Opinion
No. X04-CV-03-0127351 S
December 23, 2003
MEMORANDUM OF DECISION RE MOTIONS FOR SUMMARY JUDGMENT
In this malpractice action, the Mohegan Tribal Gaming Authority seeks damages of over $3.5 million from an architectural and an engineering firm for services allegedly negligently performed in connection with the design and construction of a 1500-room hotel and convention center on the Mohegan Sun casino grounds. The defendants have asserted nine counterclaims, which all relate to a certain owner-controlled project professional liability insurance policy, part of the MTGA's owner-controlled project insurance program or "OCIP." The counterclaims allege that the Mohegan Tribal Gaming Authority, hereafter MTGA, is responsible for: (1) the payment of the first $500,000 of the defendants' attorneys fees, consulting fees and costs and expenses in the defense of this action, and; (2) any monetary judgment which the MTGA may secure against the defendants for the $500,000 self-insured retention under the policy. The defendants' motion for partial summary judgment seeks relief under count one of nine counterclaims, a count seeking a declaratory judgment under the policy. The plaintiff's cross motion for summary judgment seeks a finding that it has sovereign immunity from suit on the counterclaims. For the reasons set forth in detail below, the court denies both motions.
I DISCUSSION A. Motion to Strike Affidavits
A preliminary matter issue is the MTGA's motion to strike certain portions of the affidavits of Frank Cioppa, F.A.I.A., and of Brays Hayda, P.E. It moves to strike portions of the affidavits on the grounds that they contain irrelevant and unsupported factual assertions, unsubstantiated and unfounded conclusions of law and inappropriate testimony of counsel. 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." LaFlamme v. Dallessio, 261 Conn. 247, 250, 802 A.2d 63 (2002); QSP, Inc. v. Aetna Casualty Surety Co., 256 Conn. 343, 351, 773 A.2d 906 (2001); Alvarez v. New Haven Register, Inc., 249 Conn. 709, 714, 735 A.2d 306 (1999); Practice Book § 17-49. Pursuant to Practice Book § 17-46, which governs affidavits filed in summary judgment proceedings, "[s]upporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein . . ." Accordingly, ". . . and if an affidavit contains inadmissible evidence it will be disregarded." 2830 Whitney Avenue Corp. v. Heritage Canal Development Associates, Inc., 33 Conn. App. 563, 568-69, 636 A.2d 1377 (1994).
The central thrust of the defendants' motion for summary judgment is that the terms of the project professional liability policy are clear and unambiguous, as a matter of law, and that they are therefore entitled to judgment. Extrinsic evidence outside of the four corners of the documents in question is irrelevant to such an inquiry, as should the court engage in it, the clear premise is that the contract terms are ambiguous and thus the defendants are not entitled to summary judgment. "Where the language of the contract is clear and unambiguous, the contract is to be given effect according to its terms . . . Although ordinarily the question of contract interpretation, being a question of the parties' intent, is a question of fact . . . [W]here there is definitive contract language, the determination of what the parties intended by their contractual commitments is a question of law." (Internal quotation marks omitted.) ARB Construction, LLC v. Pinney Construction Corp., 75 Conn. App. 151, 154, 815 A.2d 705 (2003) "A contract is to be construed as a whole and all relevant provisions will be considered together." Barnard v. Barnard, 214 Conn. 99, 109-10, 570 A.2d 690 (1990).
This entire argument, assertively argued by the plaintiff, while valid, has the result of removing from the court's consideration issues of fact which could support a denial of the motion, a result the plaintiff would appear to seek.
The objectionable portions of the affidavits contain the individual affiants' interpretation of the policy language and factual assertions that they each would never have agreed to a policy with the provisions claimed by the MTGA to be contained in the policy. The court agrees with plaintiff that these matters are irrelevant for purposes of this motion for summary judgment and the claims the defendants are asserting. The court grants the plaintiff's motion to strike these paragraphs and will disregard them in deciding the motion.
B. Legal Standard
As noted, the party moving for summary judgment bears the burden of proving the absence of a genuine dispute as to any material fact; and the party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact. "Equally well settled is that the trial court does not sit as the trier of fact when ruling on a motion for summary judgment . . . [T]he trial court's function is not to decide issues of material fact, but rather to determine whether any such issues exist." (Citations omitted; internal quotation marks omitted.) Field v. Kearns, 43 Conn. App. 265, 269-70, 682 A.2d 148, cert. denied, 239 Conn. 942, 684 A.2d 711 (1996). "To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact." Witt v. St. Vincent's Medical Center, 252 Conn. 363, 373 n. 7, 746 A.2d 753 (2000); D.H.R. Construction Company v. Donnelly, 180 Conn. 430, 434, 429 A.2d 908 (1980).
In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party. The test is whether a party would be entitled to a directed verdict on the same facts. Sherwood v. Danbury Hospital, 252 Conn. 193, 201, 746 A.2d 730 (2001); Serrano v. Burns, 248 Conn. 419, 424, 727 A.2d 1276 (1999); Forte v. Citicorp Mortgage, Inc., 66 Conn. App. 475, 784 A.2d 1024 (2000). In Connecticut, "[a] trial court should direct a verdict for a defendant if, viewing the evidence in the light most favorable to the plaintiff, [the trier of fact] could not reasonably and legally reach any other conclusion than that the defendant is entitled to prevail." (Internal quotation marks omitted.) Colombo v. Stop Shop Supermarket Co., 67 Conn. App. 62, 64, 787 A.2d 5 (2001), cert. denied, 259 Conn. 912, 789 A.2d 993 (2002).
C. Plaintiff's Cross Motion for Summary Judgment
Plaintiff argues, as it did in its motion to dismiss, that it is entitled to summary judgment as to the defendants' declaratory judgment counterclaim because of the shield of tribal sovereign immunity. To decide this question, the court, in the context of a motion for summary judgment, must review the contract in detail and cannot rely, as it did in the motion to dismiss, on the defendants' counterclaim pleadings. The court must first determine whether, as a matter of fact, the insurance contract is part of the primary agreement between the parties. Second it must determine whether the sovereign immunity provisions of the prime agreement may be extended to it.
The "prime agreement" has attached exhibits. Among those exhibits is the binder for the professional liability policy which sets forth the premium, the self-insured retention and the general coverage terms. The actual policy apparently had not been completely negotiated at the time of the signing of the primary agreements on July 9, 1999. The first fact to take into account is that the policy, when completed, was effective as of July 22, 1999 and all endorsements refer to that same effective date. Second, Part IV of the prime agreement refers to the OCIP program and that the "design professional will be required to participate in the program or provide alternative insurance . . ." It is admitted by all that the design professional elected to participate in the program and the professional liability policy was therefore negotiated. There is an unrelated section, which persuades the court that the parties intended the exhibits to become part of the prime agreement. Section 12.16 of the prime agreement states as follows:
In the event of conflicts or discrepancies among the AIA DOCUMENT B141.Cma-1 992, the Supplemental Conditions and the Exhibits to the Agreement, the various documents comprising the Agreement shall govern and control and be interpreted in order to the following ranked order of precedence: (1) the Exhibits, (2) the Supplemental Conditions (3) A1A Document . . .
Without question, this provision reflects that the parties intended to give the Exhibits the highest priority under this contract and that they were intended to be part of the prime agreement.
Exhibit G is the Professional Liability binder and refers to the fact that coverage is effective July 22, 1999. It stands for the contract of insurance, which it contemplated and which was effective on the date stated. It is a puerile quibble to assert, as does the MTGA, that this is not the contract of insurance and that therefore the sovereign immunity waiver provision cannot apply to it. By the very language of the prime agreement giving the exhibits priority in the event of am ambiguity, the parties have signaled the importance of the exhibits to their undertaking. The exhibits are, as a matter of law, the court finds, integral to the contract itself. The court concludes, as a matter of law, that the insurance policy, as represented by the binder, is a part of the prime agreement between the parties. The court therefore finds that the plaintiff's first argument is not well taken.
As to the second argument that the sovereign immunity waiver contract provisions are not intended to cover the counterclaims, the court hereby incorporates the discussion and findings set forth in its denial of the motion to dismiss, dated December 23, 2003, and makes them a part of this decision as though they were fully stated herein. The court concludes that the contractual sovereign immunity waiver provisions contemplate as permitted "unconsented suits" those claims asserted in the counterclaims. For these reasons, this court has jurisdiction. The court therefore denies the cross motion for summary judgment.
D. Defendants' Motion for Summary Judgment
At the core of the defendants' motion are the terms of the owner-controlled project professional liability policy. A careful review of the policy reveals that in its original form, without the various attached endorsements, it is a standard professional liability policy in which the first named insured is the architectural firm generally supervising all the other aspects of the design project and the other professionals involved. The various endorsements added to the policy and deleting certain sections of the original policy were all added with the goal of creating a policy which could be part of an owner-controlled insurance program. As noted in the case of Independent Ins. Agents v. Turnpike Authority, 1994 OK 69, 876 P.2d 675, 676 (1994):
Under an OCIP, the owner of a large construction project purchases and provides for consolidated "on-site" public liability and workers' compensation insurance coverage during the construction period. The owner is the "insured" and policy coverage is extended to all who work "on-site" under a contract with the owner. As the Authority notes, this concept differs from the practice of contractors and subcontractors buying such insurance coverage piecemeal and then passing the costs to the owner by including them in their bids and contracts. Not only is a typical OCIP designed to reduce the cost of insurance premiums, it allows for a coordinated risk management and safety program for workers and visitors to the construction site. An OCIP also provides for insurance premium rebates to the policy owner for good construction safety records.
While this case involves a professional liability policy and the owner is not the "insured," the general principles stated can still be observed in the MTGA's use of the program. The general practice in large construction projects is for the owner to pay the premiums, and by inference the self-insured retention, and for each of the contracting professionals involved in the project to bid a different, lower bid, taking into account the pass-through of the insurance costs. The benefit is that the owner is in a position to make certain that all coverages are appropriate and in place for all entities. Important side benefits are the safety issues referred to in Independent Insurance Agents, supra.
As noted, the policy under consideration was originally drafted as a standard professional liability policy in which the first named insured is the architectural firm. As those who draft contracts know, when a preprinted carefully drafted contract has been designed for one purpose and is amended for another, whether by actual change or by endorsements deleting certain provisions and adding others, it is extraordinarily difficult to be certain that all the provisions of the original document are altered to reflect those changes. Unintended omissions and conflicts between sections of the contract can and frequently do occur. So it is with the policy under consideration. While counsel have argued ably on both sides of the issues, at the end of the day, what remain are two conflicting policy provisions, obligating two different entities to fund the self-insured retention.
The first provision is located in the main body of the policy; "Article VI. Limits of Liability and Retention." Paragraph C is entitled "Retention: The retention shall be borne by the INSURED and shall not be insured. It shall include DAMAGES and CLAIMS EXPENSE." All agree that the first named insured under the policy is the defendant Kohn Pedersen Fox Associates and that an additional insured is the second named defendant DeSimone Consulting Engineers, P.L.L.C. In the original policy without endorsements, Article IX provided that the first named insured was to act as the sole agent for the benefit of all insureds and was to pay the premiums and payment of retention. It is clear, that as originally drafted and printed, the policy terms and provisions were consistent and there was no conflict between Article VI and Article IX.
Defendants argue that Endorsement 26 changes what the policy originally provided and provides that the MTGA must pay the self-insured retention. Endorsement 26, and previously Endorsement 14, which it replaced, provided that Article IX, Paragraph I, Other Conditions was deleted. The new provision substituted the MTGA as the "SOLE AGENT," and deleted the first named insured, Kohn Pederesen as the "SOLE AGENT." The new paragraph I of Article IX then obligated the "SOLE AGENT to act on behalf of all insureds and the insureds are bound by such action for the following duties:
1. payment or return of premium
2. payment of retention
3. receipt or acceptance of any endorsement
4. giving or receiving of notice . . ." (emphasis added).
And the endorsement repeats at its conclusion that "All other terms and conditions of the policy remain in effect."
Defendants' claims appear to be consistent with the general practice under OCIPs. There is no question that the MTGA has paid the premiums under the policy, for a number of years and no dispute that they have never sought payment from the defendants. Nonetheless, as plaintiff points out, there is a conflict between two provisions of the policy, Article VI and Article IX as amended by Endorsement 26, creating ambiguity.
Defendants further contend that where an endorsement directly conflicts with a policy provision, it takes precedence over the policy provision. See Schultz v. Hartford Fire insurance Company, 213 Conn. 696, 596 A.2d 1131 (1990). While as a general proposition this is a correct statement of the law, in this particular case, the difficulty in applying it to these facts concerns itself with the word "directly" in defining the conflict. In Schultz, after full trial, it should be noted, the court carefully analyzed the provisions of a policy and its definition of "insured premises." The conflicting provisions of the policy concerned themselves with the same term "insured premises."
In the case before the court, Article IX, paragraph I concerns itself with the fact that all insureds are to be bound by the acts of the Sole Agent in paying the premiums, and in "payment of the retention." This is a phrase that, on the one hand, can reasonably be interpreted to concern itself not with the funding of the self-insured retention in the first instance, but with the sole agent's directing that the retention funds be paid to claims of a third party made under the policy. This is the interpretation which plaintiff argues. On the other hand, defendants claim there is nothing in the endorsement that states the MTGA is the agent for the insured and simply collects the funds from them. This is also a correct statement as far as it goes, although the paragraph raised a strong inference that the MTGA is acting as an agent for all insureds since they are all bound by its acts.
Both parties have also advanced detailed arguments concerning other endorsements and policy provisions which collaterally, the plaintiff contends, supports its position. These are endorsements 16, 27 and Article IX, Section G. The court has reviewed these sections and does not discuss them further, as they do not materially change the analysis above. None sheds unequivocal light on which entity has the obligation to fund the self-insured retention, and the noted conflict in the provisions is contained within them collaterally as well.
The central and crucial difficulty with the outcome the defendants urge upon the court arises from the fact that the MTGA is not the "first named insured" and was not substituted as such through this policy by endorsement 26. It, as is set forth in the policy, is a third-party beneficiary to this contract. Where the same identical term is used in a policy, as in Schultz, it is a reasonable rule of contract construction that the later added definition, and all language surrounding it, should control. Under the MTGA OCIP policy, such a rule of construction becomes too complex in application, since resort to inferences drawn from undisputed facts is necessary to resolve the conflict. That inference is that because the MTGA paid the premiums, it is therefore also obligated to pay the self-insured retention. This is not an unreasonable interpretation, but not one controlled by the holding in Schultz v. Hartford Fire Insurance. It is subject to the not unreasonable opposite interpretation from the same facts, that while the sole agent, the MTGA, was to pay the premiums, it was not also to pay the self-insured retention.
When examining any contract, including an insurance policy, the court's obligation is to construe the contract as a whole and determine what the parties intended. As previously noted, "where there is definitive contract language, the determination of what the parties intended by their contractual commitments is a question of law." (Internal quotation marks omitted.) ARB Construction, LLC v. Pinney Construction Corp., 75 Conn. App. 151, 154, 815 A.2d 705 (2003). If there were no conflict in the policy provisions creating any ambiguity, then the court may construe the policy as a matter of law. But where there is a conflict between provisions, one of which relates to the first named insured and its obligation to pay the self-insured retention and the other of which relates to the sole agent, which through endorsement are no longer the same entities, then what the parties actually intended becomes a question of fact. For this determination, the court requires evidence outside the four corners of the document. While such a search for the meaning of the parties is appropriate at trial, in the context of a motion of summary judgment, the court cannot decide material issues of fact.
Each of the parties has filed sworn affidavits concerning their conflicting factual claims. In support of the defendants' contentions is the affidavit of the insurance agent. A fair reading of it indicates that the parties intended, since the negotiations as to the amount of the premium and the retention were directly between the MTGA and Kemper with no involvement or consultation with the defendants, that the MTGA pay the retention. They bolster that interpretation by the uncontested fact that the MTGA paid the premiums in each policy year. Such conduct is indeed consistent with the general practice concerning owner-controlled insurance programs. But this court cannot now reach this conclusion as a matter of law as the plaintiff has filed an affidavit to the contrary. Because there remain material facts in dispute, the court must deny the defendants' motion for summary judgment. The defendants are left in the unenviable position of temporarily funding the self-insured retention for purposes of this litigation until the responsibility for its payment is decided after a full trial. For all the foregoing reasons, the court denies the defendants' motion for summary judgment.
By the Court BARBARA M. QUINN, JUDGE.