Evanston Insurance Company, Plaintiff-Appellant, v. William Kramer & Associates, LLC, Defendant-Appellee.
Docket No. 16-2082
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
Decided: May 10, 2018
August Term, 2017 (Argued: August 18, 2017)
Before: PIERRE N. LEVAL, REENA RAGGI, and RAYMOND J. LOHIER, JR., Circuit Judges.
RICHARD A. SIMPSON (Kimberly A. Ashmore, on the brief), Wiley Rein LLP, Washington, DC, for Defendant-Appellee.
LEVAL, Circuit Judge:
Plaintiff Evanston Insurance Co. (hereinafter the “Plaintiff” or the “Insurer“) appeals from the entry of judgment as a matter of law by the United States District Court for the District of Connecticut (Michael P. Shea, J.) in favor of defendant William Kramer & Associates, LLC (hereinafter the “Defendant” or the “Adjuster“), which served as the Insurer‘s adjuster on a claim for hurricane damage. The Adjuster negligently failed to advise the Insurer of a mortgage on the insured property, with the consequence that the Insurer incurred liability in favor of the mortgagee for paying the claim without protecting the mortgagee‘s interest in the damaged property. The Insurer brought this action against its Adjuster, alleging negligence, but filed the suit more than the three years after the event that the Connecticut statute of limitations allows.
BACKGROUND
The evidence, if considered in the light most favorable to the Plaintiff, showed the following.
On October 24, 2005, Hurricane Wilma damaged a commercial property in Florida known as “the Villas.” The Villas was insured under a
On April 25, 2006, the Adjuster received a letter identifying a mortgage on the property in favor of Intervest National Bank (“Intervest“), as mortgagee. The Adjuster promptly responded, acknowledging receipt, and placed the letter in its file. Nonetheless, on June 22, 2006 and July 19, 2006, the Adjuster erroneously asserted in written reports to the Insurer that there were
Throughout this period, the Adjuster stored documents concerning its adjustment work for the Villas in two locations. It kept some documents in a working file that one employee took with him as he travelled between various cities in Florida and Duluth, Minnesota. It kept other documents in an “office file” in the Adjuster‘s office in Palm Harbor, Florida. Id. at 996. The travelling employee eventually delivered the working file, which comprised two banker boxes of documents, to the Adjuster‘s Palm Harbor office. The Adjuster‘s
After May 8, 2007, the Adjuster continued to treat the Insurer as a “client.” Id. at 756. In relation to the Villas loss, it “reach[ed] out to” the Insurer on several occasions to bill the Insurer for services, id. at 983, and to use the Insurer‘s attorneys. Martin testified that the Adjuster conducted itself in this manner because it had an “ongoing relationship with [the Insurer] even to this day [February 11, 2016].” Id. at 756. In August or September of 2007, the Adjuster advised the Insurer that another insurer of the Villas had requested information about the Insurer‘s payment checks. The Insurer responded by discussing its payments with the other insurer. In 2009, the Adjuster again initiated contact with the Insurer, indicated that the Adjuster had received a subpoena for its complete files concerning the Villas, and “sought [the Insurer‘s] input” about the process of responding to the subpoena. Id. at 816. Martin explained that the Adjuster “reach[ed] out to” the Insurer after receiving the subpoena “because that‘s the proper thing to do,” as the Adjuster was the Insurer‘s “agent for this loss.” Id. at 983. Martin testified, “although the last – the payment check had been issued, if an issue
Upon receiving the Adjuster‘s notification of its receipt of a subpoena, the Insurer replied by advising the Adjuster that it “would assist with [the Adjuster‘s] responsibility to produce their file.” Id. at 817. The Insurer then retained a lawyer to “assist [the Insurer and the Adjuster] with the document production.” Id. As a result, the Insurer “continued to incur expenses associated with the subpoena and production process on behalf of [the Adjuster] and [the Insurer].” Id. In response to the subpoena, the Adjuster produced two banker boxes of documents. The Adjuster failed to produce the document that identified the Intervest mortgage.3
In January 2011, the Insurer received a civil action summons naming it as a defendant in a lawsuit filed by Intervest. The Insurer‘s employee Richard Verna, who had worked on the final claim payment for the Villas loss, testified that, at the point when the Insurer received the summons, he had no knowledge of “what had happened to the actual Villas property,” and that he
Intervest‘s complaint asserted that the Villas’ owners had failed to make mortgage payments, to pay their property taxes, or to use their insurance payments to repair the hurricane damage, and that Intervest had foreclosed on the property. After receiving the summons, the Insurer retained a new law firm to represent it in Intervest‘s lawsuit. The Insurer incurred legal fees and expended resources to formulate a defense and to conduct discovery and depositions, including depositions both of its own employees and of the Adjuster‘s employees.
On May 8, 2012, the Insurer‘s employee Verna was deposed for the first time. At this time, the Adjuster had still failed to produce the document in its Palm Harbor office file that identified Intervest as a mortgagee. In his deposition, Verna “emphatically denied” that either the Insurer or the Adjuster had “any knowledge” of Intervest‘s mortgage. Id. at 823-34.
Approximately four months later, the Adjuster‘s employee Martin was deposed. He testified that, in preparation for his deposition, the Adjuster
On September 13, 2012, the Insurer‘s employee Verna was deposed a second time and cross-examined by at least five attorneys concerning his prior testimony in which he had denied both the Insurer‘s and the Adjuster‘s knowledge of the Intervest mortgage. The Insurer then reanalyzed its position in the Intervest lawsuit and concluded that it “was now exposed to the fact that it was on notice of the Intervest interest in the Villas property because
On October 21, 2013, the Insurer brought this action against the Adjuster for negligent failure to advise it about Intervest‘s interest as mortgagee. The Adjuster answered that the suit was time-barred, but did not plead a specific statute of limitations. The Insurer moved for summary judgment. The Adjuster again responded that the suit was time-barred, but did not identify
It is undisputed that the Insurer filed suit more than three years after the Adjuster first failed to inform it about the Intervest mortgage, and more than three years after the Insurer issued its final claim payment check. The Insurer argued that the Adjuster had engaged in a continuing course of conduct that tolled the statute of limitations until 2012, when the Adjuster finally revealed the document identifying Intervest as mortgagee. The
The Adjuster then moved for judgment as a matter of law pursuant to
The principal question on appeal is whether, construing the trial evidence in the light most favorable to the Insurer, a reasonable jury could conclude that the Adjuster engaged in a continuing course of conduct that tolled the statute of limitations at least through October 21, 2010, three years before the commencement of this action.
I. Ongoing Special Relationship:
In the words of the Connecticut Supreme Court, Connecticut‘s “appellate courts have not defined precisely what constitutes a special relationship for purposes of tolling because the existence of such a relationship will depend on the circumstances that exist between the parties and the nature of the claim at issue.” Saint Bernard Sch. of Montville, Inc. v. Bank of Am., 95 A.3d 1063, 1077 (Conn. 2014). The Connecticut Supreme Court has offered guidance that a special relationship is “[u]sually . . . built upon a fiduciary or otherwise confidential foundation.” Id. (emphasis added). At trial,
First, the Adjuster asks us to recognize a rule that the duties arising from a special relationship necessarily end when the specific object of that relationship ends. The Adjuster asserts that this view is supported by the ruling of Flannery v. Singer Asset Finance Co. that an attorney-client relationship ended when the discrete sale transaction for which the attorney had been hired was complete. 94 A.3d at 573. However, the Flannery court made that ruling “[p]ursuant to the clear terms of [a] retainer agreement,” id., which specified that the “scope of representation was limited to the sale
The Connecticut Supreme Court‘s opinions in Grey, 924 A.2d 831, and Blanchette, 640 A.2d 74, do not resolve this question because they address doctor-patient relationships and a separate doctrine known as the “continuous treatment doctrine.” As a result, we are uncertain whether the reasoning of those cases should apply beyond the medical context. While Blanchette notes the similarities between the continuous treatment and continuing course of conduct doctrines, see 640 A.2d at 85, the Connecticut Supreme Court‘s more recent opinion in Grey emphasized that they are distinct, see 924 A.2d at 839 (explaining that the continuous treatment doctrine “focuses on the plaintiff‘s reasonable expectation . . . while the [continuing course of conduct doctrine] focuses on the defendant‘s duty to the plaintiff arising from [the defendant‘s] knowledge of the plaintiff‘s condition“) (emphasis in original). The Grey court based its holding exclusively on the continuous treatment doctrine and noted that the continuing course of
We find that Grey does not control here because its discussion (in dicta) merely presents some non-exclusive factors that may extend a special relationship, and does not present any factors that terminate one. See 924 A.2d at 839 (observing that a defendant‘s suspicion of cancer, knowledge of a particular condition, or “reason to know” the plaintiff‘s need for monitoring, may trigger the continuing course of conduct doctrine). The Blanchette opinion, to the extent it is pertinent outside of the doctor-patient relationship, seems to argue against the Adjuster‘s position; Blanchette asserted, albeit in dicta, that the determination whether a special relationship had terminated depends on a non-exclusive list of factors including:
the subjective views of the parties as to whether their relationship had terminated; the length of their relationship; the frequency of their interactions; the nature of the physician‘s practice; whether the physician had prescribed a course of treatment for or was monitoring the condition of the patient; whether the patient was relying upon the opinion and advice of the physician with regard to a particular injury, illness or medical condition; and whether the patient had begun to consult with another physician concerning the same injury, illness or medical condition. 640 A.2d at 86.
Next, the Adjuster argues that only narrow circumstances may give rise to an ongoing special relationship, such as when the parties have a longstanding relationship. Our reading of Connecticut case law does not support this view. It is true that each case in which Connecticut‘s courts have found an ongoing special relationship identified some narrow circumstances in which such a relationship may be found. But we know of no Connecticut precedent holding that any particular circumstance is necessary to find an ongoing special relationship.
The district court reasoned that Connecticut law constrains a jury‘s discretion to find an ongoing special relationship in at least two circumstances. First, it asserted: “[s]ubsequent communication between parties alone does not extend a special relationship.” Essex Ins. Co., 2016 WL
We do not find the district court‘s view persuasive. In Flannery, the plaintiff had retained an attorney to represent him in a sale of lottery payments to the defendant, and the attorney had failed to disclose his simultaneous representation of the defendant. Id. at 557-59. The plaintiff alleged that the defendant aided and abetted the attorney in a breach of fiduciary duty. Id. at 557. The Flannery court did not decide whether the attorney‘s conduct could be imputed to the defendant for purposes of tolling the aiding and abetting claim (though it commented that the limited jurisprudence on the issue suggested not). Id. at 567 n.23. Instead, the court reasoned that “the undisputed facts show no continuing course of conduct by either the defendant or [the attorney].” Id. at 570 (emphasis in original). The defendant had never had a special relationship with the plaintiff, owed no duty to the plaintiff, had no contact with the plaintiff following the sale transaction, and engaged in no acts relevant to tolling. Id. As to the attorney,
Flannery thus establishes that a plaintiff is not entitled to tolling solely by showing that a former client contacted his former attorney and received a referral in response, where the interaction occurred after the statute of limitations had expired. It does not hold that subsequent communication between the parties alone never suffices to extend a special relationship. Indeed, the Flannery court contemplated that subsequent communication can
More broadly, we see no reason why communications between the parties should be insufficient to establish a continuing course of conduct. Relationships are generally defined or affected by communication between the parties. Under the district court‘s view, a statement by the Adjuster to the Insurer saying, “We will continue to work on your behalf on the matter, to exercise fiduciary duties in your favor, to treat you as a client, and to bill you for our time and expenses incurred on your behalf,” would be inadequate to extend the duration of the special relationship. This seems to us to be neither logical nor mandated by Connecticut court opinions. Furthermore, the proposition that the fact of communication between the parties without more is insufficient to establish a continuing course of conduct is irrelevant to this case because the Insurer was not relying on the fact of communication alone
Second, the district court asserted that an ongoing special relationship must continue the ”original duty of care” that applied at its inception. Essex Ins. Co., 2016 WL 3198190, at *13 (emphasis in original). Otherwise put, it was the district court‘s view that an ongoing special relationship requires not only the continuation of a special relationship, but the continuation of the identical special relationship as previously existed. We find no such limitation in the Connecticut case law. To be sure, the precedents require that the defendant
Furthermore, we see no logical reason why a relationship that takes different forms at different times could not give rise to a duty that continues across each instantiation. Consider a circumstance in which the Adjuster had discovered the existence of the mortgage on the Villas a few days after the supposed termination of the original relationship, when the Insurer would still have been able to recover its loss by suing the wrongful payee to recoup
In sum, we find no support in Connecticut precedent for the Adjuster‘s argument in favor of bright-line rules limiting the circumstances in which a continuing special relationship may be found. The following evidence seems to give some support to the existence of a continuing special relationship after the Insurer issued its final check, consistent with the Connecticut authority cited to us.
At the inception of the parties’ relationship, the Adjuster owed the Insurer both a general fiduciary duty and a specific duty to inform the Insurer of any mortgagees for the Villas. After the Insurer issued its final claim settlement check, the Adjuster initiated contact with the Insurer at least three times: in August or September of 2007, in 2009, and in 2012. During this
Such facts seem to us arguably sufficient to support a finding that a special relationship continued between the Adjuster and the Insurer at least through October 21, 2010, which would render the Insurer‘s claim timely. We recognize, however, that the “special relationship” prong of the continuous
II. Later Wrongful Conduct:
In the alternative, a continuing course of conduct may be established by showing “some later wrongful conduct of a defendant related to the prior act.” Flannery, 94 A.3d at 570. The Connecticut Supreme Court has clarified that “later wrongful conduct may include acts of omission as well as affirmative acts of misconduct.” Id. (internal quotation marks omitted). A later omission must be independently wrongful; mere failure to correct an earlier omission does not necessarily establish later wrongful conduct. See id. at 575.5 Further, for a series of subsequent wrongful omissions to trigger the continuing course of conduct doctrine, the series must be more than a
Beyond these minimal contours, Connecticut case law does not clarify the scope of a jury‘s discretion to find a continuing course of conduct based on later related wrongful conduct. As the district court noted, “a dearth of analogous case law . . . make[s] it difficult to predict . . . how broadly the phrase ‘later wrongful conduct related to the original wrong’ sweeps.” Essex Ins. Co., 2016 WL 3198190, at *17. It is not clear to us whether the Connecticut Supreme Court intends that the subsequent wrongful act needs to be wrong in the sense of breaching the same duty as the original wrong, or whether other wrongful conduct that is related to the original wrong would suffice. The Connecticut Supreme Court‘s opinion in Watts seems to suggest the latter because there, outside the negligence context, wrongful conduct sufficed to toll the statute even though the conduct occurred after the dissolution of the
In arguing for tolling, the Insurer contends that the Adjuster‘s conduct in any event would qualify as wrongful conduct “related to the [alleged original wrong].” Flannery, 94 A.3d at 570. The following evidence before the jury seems to us relevant to the question. The Adjuster‘s employee testified that the Adjuster had a continuing “obligation to tell” the Insurer about any issues that “came up” regarding the Villas property. App‘x at 983. The Adjuster continued to bill the Insurer for services, to refer to the Insurer as its “client,” id. at 756, to serve as the Insurer‘s agent for the Villas loss, and to use the Insurer‘s attorneys in 2009 and 2012. There are at least three post-2007 moments when an issue came up regarding the Villas: the Adjuster‘s receipt of the 2009 subpoena, the Insurer‘s January 2011 receipt of the civil summons, and Verna‘s May 8, 2012 deposition. Each of these events, separately and cumulatively, could have put the Adjuster on notice that something was amiss with its loss adjustment work. Yet, throughout, the Adjuster failed to inform the Insurer about Intervest‘s interest as a mortgagee. The Insurer suffered injury by incurring legal fees, first to assist the Adjuster‘s
* * *
The issue is whether the record contains sufficient evidence to support the jury‘s verdict that a continuing course of conduct tolled the statute of limitations,
CONCLUSION
We hereby respectfully certify to the Connecticut Supreme Court the following question: Is the trial evidence legally sufficient to support the jury‘s
It is hereby ORDERED that the Clerk of this Court transmit to the Clerk of the Connecticut Supreme Court a Certificate, as set forth below, together with a complete set of the briefs, appendix, and record filed in this Court by the parties. The parties are directed to bear equally such fees and costs as may be directed by the Connecticut Supreme Court.
This panel retains jurisdiction so that after we receive a response from the Connecticut Supreme Court we may dispose of the appeal.