132 Conn. App. 370
Conn. App. Ct.2011Background
- Sakon was named insured on Cambridge Mutual Fire Insurance Company's homeowner policy for his Avon, Connecticut residence from Feb 1, 2004 to Feb 1, 2005.
- In December 2004, Manager sued Sakon in underlying litigation; in February 2007 Manager filed a five-count counterclaim against Sakon.
- In January 2008 Cambridge filed a declaratory judgment action seeking a ruling on its duty to defend or indemnify Sakon against Manager's counterclaim.
- In October 2008 Cambridge moved for summary judgment arguing the policy's business exclusion precluded coverage; it attached the underlying pleadings and policies as exhibits.
- The trial court granted summary judgment for Cambridge on November 12, 2009; reconsideration was denied February 9, 2010; Sakon appealed.
- The court applied the two-part Pacific Indemnity test (continuity and profit motive) to determine whether the counterclaim arose from Sakon's business activities and thus fell within the business exclusion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the business exclusion preclude defense/indemnity? | Sakon's counterclaim showed continuous business activity with profit motive. | Counterclaim did not establish a business-related dispute; it was a personal dispute. | Yes; business exclusion applies, precluding defense/indemnity. |
| Is Cambridge estopped from asserting the business exclusion? | Reservation of rights and prior defense do not create estoppel. | Prior defense without reservation or assurances creates estoppel to assert exclusion. | No; insurer not estopped; no evidence of misrepresentation or reliance causing prejudice. |
Key Cases Cited
- Pacific Indemnity Ins. Co. v. Aetna Casualty & Surety Co., 240 Conn. 26 (1997) (defines continuity and profit-motive test for business-pursuit exclusions)
- Hartford Cas. Ins. Co. v. Litchfield Mut. Fire Ins. Co., 274 Conn. 457 (2005) (duty to defend measured by the complaint; defense may occur under reservation of rights)
- DaCruz v. State Farm Fire & Casualty Co., 268 Conn. 675 (2004) (distinguishes duty to defend from duty to indemnify)
- Schilberg Integrated Metals Corp. v. Continental Casualty Co., 263 Conn. 245 (2003) (summary-judgment standard; insurer’s duty context in Connecticut)
- QSP, Inc. v. Aetna Casualty & Surety Co., 256 Conn. 343 (2001) (broad interpretation of 'arising out of' in exclusions)
- West Haven v. Hartford Ins. Co., 221 Conn. 149 (1992) (reservation-of-rights and waiver principles in estoppel context)
- Heyman Associates No. 1 v. Ins. Co. of Pennsylvania, 231 Conn. 756 (1995) (waiver requires knowledge and intent to relinquish a known right)
- Liberty Mutual Ins. Co. v. Lone Star Indus., Inc., 290 Conn. 767 (2009) (cautions construction favoring insured but presses standard for exclusions)
- Cody v. Remington Electric Shavers, 179 Conn. 494 (1970) (policy language construed as laymen would understand)