Opinion
No. 397358
June 16, 2004
MEMORANDUM OF DECISION
The plaintiff, Trumbull Insurance Company, moves for summary judgment on its complaint in which it seeks a declaratory judgment that it has neither a duty to defend nor to indemnify the defendant attorneys, its insureds, pursuant to a Lawyers Professional Liability Policy, in connection with litigation arising out of the issuance of a title insurance policy.
The defendants, Braunstein Todisco, LLC (BT), is a limited liability company engaged in the practice of law. The co-defendants, Samuel L. Braunstein and Amy Todisco, individually, are members of the company. Also named as a defendant is Fidelity National Title Insurance Company (Fidelity). Fidelity has brought an action in the Superior Court (hereafter referred to as the underlying action or the Fidelity action) against the defendants alleging that, in a real estate and business closing, which occurred on October 25, 2000, the membership interest in Teamwork Holdings, LLC ("Teamwork") was sold and transferred to Proprios, LLC. Proprios, as the sole member of Teamwork, then caused Teamwork to convey property consisting of a condominium development to SSMLN, LLC (SSMLN) for $1,700,000 and SSMLN granted a mortgage to Kevin Robik in the amount of $1,375,000.
See generally General Statutes § 34-100 et seq.
At the closing, BT, acting through Todisco, was an issuing agent for Fidelity and issued an Owner's Title Policy in which Fidelity insured the fee simple title in favor of SSMLN for $1,700,000 without any noted exception and issued a Loan Policy in which Fidelity insured the mortgage interest of Robik in the amount of $1,375,000 without any noted exception. Specifically, neither policy disclosed the prior contract between Teamwork and First Fairfield Funding, LLC (First Fairfield), even though at the closing, BT had actual knowledge that on August 16, 2000, a contract for the sale of the same real estate was executed between Teamwork and First Fairfield.
After the closing, First Fairfield brought an action against SSMLN, Robik and others seeking specific performance of its contract. SSMLN and Robik each placed Fidelity on notice of the action and made claims against the respective Fidelity policies. Fidelity alleges that it paid or would pay $850,000 to settle that litigation and may incur other expenses incident to the litigation, for which Fidelity seeks indemnification.
In the first count of the Fidelity action, Fidelity claims that BT breached its contractual obligations to Fidelity under an Issuing Agency Agreement. The second count incorporates the material factual allegations of the first count and further alleges that BT submitted various documents to Fidelity in the course of issuing the subject policies, including standard form title affidavits, on which Fidelity relied. BT did not disclose the true state of title to the property because it failed to disclose claims to the title thereof that BT knew or should have known existed. The representations made by BT with regard to the true state of the title to the property "were false and were known by it to be false or were made with careless disregard for the truth." The second count further alleges that BT "knew or should have known that its error or omission to accurately represent the state of title of the property would induce Fidelity to accept said Policies." Fidelity alleges that BT had an express duty, pursuant to the terms of the Issuing Agency Agreement, to disclose a known or discovered defect in the title of the Property, and failed to do so. As a result Fidelity suffered damages.
Paragraph 17 of the first count of the Third Revised Complaint in the Fidelity action alleges that BT "breached its contractual obligations to Fidelity under the Issuing Agency Agreement, in that: (a) it failed to disclose a known claim to the title to the Property, specifically, the Sales Contract; (b) it failed to take exception in the Title Certificate or otherwise advise Fidelity of the known claim to the Property; (c) it failed to adhere to the usual and customary practices and procedures and prudent underwriting guidelines, including but not limited to, its issuance of an enhanced version owner's title policy that is limited to 1-4 family residences thereby exposing Fidelity to a claim for coverage not ordinarily for a commercial property; (d) it committed Fidelity to an unseasonable and extra hazardous risk without disclosing the complete state of the title to the Property."
The third count incorporates the material factual allegations of the first count and alleges that "the Defendant has wrongly and falsely and for improper reasons failed to disclose a known and/or discovered defect to the title to the Property," which Fidelity claims resulted in the defendant having breached its covenant of good faith and fair dealing.
The third count incorporates the material factual allegations of the first count and states that BT, as an authorized title agent with underwriting authority and engaged in the practice of law, owed a professional duty of care and candor to Fidelity; that BT knew or should have known that it had a professional duty to disclose a known and/or discovered defect in the title of the property to the plaintiff that BT knew or should have known that the First Fairfield litigation, the SSMLN claim and the Robik claim would result from the extant sales contract between Teamwork and First Fairfield; and that BT failed to notify Fidelity of the existence of that sales contract and the defect in title. As a result of this negligence, Fidelity alleges that it suffered damages. The Fidelity action remains pending.
The plaintiff, the professional liability insurer of BT and Braunstein and Todisco, individually, brought this action against Fidelity and its insureds alleging that it has no duty to defend or indemnify its insureds under the policy issued to them. The defendants have answered the complaint and filed special defenses and counterclaims. In its first special defense, the defendants allege that under an "innocent insured" clause in the insurance policy, the plaintiff is obligated to the defendants, the insureds, and must indemnify every insured who did not personally commit the acts, errors or omissions that the plaintiff claims triggers the policy's exclusions. In the first count of its counterclaims, the defendants contend that the plaintiff breached its insurance policy with the defendants by failing to settle the Fidelity action. In the second count the defendants allege that the plaintiff breached its covenant of good faith and fair dealing by failing to settle the Fidelity action, by controlling the defense of the Fidelity action using information gained from that defense to avoid coverage in this action. In the third count, the defendants allege that the plaintiff's actions constitute bad faith.
Although Fidelity is also named as a defendant, for clarity, reference herein to defendants is to BT and Braunstein and Todisco, individually.
The plaintiff has now moved for summary judgment on its complaint, based on two exclusions in its policy. In response, the defendants argue that the plaintiff has a duty to defend the defendants where the four corners of the underlying complaint creates the possibility of coverage under the policy. Further, the defendants argue that the plaintiff's attempt to introduce evidence outside the allegations in the complaint contravenes the "four corners" test. The defendants also contend that neither exclusion A, the "intentional acts" exclusion, nor exclusion K, the "Title Agent" exclusion, apply and thus, the exclusions do not deprive the defendants of a defense. The defendants further contend that the "innocent insured" clause protects Braunstein Todisco and Braunstein, individually. Finally, the defendants argue that the defendants have a constitutional right to a jury trial on their counterclaims.
"The standard of review of a trial court's decision to grant a motion for summary judgment is well established. 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 . . . For purposes of a motion for summary judgment, [a] material fact is a fact `which will make a difference in the result of the case." (Citations omitted; internal quotation marks omitted.) McDonald v. National Union Fire Ins. Co. of Pittsburgh, PA, 79 Conn. App. 800, 803, 831 A.2d 310, appeal denied, 266 Conn. 929, 837 A.2d 802 (2003).
Preliminarily, the court addresses the defendants' claim that the motion is premature since it has been filed prior to the filing of a reply to defendants' special defenses and counterclaims and, thus, before the pleadings closed.
"Prior to the current revision of the Practice Book in 1998, Practice Book, 1978, § 379 provided in relevant part: `In any action, except actions for dissolution of marriage, legal separation, or annulment of marriage, and except administrative appeals which are not enumerated in Sec. 257(d), any party may move for a summary judgment, provided that the pleadings are closed as between the parties to that motion.' (Emphasis added.) Thus, in general, `[t]he rules of practice in Connecticut require[d] that all pleadings be closed before a party may move for summary judgment.' Orticelli v. Powers, 197 Conn. 9, 15, 495 A.2d 1023 (1985); see Griggs v. BG Land, Inc., 24 Conn. App. 611-12, 590 A.2d 982 (1991) (reversing the granting of summary judgment where pleadings were not closed); Rocherolle v. Godina, 17 Conn. App. 814, 815, 551 A.2d 420 (1988) (same).
"This requirement was abolished with the 1998 revision of the Practice Book. Section 17-44 of the Practice Book now provides in relevant part: `In any action, except administrative appeals which are not enumerated in Section 14-7, any party may move for a summary judgment at any time, except that the party must obtain the judicial authority's permission to file a motion for summary judgment after the case has been assigned for trial." (Emphasis added.) Therefore, a motion for summary judgment may now be filed before the pleadings are closed. The [defendants'] claim that the motion for summary judgment is premature is not well taken." Villa v. Sport Hill Chiropractic, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 020398722 (November 28, 2003).
The defendants also argue that the court should defer entertaining the plaintiff's motion for summary judgment because the plaintiff has in effect stonewalled the defendants' attempts to obtain discovery. Because the plaintiff's motion rises or falls based on the allegations of the complaint in the Fidelity action and the terms of the plaintiff's policy of insurance, it is unnecessary to address this claim.
The insuring agreement in the plaintiff's policy provides in pertinent part: "The Company will pay on behalf of the Insured all Damages that the Insured becomes legally obligated to pay for any Claim first made against the Insured and reported to the Company during the Policy Period . . . for any actual or alleged act, error, omission or Personal injury arising out of the performance of Professional Services." Under the policy's definition of "insured," BT as well as Braunstein and Todisco, individually, are insureds.
The policy also provides that "Personal injury means any injury arising out of one or more of the following offenses:
1. False arrest, detention or imprisonment;
2. Malicious prosecution or abuse of process;
3. Wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies by or on behalf of its owner, landlord or lessor;
4. Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services; or
5. Oral or written publication of material that violates a person's right of privacy."
The plaintiff's argument that its policy does not cover Fidelity's claim is based on two exclusions, A and K.
The court first addresses exclusion A. Part III of the policy states: "The Company will not pay Damages or Claim Expenses in connection with any Claim:
"A. Based upon, arising out of, directly or indirectly resulting from or in consequence of, or in any way involving any dishonest, fraudulent, criminal, intentional or malicious act, error, omission, or Personal injury or deliberate misrepresentation committed by or at the direction of, or with knowledge of the Insured. Notwithstanding the foregoing, the Company will provide a defense for such a Claim involving Personal injury, without any liability on the part of the Company to pay such sums that the Insured shall become legally obligated to pay as Damages . . ."
"[T]he terms of an insurance policy are to be construed according to the general rules of contract construction . . . 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 . . . If the terms of the policy are clear and unambiguous, then the language, from which the intention of the parties is to be deduced, must be accorded its natural and ordinary meaning . . . However, [w]hen the words of an insurance contract are, without violence, susceptible of two [equally responsible] interpretations, that which will sustain the claim and cover the loss must, in preference, be adopted . . . [T]his rule of construction favorable to the insured extends to exclusion clauses . . ." (Internal quotation marks omitted.) Galgano v. Metropolitan Property Casualty Co., 267 Conn. 512, 519, 838 A.2d 993 (2004). In the construction of insurance policies, Connecticut also subscribes to the maxim of "nositur a sociis," that the meaning of words is "revealed by their association with other words," that is, that words "are known by the company they keep." Smedley Co. v. Employers Mutual Liability Ins. Co., 143 Conn. 510, 515, 123 A.2d 755 (1956).
The plaintiff's argument that exclusion A defeats coverage is premised on testimony given by the defendant Todisco in a deposition in the Fidelity action. The defendants argue that in determining the duty to defend, the court cannot look beyond the four corners of the complaint in the Fidelity action. The plaintiff responds that "[t]he court is not required to ignore sworn testimony given in the underlying case by the insured, admitting conduct that clearly falls within one or more policy exclusions." (Reply to Objection to Plaintiff's Motion for Summary Judgment, p. 5.) In determining whether the plaintiff has a duty to defend, however, this is precisely what the court must do.
"[T]he principles governing our determination of this issue are well settled. [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 . . . Hence, if the complaint sets forth a cause of action within the coverage of the policy, the insurer must defend." (Internal quotation marks omitted.) Board of Education v. St. Paul Fire Marine Ins. Co., 261 Conn. 37, 40-41, 801 A.2d 752 (2002). "Indeed, [i]f an allegation of the complaint falls even possibly within the coverage, then the insurance company must defend the insured . . . On the other hand, if the complaint alleges a liability which the policy does not cover, the insurer is not required to defend." (Citations omitted; internal quotation marks omitted.) Community Action for Greater Middlesex County, Inc. v. American Alliance Ins. Co., 254 Conn. 387, 399, 757 A.2d 387 (2000).
The first count of the complaint in the Fidelity action alleges that BT had actual knowledge of the existence of the Teamwork First Fairfield contract and that, in spite of this knowledge, BT issued the Fidelity policies that are the subject of the underlying action. The complaint, however, does not allege that BT committed "any dishonest, fraudulent, criminal, intentional or malicious act, error, omission, or Personal Injury or deliberate misrepresentation" within exclusion A. The allegations of the first count of the Fidelity action are consistent with BT's action being careless and hence not dishonest, fraudulent, criminal, malicious or a deliberate misrepresentation.
Nor was BT's action necessarily intentional. "In its most common usage, `intent' involves `(1) . . . a state of mind (2) about consequences of an act (or omission) and not about the act itself, and (3) it extends not only to having in the mind a purpose (or desire) to bring about given consequences but also to having in mind a belief (or knowledge) that given consequences are substantially certain to result from the act.' (Emphasis in original.) [W. Prosser W. Keeton, Torts (5th Ed. 1984)], p. 34. Also, the intentional state of mind must exist when the act occurs. Id. Thus, intentional conduct `extends not only to those consequences which are desired, but also to whose which the actor believes are substantially certain to follow from what the actor does.' Id., p. 35. Furthermore, `[i]t is not essential that the precise injury which was done be the one intended.' Alteiri v. Colasso, 168 Conn. 329, 334, 362 A.2d 798 (1975). `Rather, it is an intent to bring about a result which will invade the interests of another in a way that the law forbids.' W. Prosser W. Keeton, supra, p. 36. Our case law accords with these principles . . .
"Negligent conduct however, `is a matter of risk.' W. Prosser W. Keeton, supra, p. 169. It is defined as `conduct which falls below the standard established by law for the protection of others against unreasonable risk of harm.' Id., quoting 2 Restatement (Second), Torts § 282. `Negligence is conduct, and not a state of mind.' (Internal quotation marks omitted.) W. Prosser W. Keeton, supra, p. 169. Prosser and Keeton aptly describe the relationship between intentional and negligent tortious conduct as follows: `In negligence, the actor does not desire to bring about the consequences which follow, nor does he know that they are substantially certain to occur, or believe that they will. There is merely the risk of such consequences, sufficiently great to lead a reasonable person in his position to anticipate them, and to guard against them . . . As the probability of injury to another, apparent from the facts within the acting party's knowledge, becomes greater, his conduct takes on more of the attributes of intent, until it approaches and finally becomes indistinguishable from that substantial certainty of harm that underlies intent.' Id., pp. 169-70. Our case law also accords with these principles . . . "It is true, of course, that intentional tortious conduct will ordinarily also involve one aspect of negligent conduct, namely, that it falls below the objective standard established by law for the protection of others against unreasonable risk of harm. That does not mean, however . . . that the same conduct can reasonably be determined to have been both intentionally and negligently tortious. The distinguishing factor between the two is what the negligent actor does not have in mind: either the desire to bring about the consequences that follow or the substantial certainty that they will occur. If he acted without either that desire or that certainty, he was negligent; if he acted with either that desire or that certainty, he acted intentionally . . ." (Citations omitted; emphasis in original; internal quotation marks omitted.) American National Fire Ins. Co. v. Schuss, 221 Conn. 768, 776-77, 607 A.2d 418 (1992).
That BT had actual knowledge of the Teamwork-First Fairfield contract and did not disclose it to Fidelity does not necessarily, given the meager circumstances alleged in the first count of the Fidelity action, compel the conclusion that BT desired to harm Fidelity or was substantially certain that such a result would occur. BT may simply have overlooked the Teamwork-First Fairfield contract or had good reason to understand and believe that that contract, for any number of reasons, would never furnish litigation. That allegations in subsequent counts of the Fidelity action might lead to a different conclusion is irrelevant. "Where a complaint in an action against one to whom a policy of liability insurance has been issued states different causes of action or theories of recovery against the insured, and one such cause is within the coverage of the policy but others may not be within such coverage, the insurer is bound to defend with respect to those which, if proved, are within the coverage." (Internal quotation marks omitted.) Schurgast v. Schumann, 156 Conn. 471, 490, 242 A.2d 695 (1968).
Accordingly, exclusion A does not excuse the plaintiff from its duty to defend the defendants.
The plaintiff also relies on exclusion K which excepts from coverage any claim "arising out of any intentional breach of underwriting authority by any Insured in the Insured's capacity as a tide insurance agent, or arising from defects of title not disclosed of public record and which the Insured had knowledge of at the date of issuance of such title . . ."
The complaint in the Fidelity action neither discloses what BT's underwriting authority was nor whether the Teamwork-First Fairfield contract was of public record. A public record is "a record that a governmental unit is required by law to keep, such as land deeds kept at a county courthouse. Public records are generally open to view by the public." Black's Law Dictionary (7th Ed.); see also 76 C.J.S. 83, Records § 2 (1994) ("A public record is sometimes defined as one required by law to be kept, or necessary to be kept, in the discharge of a duty imposed by law, or directed by law to serve as a memorial and evidence of something written, said, or done, or a written memorial made by a public officer authorized to perform that function, or a writing filed in a public office"); 66 Am.Jur.2d 57, Records and Recording Laws § 1 (2001) ("A public record is sometimes defined as a record required by law to be kept or necessary to be kept, in the discharge of a duty imposed by law, or directed by law, to serve as a memorial and evidence of something written, said or done; or a writing filed in a public office"). Accordingly, exclusion K does not excuse the plaintiff from its duty to defend the defendants. The allegations in the Fidelity action state a claim that falls possibly within the coverage provided by the plaintiff to the defendants. The court holds that the plaintiff has failed to establish that it is entitled to summary judgment that it does not have a duty to defend its insureds in the underlying Fidelity action.
The plaintiff also seeks a determination that, even if it has a duty to defend its insureds, it does not have a duty to indemnify them against a judgment that may be rendered in the Fidelity action. The plaintiff has not provided the court with any authority or analysis that would support the court granting declaratory judgment on the duty to indemnify where the court has denied summary judgment on the duty to defend. For this reason, the court holds that such a determination is inappropriate at this time. See generally DaCruz v. State Farm Fire and Casualty Company, 268 Conn. 675, 689, 842 A.2d 1124 (2004).
The plaintiff's motion for summary judgment is denied.
BY THE COURT
Bruce L. Levin Judge of the Superior Court