331 Conn. 364
Conn.2019Background
- Southeastern Connecticut Water Authority (SCA) was created by a 1967 special act as a municipal corporation to plan, operate, and maintain a regional water supply; §14 grants powers including to "sue and be sued," to "make . . . rules for the sale of water and the collection of rents and charges," and to "fix rates . . . sufficient" to cover debts and operating costs.
- SCA adopted Rules Governing Water Service, including Rule 5 ("SUPPLY OF WATER") which purports to bar liability for any deficiency or failure in water supply or pressure "for any cause whatsoever."
- Raspberry Junction Holding, LLC sued SCA for lost hotel revenue after a hydropneumatic tank explosion at an SCA pumping station alleged to be caused by SCA’s negligent construction/maintenance, seeking damages for economic loss.
- SCA moved for summary judgment on two grounds: (1) Rule 5 immunized SCA from liability and was a lawful exercise of its rule-making authority under the special act; (2) the economic loss doctrine barred the negligence claim for purely monetary loss.
- The trial court granted summary judgment based solely on the validity of Rule 5 (drawing on out-of-state authority that liability limitations are necessary to permit reasonable regulated rates), and did not rule on the economic loss argument. The Supreme Court granted certification and reviewed the issue de novo.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the special act authorizes SCA to promulgate a rule that immunizes it from liability for negligent disruption of water service | The special act contains no express or necessary implied authority to waive SCA’s liability; SCA acts in a proprietary capacity and may be liable for negligence | Rule 5 is within SCA’s express power to make rules for sale of water and to set rates; limiting liability is reasonably necessary to set rates and accomplish the authority’s purposes | Held: No. The special act does not expressly authorize such an immunity, and such authority cannot be necessarily implied; Rule 5 is invalid as a source of immunity |
| Whether a general catchall ("do all things necessary or convenient") or the act’s purposive language supplies authority to adopt liability-limiting rules | Purposive or catchall provisions cannot be stretched to abrogate common-law liability without clear legislative expression | Such broad language and stated purposes impliedly authorize incidental measures needed to carry out functions, including liability limits tied to rate-setting | Held: No. Convenience or general purpose language is insufficient to imply authority to waive liability; necessary implication standard not met |
| Whether the link between rate-setting authority and liability limitations justifies immunity | Allowing liability would not prevent SCA from setting rates sufficient to cover costs; insurance is available and SCA is not rate-regulated by the public utilities commission | Liability limits are needed to permit reasonable rates and are supported by authorities involving heavily regulated utilities | Held: No. SCA is not subject to comprehensive rate regulation that would compel liability-limiting trade-offs; other jurisdictions’ regulatory contexts are inapposite |
| Whether summary judgment should be affirmed on Rule 5 grounds or remanded for consideration of SCA’s alternative economic-loss argument | (Implicit) If Rule 5 invalid, plaintiff still can prevail unless economic loss doctrine bars recovery | (Alternative) Economic loss doctrine bars recovery of purely economic losses in negligence absent property/physical harm | Held: The Supreme Court reversed the summary judgment based on Rule 5 and remanded for the trial court to consider SCA’s alternative economic-loss ground |
Key Cases Cited
- Monroe v. Middlebury Conservation Comm’n, 187 Conn. 476 (Conn. 1982) (municipal corporations only exercise powers expressly granted or necessarily implied)
- Simons v. Canty, 195 Conn. 524 (Conn. 1985) (statutory authority required for municipalities to adopt challenged provisions; search for authorization, not for prohibition)
- Rumbin v. Utica Mut. Ins. Co., 254 Conn. 259 (Conn. 2000) (strict construction where statute would derogate common law; abrogations limited to clear scope)
- Martel v. Metropolitan Dist. Comm’n, 275 Conn. 38 (Conn. 2005) (distinguishing municipal proprietary function liability from public duty immunity)
- Los Angeles Cellular Tel. Co. v. Superior Court, 65 Cal. App. 4th 1013 (Cal. App. 1998) (liability limitations justified as trade-off when utilities are subject to comprehensive rate regulation)
- Adams v. Northern Ill. Gas Co., 211 Ill. 2d 32 (Ill. 2004) (explaining public-utility regulatory context in upholding liability-limiting tariffs)