184 Conn. 231 | Conn. | 1981
Lead Opinion
This is a dispute arising out of an insurance policy providing comprehensive coverage against general and contractual liability. The plaintiff, Plastierete Corporation, brought an action claiming that the defendant, American Policyholders Insurance Company, had, in violation of its contractual obligation under the policy, refused to defend the plaintiff in a lawsuit brought against the plaintiff by a customer in New York City. This action sought damages and a declaratory judgment to determine the applicability of the insurance policy. The defendant’s answer denied liability and raised two special defenses, the insured’s failure to give timely notice and its failure to cooperate. After a full hearing, the state referee, acting as the trial court, found the issues for the plaintiff. Prom the judgment thereafter rendered, the defendant has appealed.
The underlying facts that appear in the trial court’s finding are undisputed. The plaintiff Plasticrete is a corporation that manufactures masonry building materials, including masonry blocks. In 1971, Plastierete entered into a contract with LaSala Masonry Corporation to provide masonry blocks for the construction of the outside walls of a building in New York City known as Tracey Towers for which Leon D. DeMateis & Sons, Inc. was the general contractor. The general contract called for a cavity wall construction, in effect a double wall composed of an outer wall built with Plastierete blocks, a cavity, and then an inner wall for which Plastierete did not supply the materials.
During the time when this contract was being performed, the defendant American Policyholders Insurance Company (American Policyholders) insured Plasticrete against comprehensive general liability and contractual liability. The policy obligated American Policyholders to defend Plasticrete in any litigation in connection with property damage. The policy defined the occurrences for which insurance coverage was provided, imposed upon Plasticrete duties of notice and cooperation, and expressly made compliance with each of the terms of the policy a condition of American’s obligations.
Plasticrete delivered masonry blocks to the work-site from 1971 to 1973. In June, 1973, after deliveries had been completed, the general contractor, DeMateis, notified Plasticrete that the exterior wall was leaking and that he was considering waterproofing at an estimated cost of $400,000. A subsequent letter, on July 5, 1973, sought a response from Plasticrete and contained a revised estimate of the cost of waterproofing in the amount of $900,000. Plasticrete replied on July 12,1973, denying responsibility and attributing the problem to improper workmanship by the installer. This explanation was rejected by the general contractor, who subsequently informed Plasticrete, on November 27,
At the trial, one of American Policyholder’s defenses was that Plasticrete had failed to comply with its duty, under the policy, to give the defendant timely notice. The policy provides: “In the event of an occurrence, written notice containing particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given by or for the insured to the company or any of its authorized agents as
The trial court noted that these provisions were difficult to apply to a claim for damages that arose out of an event that was, as everyone conceded, not an accident. It ultimately found that there had not been an occurrence within the definition of the policy. Nevertheless the court found that Plasticrete had given timely notice after it had received service of the New York lawsuit and that this notice was sufficient under the insurance policy to entitle Plasticrete to defense and indemnification. Alternatively, the court also determined that American Policyholders had not proven that it had been prejudiced because of the claimed failure of Plasticrete to comply with its obligation to give timely notice.
These conclusions are, at least in part, irreconcilable. There is no basis for imposing liability upon American Policyholders if there has been no occurrence within the language of the policy. Without an “occurrence” there is, under the policy, no coverage for either bodily injury or property damage. It is axiomatic that no insurer is bound to provide indemnification or defense beyond the scope of
The court made other findings which indicate that there was evidence that would have supported the conclusion that there was, in fact, an occurrence as defined by the policy. Whether there was property damage “neither expected nor intended from the standpoint of the insured” with regard to the out
Upon retrial, the trial court must determine not only whether there was an occurrence but also when there was an occurrence. The latter is likely to be the more difficult question. Insurance coverage defined to encompass “continuous repeated exposure to conditions which result in . . . property damage” appears to contemplate a developing condition that may be difficult to locate in a specific time frame. Yet the duty to give notice “as soon as practicable” must be triggered by an identifiable event.
The commercial dilemma that the trial court must resolve arises out of the inherent conflict between a merchant’s interest in keeping his customers contented, particularly where the merchant is venturing into a new market, and an insurer’s interest in early warning signals about potential claims. From the point of view of the merchant, it is reasonable to contemplate considerable accommodation with respect to any one contract in order to reap the gains of future contractual relationships. The insurance policy recognizes this, in part, in the provision permitting “the insured ... at his own cost, voluntarily [to] make any payment.”
There is error, the judgment is set aside and the case is remanded for a new trial in accordance with this opinion.
In this opinion Healey and Weight, Js., concurred.
“Conditions ... 4. Insured’s Duties in the Event of an Occurrence, Claim or Suit: (a).”
“Definitions . . . 'occurrence.’ ”
“Coverage Z ■—■ Contractual Property Damage Liability.”
The definition of an occurrence which gives rise to the insurer’s duty to defend the insured in a suit for damages must, logically, be broader than that of an occurrence which gives rise to the duty to indemnify the insured. Smedley Co. v. Employers Mutual Liability Ins. Co. of Wisconsin, 143 Conn. 510, 516, 123 A.2d 755 (1956). See footnote 7, infra.
Wo note that the duty to give written notice is premised, by the terms of § 4 (a) of the insurance policy, upon “the event of an occurrence,” not upon a claim, that there has been an occurrence. Yet a reasonable reading of this clause must delay the rise of the duty until the insured has or reasonably should have knowledge of the event. Often this will come only with a claim.
“Conditions ... 4. Insured’s Duties in the Event of Occurrence, Claim or Suit: . . . (c).”
“Coverage Z — Contractual Property Damage Liability.”
Thus the policy contemplates at least some obligations to defend which will, because the suits are entirely groundless, false or fraudu
Dissenting Opinion
(dissenting). The parties are in agreement that an accident did not take place. The question is whether there was a “continuous or repeated exposure to conditions which resulted in . . . property damage neither expected nor intended from the standpoint of the insured.” The leakage of water through the Plasticrete outer wall was continuous and repeated. Although the plaintiff states that it contemplated that water would enter into the cavity between the outer and inner wall, it did not expect or intend any resulting property damage to the interior of the buildings. The conclusion is inescapable that this continuous water damage was an “occurrence” and that the trial court’s conclusion that there was no “occurrence” is unsupported by the subordinate facts found and
The next question arises: at what point must the insured provide notice of the occurrence to the defendant? Silver v. Indemnity Ins. Co., 137 Conn.
The subordinate facts reveal that the plaintiff conducted negotiations in 1974 and made an offer of settlement. It was at this point that the plaintiff should have known that liability might have been incurred. The discussions with the general contractor had gone beyond the stages of a routine customer complaint. The large amount of money involved, and the plaintiff’s status as a corporation, in business for fifty years, are further reasons why the plaintiff should have known of a possible lawsuit and should have given notice of the occurrence.
The trial court determined that the defendant must show prejudice to itself from the late notice in order to be relieved of its responsibility under the policy. The question of whether prejudice must be shown has been the subject of much controversy in recent years.
A forfeiture of insurance coverage because of a delay in giving notice when there is no harm to the carrier is an unnecessarily harsh result. Many jurisdictions hold that prejudice can be
As the court in Brakeman stated: “The rationale underlying the strict contractual approach ... is that courts should not presume to interfere with the freedom of private contracts and redraft insurance policy provisions where the intent of the parties is expressed by clear and unambiguous language. We are of the opinion, however, that this argument, based on the view that insurance policies are private contracts in the traditional sense, is no longer persuasive. Such a position fails to recognize the true nature of the relationship between insurance companies and their insureds. An insurance contract is not a negotiated agreement; rather its conditions are by and large dictated by the insurance company to the insured. ... A strict contractual approach is also inappropriate here because what we are concerned with is a forfeiture. The insurance company in the instant case accepted the premiums paid by the insured for insurance coverage and now seeks to deny that coverage on the ground of late notice. . . .
“We are reluctant, therefore, to allow an insurance company to refuse to provide that which it was
The rule that prejudice to the insurer is immaterial is based on the theory that breach of the notice requirement raises a conclusive presumption that the insurer is prejudiced, regardless of whether the insurer is in fact prejudiced. 8 Appleman, Insurance Law & Practice §4732 (1962). There is no sound reason, in logic or equity, why the insurer should have the benefit of a conclusive presumption. Such an artificial rule has no basis in reality. A mere showing of late notice should not automatically relieve the insurer of its obligations under the policy.
The trial court correctly placed the burden of persuasion of showing prejudice on the insurance company. This is consistent with the clear trend of the law. E.g., State Farm Mutual Ins. Co. v. Murnion, 439 F.2d 945 (9th Cir. 1971); Powell v. Home
Undeniably, it would be difficult for the policyholder to prove a lack of prejudice to the insurer. Normally, the burden is on the party having the affirmative, since a party is generally not required to disprove a negative. Tait & LaPlante, Handbook of Connecticut Evidence §4.2. Burdens are allocated on considerations of fairness and convenience. Id. Since the insurer chooses to disclaim liability, it is proper to place the burden of persuasion on it.
The trial judge found that the defendant had not sustained its burden of showing prejudice. The court expressly found that the defendant produced no witnesses at the time of trial, nor was there any testimony of any kind as to how and why the defendant would be prejudiced in defending the lawsuit brought against the plaintiff because it had not been given timely notice of the difficulties with the general contractor.
The defendant next contends that the plaintiff breached its duty to cooperate
I would affirm.
In this opinion Armentano, J., concurred.
The finding was filed February 20, 1979.
See generally comment, “The Materiality of Prejudice to the Insurer as a Result of the Insured’s Failure to Give Timely Notice,” 74 Dick. L. Rev. 260 (1970); 8 Appleman, Insurance Law & Practice § 4732 (1962); 13 Couch, Insurance (2d Ed. 1965) § 49.88; 44 Am. Jur. 2d, Insurance § 1463; annot., 18 A.L.R.2d 443.
This rationale becomes even more forceful when applied to the field of automobile liability insurance, since the state has an interest in protecting parties injured in motor vehicle accidents.
The duty to cooperate provision in the policy provided: “4. insured's duties in the event oe occurrence, claim or suit:
“(a) In the event of an occurrence, written notice containing particulars sufficient to identify the insured and also reasonably obtain
“(b) If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative.
“(e) The insured shall cooperate with the company and, upon the company’s request, assist in making settlements, in the conduct of suits and in enforcing any right of contribution or indemnity against any person or organization who may be liable to the insured because of injury or damage with respect to which insurance is afforded under this policy; and the insured shall attend hearings and trials and assist in securing and giving evidence and obtaining the attendance of witnesses. The insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other than for first aid to others at the time of accident.”