underlying Middeleer proceedings. Indeed, Travelers itself relies heavily on excerpts of the Middeleer deposition in its memorandum of law in support of its motion for summary judgment. It is Netherlands' position that these additional facts outside of the complaint could only have been considered by Travelers at the time it made its decision to defend or not to defend to the extent that they supported the existence of a covered claim but not to the extent that they might defeat coverage. Indeed, it is Netherlands' position that this court, in determining whether the Middeleer claim is an incident "arising out of" Church Hill's use of the leased premises and whether Travelers had a duty to defend, "is limited to looking at the allegations of the complaint, supplemented by additional facts known to the insurer that support the existence of a covered claim, but not permitting reference to facts outside the pleading that might defeat coverage."
V
The underlying complaint states that Middeleer was a business invitee upon the premises owned by Misiti, which it defines as all of 1, 3 and 5 Glen Road, Sandy Hook. The site of the split rail fence through which Sarah Middeleer fell onto the rocky riverbed of the Pootatuck River below was located on the premises. The fall occurred as Sarah Middeleer leaned against the top wooden rail. The complaint states that "the purpose of the premises involved persons being invited onto the premises to do business with its commercial tenants." It is admitted and stipulated that Church Hill rented that portion of the premises known as the first floor of 1 Glen Road, where it operated the Red Brick Tavern together with the use of the parking area in common with other tenants. Netherlands and Misiti assert that the complaint alone raises at least the possibility that Sarah Middeleer was a patron of the Red Brick Tavern. The court agrees. In addition, the Newtown Police Department's Medical Assist Report, admittedly within the knowledge of Travelers, tells us that "Middeleer had been walking through the park . . . after a business meeting at the Red Brick Tavern." The court finds that these facts as recited above create a sufficient nexus between Middeleer's use and enjoyment of the premises owned by Misiti, including the location where the incident occurred, and her patronage of the Red Brick Tavern so as to give rise to a causal connection that is not tortured and unreasonable and is sufficient for the court to conclude that conditions to establish liability "arising out of" Church Hill's use of the leased premises have been met. Further, additional facts also admittedly within the knowledge of Travelers which bolster this conclusion follow. Middeleer ate food and drank wine at the Red Brick Tavern. She left the Red Brick Tavern with her boss and walked toward the parking areas where her car was located. Along the way, the two diverted from the path to the parking area to walk into an open area adjacent to the parking lot to look at the river and a waterfall. From the underlying complaint, the fall occurred as Sarah Middeleer leaned against the top rail of the split rail fence.
CONCLUSION
Based on a review of the file the court finds that the conditions of Practice Book § 17-55 et seq. for the maintenance of an action for declaratory judgment have been met and that there is no other form of proceeding that can provide Netherlands and Misiti immediate redress. The court finds that all persons who have an interest in the subject matter of the requested declaratory judgment that is direct, immediate and adverse to the interest of one or more of the plaintiffs or defendants in the action have been made parties to the action. The court further finds that
1. Travelers Property Casualty Company of America has and had, by virtue of the polity of insurance it issued to Church Hill Tavern, LLC and to which Misiti, LLC had been added as an additional insured, a duty to defend the plaintiffs with respect to the lawsuit brought by Sarah Middeleer and Geoffrey Middeleer.
2. Travelers Property Casualty Company of America breached its duty to defend the plaintiffs in that lawsuit and is obligated to indemnify them to the limits of its policy.
For the foregoing reasons the court finds that no genuine issues as to material facts exist. Travelers' motion for summary judgment is therefore ordered DENIED. Netherlands' and Misiti's cross motion for summary judgment as to liability is ordered GRANTED.