269 Conn. 527 | Conn. | 2004
Opinion
In this certified appeal, we must determine whether the Appellate Court properly reversed the judgment of the trial court, rendered after a trial to the court, in favor of the substitute plaintiff, Middlesex Mutual Assurance Company (Middlesex).
The opinion of the Appellate Court sets forth the following relevant facts and procedural history of this case. “In 1993, Brian Wasko and Phyllis Wasko, residents of Weston, owned a house on Shore Road in Goshen that they used primarily on weekends and vacations. [The defendant, James] Manella was a friend and business associate of the Waskos who had recently moved to New York City. The Waskos offered to let [the defendant] stay at their house in Goshen on the weekend of February 5, 1993, with the proffered hope that he might be interested in renting or buying it in the future. [The defendant] accepted that offer. While at the house in Goshen, he lit a fire in the fireplace, and, when he was ready to return to New York, he emptied the ashes and embers into a paper bag, which he placed outside on the porch. After he departed, the house caught fire and was substantially destroyed. The fire mar shal of the town of Goshen determined that the ashes and embers in the paper bag had caused the blaze.
“The house was insured under a homeowners policy from Middlesex. Pursuant to the insurance policy, Mid-dlesex paid the Waskos $48,500 for the lost personal property and $84,005 for the lost dwelling for a total of $132,505. In October, 1993, the Waskos brought an action against [the defendant] sounding in negligence, recklessness and res ipsa loquitur. In March, 1997, Mid-dlesex was substituted as the real party in interest.
“On April 14, 2000, [the defendant] filed a motion for summary judgment on all counts, of which only the
“In the subsequent trial to the court on July 24 and 25, 2001, the court found that [the defendant] had been negligent and that his negligence had caused the destruction of the Waskos’ house and personal property. The court awarded Middlesex $132,505 in damages.” Id., 33-34.
The defendant appealed to the Appellate Court, claiming that the trial court: (1) improperly had found that Middlesex had a right of subrogation against a social guest; (2) improperly had precluded Brian Wasko from testifying as to his understanding of the scope of coverage of his insurance policy; and (3) inaccurately had calculated the replacement value of the personal property. Id., 34-35. Addressing the defendant’s first claim, the Appellate Court determined initially that Mid-dlesex’s right of subrogation was equitable, and not contractual, in nature. Id., 38. Accordingly, the Appellate Court reviewed DiLullo v. Joseph, 259 Conn. 847, 848, 792 A.2d 819 (2002), in which this court concluded that a landlord’s insurer did not have a right of subrogation against a tenant who negligently had damaged the insured property. Applying the reasoning of DiLullo to the present case, the Appellate Court determined that allowing the insurer to pursue a subrogation action against a houseguest would lead to economic waste and would place an even greater “strain on the limits of equity” than the factual situation presented in DiLullo.
We thereafter granted the Middlesex’s petition for certification to appeal limited to the following issue: “Did the Appellate Court properly reverse the decision of the trial court, and extend this court’s opinion in DiLullo v. Joseph, [supra, 259 Conn. 847], in the context of landlord/tenant, by holding that a guest in a personal residence is immune from liability for negligently caused damages in a subrogation action brought by the homeowner’s insurance earner?” Wasko v. Manella, 262 Conn. 942, 942-43, 815 A.2d 674 (2003). This appeal followed.
On appeal, Middlesex claims that the Appellate Court’s reversal of the judgment of the trial court was improper because the Appellate Court: (1) failed to recognize that the subrogation right being enforced was granted by statute, and not by principles of equity; (2) confused the concept of third party liability coverage protecting an insured from damages caused to another with the concept of first party coverage protecting an insured from damage to their own property; and (3) improperly expanded the analytical framework of DiLullo v. Joseph, supra, 259 Conn. 847, to the facts of the present case. In response, the defendant contends that: (1) Middlesex does not have a statutory right of subrogation; (2) the Appellate Court properly applied DiLullo to the facts of this case; and (3) the Appellate Court properly determined that premiums for temporary fire insurance policies that covered guests during
I
Middlesex first claims that the Appellate Court improperly failed to recognize that the subrogation right being enforced was granted by statute, and not by principles of equity. The defendant contends that the Appellate Court properly concluded that Middlesex’s right of subrogation was equitable, and not statutory, in nature. We agree with the defendant.
“The law has recognized two types of subrogation: conventional; and legal or equitable. 73 Am. Jur. 2d 599, Subrogation § 2 (1974 and 1995 Sup.) .... Conventional subrogation can take effect only by agreement and has been said to be synonymous with assignment. It occurs where one having no interest or any relation to the matter pays the debt of another, and by agreement is entitled to the rights and securities of the creditor so paid. ... By contrast, [t]he right of [legal or equitable] subrogation is not a matter of contract; it does not arise from any contractual relationship between the parties, but takes place as a matter of equity, with or without an agreement to that effect. . . . The object of [legal or equitable] subrogation is the prevention of injustice. It is designed to promote and to accomplish justice, and is the mode which equity adopts to compel the ultimate payment of a debt by one who, in justice, equity, and good conscience, should pay it. ... As now applied, the doctrine of [legal or] equitable subro-
Under this legal framework, the Appellate Court noted that “[a]t first blush,” this case would appear to involve conventional subrogation, due to the insurance contract between the Waskos and Middlesex. Wasko v. Manella, supra, 74 Conn. App. 36-37. Upon further analysis, however, the Appellate Court concluded that “[t]he contract ... is not the source of the right, but rather is a reference to those rights that may exist at law or in equity.” Id., 37. We agree with this conclusion. As we stated in Westchester Fire Ins. Co. v. Allstate Ins. Co., supra, 236 Conn. 372, insurers that are obligated by a preexisting contract to pay the losses of an insured proceed in a subsequent action against the responsible party under the theory of equitable subrogation, and not conventional subrogation. See also DiLullo v. Joseph, supra, 259 Conn. 853 (equitable principles used to address fire insurance company’s claimed right of sub-rogation against negligent tenant); Hanover Ins. Co. v. Fireman’s Fund Ins. Co., 217 Conn. 340, 344, 586 A.2d 567 (1991) (affirming trial court’s finding that equitable subrogation action by insurance company was untimely). This is because the insurer, as well as the insured, has a preexisting financial interest in the outcome of the litigation. Westchester Fire Ins. Co. v. Allstate Ins. Co., supra, 372; Berlinski v. Ovellette, 164 Conn. 482, 496, 325 A.2d 239 (1973) (MacDonald, J., dissenting), overruled, Westchester Fire Ins. Co. v. Allstate Ins. Co., supra, 364. In sum, while “[a] right of true [equitable] subrogation may be provided for in a
Middlesex attempts to distinguish the subrogation clause in the present contract by noting that “[t]he legislature, in the context of fire insurance policies, has specifically granted a right of subrogation to a fire insurance company for all rights of recovery that the insured has against the tortfeasor.” Moreover, Middle-sex contends that this “statutory right of assignment for its loss is inviolate . . . [and] the court may not substitute its judgment for a grant of statutory recovery given by the legislature . . . .” (Emphasis added.) We are unpersuaded.
“Issues of statutory construction raise questions of law, over which we exercise plenary review.” Celentano v. Oaks Condominium Assn., 265 Conn. 579, 588, 830 A.2d 164 (2003). “The process of statutory interpretation involves a reasoned search for the intention of the legislature. ... In other words, we seek to determine,
The Connecticut legislature has enacted a standard form of fire insurance, with which all fire insurance policies issued in this state must conform. See General Statutes § 38a-308.
“As with any issue of statutory construction, we begin with the pertinent language of the statute.” Lombardo’s Ravioli Kitchen, Inc. v. Ryan, 268 Conn. 222, 232, 842 A.2d 1089 (2004). The subrogation clause set forth in § 38a-307 fails to provide an insurer with a direct, and inviolate, right of subrogation. To the contrary, it merely provides that an insurer “may require” an insured to assign any rights he or she has to the insurer. Thus, under this clear language, the right of recovery belongs to the insured, and the insurer only obtains that right when the insured grants it. This is true because it is axiomatic that “a subrogee merely succeeds to the legal rights or claims of a subrogor.” 73 Am. Jur. 2d 542, Subrogation § 1 (2001); see also Home Owners’ Loan Corp. v. Sears, Roebuck & Co., 123 Conn. 232, 238, 193 A. 769 (1937). Indeed, as the contract in the present case demonstrates, the insured had the ability to waive any rights of recovery prior to the occurrence of a loss. See footnote 6 of this opinion. Contrary to the claim set forth by Middlesex, therefore, the language of § 38a-307 does not expressly provide an insurer with an inviolate right to bring a subrogation action.
This conclusion is buttressed by a comparison of the treatment of subrogation under the standard form of fire insurance and under our workers’ compensation scheme. Hatt v. Burlington Coat Factory, 263 Conn.
More importantly, in § 31-293 the legislature specifically granted employers an independent right to bring an action against the tortfeasor to recover any amount paid to their injured employee. Doucette v. Pomes, 247 Conn. 442, 468, 724 A.2d 481 (1999). Section 31-293 (a)
Finally, we note that our conclusion in the present case accords with the approach taken by other jurisdictions. See, e.g., Sapiano v. Williamsburg National Ins. Co., 28 Cal. App. 4th 533, 538, 33 Cal. Rptr. 2d 659 (1994) (“[although insurers may place subrogation clauses in their policies [such as California standard form of fire insurance] . . . those provisions typically are general and add nothing to the rights of subrogation arising by law”); Dunton v. Westchester Fire Ins. Co., 104 Me. 372, 378, 71 A. 1037 (1908) (“[t]he Maine Standard [fire insurance] policy, though its form is prescribed by stat
In sum, we reject Middlesex’s claim of an inviolate statutory right of subrogation, and we conclude that the Appellate Court properly determined that Middlesex’s right of subrogation was equitable in nature.
II
Accordingly, we must next determine whether the Appellate Court properly extended this court’s opinion in DiLullo v. Joseph, supra, 259 Conn. 847, which precluded an insurer from pursuing an equitable subrogation action against a negligent tenant, to a situation involving a negligent houseguest.
“The determination of what equity requires in a particular case, the balancing of the equities, is a matter for the discretion of the trial court.” Kakalik v. Bernardo, 184 Conn. 386, 395, 439 A.2d 1016 (1981); Robert Lawrence Associates, Inc. v. Del Vecchio, 178 Conn. 1, 18-19, 420 A.2d 1142 (1979); Gager v. Gager & Peterson,
Before the trial court, the defendant claimed that equitable considerations should prevent him from being held liable in Middlesex’s subrogation action.
In DiLullo, the issue before this court was whether, in the absence of a specific agreement between the landlord and the tenant, the landlord’s fire insurer had a right of subrogation against a tenant for negligently causing a fire that damaged the insured’s property. DiLullo v. Joseph, supra, 259 Conn. 848. We answered that question in the negative, and affirmed the judgment
In regard to our first rationale in DiLullo, we noted that forcing a tenant to carry insurance for the full cost of the building would create economic waste, as it would be duplicative of the insurance carried by the landlord; further, this economic waste would be compounded by the number of tenants in a particular building. Id., 854. In a situation such as the one found in the present case, the insured has a fire insurance policy covering the home. Therefore, if the insured, or another individual covered by the policy, negligently were to bum the home down, that fire insurance policy would cover the loss.
Furthermore, as the Appellate Court noted in its opinion, rather than submitting a claim to the insurer, an insured host could proceed directly against the houseguest in an action for negligently caused damages to the insured property. Id., 42. Indeed, that is the exact situation found in the present case—the Waskos instituted the original action against the defendant, and Mid-dlesex was substituted as the plaintiff after paying for the damage to the Waskos’ home. If the insured property owner can bring an action to recover for negligently caused damages against the defendant, we see no reason why an insurer that pays for the property owner’s loss cannot also bring an action against the defendant. Put another way, we see no reason why it is equitable to permit a property owner to proceed against a negligent houseguest’s current insurance policy, yet it is inequitable to permit an insurance company that has paid out to its insured to proceed against that same policy. See Westchester Fire Ins. Co. v. Allstate Ins. Co., supra, 236 Conn. 372 (“courts should be inclined to extend rather than restrict” subrogation). In either situation, the houseguest’s current third party liability insurance coverage will protect against liability, and there is no need
Our second rationale in DiLullo v. Joseph, supra, 259 Conn. 851, namely, the lack of expectation of subrogation on the part of a tenant, also is not found in the present situation. In DiLullo, we endorsed the statement that: “The possibility that a lessor’s insurer may proceed against a lessee almost certainly is not within the expectations of most landlords and tenants unless they have been forewarned by expert counseling.” (Internal quotation marks omitted.) Id., 852; R. Keeton & A. Widiss, Insurance Law (1988) § 4.4 (b), pp. 340-41. Contrary to the protestations of the defendant’s counsel at oral argument before this court, we are convinced that social houseguests do not proceed with the same lack of expectations regarding personal responsibility for negligent conduct as do tenants. Put another way, we believe that most social gaests fully expect to be held hable for their negligent conduct in another’s home— whether that conduct constitutes breaking the television, causing physical injury, or burning the house down. Unlike tenants, social guests have not signed a contract with the host, they have not paid the host any set amount of money for rent, and, accordingly, they do not have the same expectations regarding insurance coverage for the property as do tenants. In sum, the equitable concerns that led this court to preclude subro-gation in the context of landlord and tenant simply are not present in the context of houseguest and host.
A more appropriate source of guidance on the equity involved in allowing subrogation in the present situation is our decision in Westchester Fire Ins. Co. v. Allstate Ins. Co., supra, 236 Conn. 362. In that case, the plaintiff insurance company became obligated to pay uninsured motorist benefits to its insured when the defendant
We explained further that in an equitable subrogation matter, “[t]he insurer was not acting as a mere volunteer; rather, it was obligated by a preexisting contract of insurance to pay the losses of its insured. Upon such payment, the insurer became subrogated to any rights that its insured might have had against the party who had caused the loss. The tortfeasor, who was the party primarily hable for the losses sustained by the insured, benefited by the insurer’s payment of a debt truly owed by the tortfeasor. We see no logical reason to permit a tortfeasor to be unjustly enriched by virtue of having its debt paid by the insurance company of a party who had the foresight to obtain insurance coverage, and thus to escape all liability for its wrongdoing, simply because the insurance company was not permitted to participate in a suit against the tortfeasor in order to recover the money that it had paid to its insured but which was properly payable by the tortfeasor.” Id., 372-73. Accordingly, we overruled Berlinski v. Ovellette, supra, 164 Conn. 482, which had precluded providers of uninsured motorist coverage from bringing subrogation actions against uninsured tortfeasors, and we reversed the judgment of the trial corut. Westchester Fire Ins. Co. v. Allstate Ins. Co., supra, 236 Conn. 375.
The judgment of the Appellate Court is reversed and the case is remanded to that court with direction to consider the defendant’s remaining claims on appeal.
In this opinion the other justices concurred.
Middlesex is the substitute plaintiff subrogee for the subrogors, Brian Wasko and Phyllis Wasko, the insured homeowners who no longer are parties in interest in this action.
This conclusion made it unnecessary for the Appellate Court to address the defendant’s two remaining claims.
See also Hartford Accident & Indemnity Co. v. Chung, 37 Conn. Sup. 587, 592, 429 A.2d 158 (1981) (“[t]he right of legal subrogation is not amatter of contract; it does not arise from any contractual relationship between the parties, but takes place as a matter of equity, with or without an agreement to that effect”); M. Quinn, “Review Essay—Subrogation, Restitution, and Indemnity,” 74 Tex. L. Rev. 1361, 1389 (1996) (“[i]t is puzzling why insurance contracts contain contractual subrogation clauses when subrogation is automatic . . . the subrogation agreement can express nothing more than what the law would automatically provide”); S. Kimball &D. Davis, “The Extension of Insurance Subrogation,” 60 Mich. L. Rev. 841, 842 (1962) (“[although subrogation clauses are very common in insurance policies, on the whole they merely confirm rights that would exist without them, and at most they alter the incidence of legal subrogation in some particulars”); 73 Am. Jur. 2d, Subrogation § 15 (2001) (“[e]quitable subrogation is committed to the equitable powers of the court which, in the exercise of its discretion, may be awarded and although these powers may be confirmed by contractual provisions, they may not be expanded by them”).
Public Acts 2003, No. 03-154, § 1, provides: “The meaning of a statute shall, in the first instance, be ascertained from the text of the statute itself and its relationship to other statutes. If, after examining such text and considering such relationship, the meaning of such text is plain and unambiguous and does not yield absurd or unworkable results, extratextual evidence of the meaning of the statute shall not be considered.” We note that, in this question of first impression, the relevant statutory text, in connection with the relationship of that text to other statutes, is not plain and unambiguous. Accordingly, our analysis is not constricted by this legislation.
General Statutes § 38a-308 (a) provides in relevant part: “No policy or contract of fire insurance shall be made, issued or delivered by any insurer or any agent or representative thereof, on any property in Ihis state, unless it conforms as to all provisions, stipulations, agreements and conditions with the form of policy set forth in section 38a-307. . . .”
Subsection (b) of § 38a-308 allows insurers to issue a nonconforming policy, however, so long as “(1) such policy or contract shall afford coverage, with respect to the peril of fire, not less than the substantial equivalent of the coverage afforded by said standard fire insurance policy, (2) the provisions in relation to mortgagee interests and obligations in said standard fire insurance policy shall be incorporated therein without change, (3) such policy or contract is complete as to all of its terms without reference to any other document and (4) the commissioner is satisfied that such policy or contract complies with the provisions hereof.”
The subrogation clause in the contract between the Waskos and Middle-sex was a mirror image of this statutory language, providing: “An insured may waive in writing before a loss all rights of recovery against any person. If not waived, we may require an assignment of rights of recovery for a loss to the extent that payment is made by us.”
For this reason, one commentator has stated that, rather than viewing such a statute as granting an insurer a right to subrogation, it seems more appropriate to view them as “statutory liens in favor of insurance carriers.” M. Quinn, “Review Essay—Subrogation, Restitution, and Indemnity,” 74 Tex. L. Rev. 1361, 1371 (1996).
See, e.g., Skauge v. Mountain States Telephone & Telegraph, 172 Mont. 521, 528, 565 P.2d 628 (1977) (reviewing various theories and “adopt[ing] the view that when the insured has sustained a loss in excess of the reimbursement by the insurer', the insured is entitled to be made whole for his entire loss and any costs of recovery, including attorney’s fees, before the insurer can assert, its right of legal subrogation against the insured or the tort-feasor”); Transamerica Ins. Co. v. Barnes, 29 Utah 2d 101, 105, 505 P.2d 783 (1972) (“[e]quitable principles apply to subrogation, and the insured is entitled to be made whole before the insurer may recover any portion of the recovery from the tortfeasor”); 6A J. Appleman, Insurance Law and Practice (1972) § 4094, p. 265 (“[b]ut where the loss was greater than the insurance, and the insured settled with the wrongdoer for damages which, when added to the insurance, were less than the loss, the insurer could recover nothing from the insured”).
The difference between the subrogation clauses in the workers’ compensation statutes and the standard form of fire insurance arises from the common-law principles underlying those two areas of law. The common law did not permit the assignment of personal injury actions, and thus the legislature specifically, and explicitly, had to abrogate the common law in order to allow an employer to subrogate against a tortfeasor. Westchester
The legislative history of the current standard form of fire insurance, while not extensive, does provide some evidence of two primary motivations behind the adoption of the current form: (1) to reduce an agent’s workload; and (2) to provide consumers with a consistent and easily understandable 1'orm of insurance. In 1945, the legislature adopted a new standard form of fire insurance based upon the 1943 New York standard fire insurance policy. See Public Acts 1945, No. 266 (P.A. 266). During a public hearing prior to the enactment oí P.A. 266, Commissioner Ellery Allyn testified: “As you know, the fire policy in use at the present time in Connecticut is the New York policy of 1886 . . . [and] it has been usable only by reason of the fact that it has been covered with all sorts of riders and endorsements. This new type [set forth in P.A. 266] ... is a shorter form, with more readable language. ... We feel the interest of the public can be served by this modem type of policy.” Conn. Joint Standing Committee Hearings, Insurance, Pt. 1, 1945 Sess., p. 37. In addition, B.F. Wilcox, a member of the legislative committee of the Connecticut Association of Insurance Agents testified: “We feel that the public will be better served by the adoption of such a policy and the agents saved a great deal of labor in preparation of policies for their client.” Id.
General Statutes § 38a-307 provides in relevant part: “The standard form of fire insurance policy of the state of Connecticut . . . shall be as follows . . .
“Waiver provisions. No permission affecting this insurance shall exist, or waiver of any provision be valid, unless granted herein or expressed in writing added hereto. No provision, stipulation or forfeiture shall be held to be waived by any requirement or proceeding on the part of this Company relating to appraisal or to any examination provided for herein. ...”
General Statutes § 38a-307 provides in relevant part: “The standard form of fire insurance policy of the state of Connecticut . . . shall be as follows . . .
“Suit. No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within twelve months next after inception of the loss. . .
See also Lees v. Middlesex Ins. Co., 219 Conn. 644, 650, 594 A.2d 952 (1991) (narrowly construing provisions of § 38a-307 and concluding that plaintiffs claims under Connecticut Unfair Insurance Practices Act and Connecticut Unfair Trade Practices Act were not subject to provision set forth in standard form of fire insurance limiting period to bring action under policy to one year).
Initially, the defendant claimed that, as a social guest of the Wasltos, he was a coinsured under the terms of their insurance policy and, therefore, he could not, be liable in a subrogation action by Middlesex. Militating against this claim, however, is the clear and unambiguous language of the Waskos’ policy, which provides in relevant part: “ ‘[I]nsured means you and residents of your household who are: a. your relatives; or b. other persons under the age of 21 and in the care of any person named above.” Accordingly, the trial court properly concluded that the defendant was not a party covered under the terms of the policy. See Tallmadge Bros., Inc. v. Iroquois Gas Transmission System, L.P., 252 Conn. 479, 498, 746 A.2d 1277 (2000) (“Where the language of the contract is clear and unambiguous, the contract is to be given effect according to its terms. A court will not torture words to import ambiguity where the ordinary meaning leaves no room for ambiguity. ” [Internal quotation marks omitted.]).
The Appellate Court noted that the defendant was not a coinsured under the clear and unambiguous terms of the Waskos’ insurance policy. Wasko v. Manella, supra, 74 Conn. App. 37. In addition, the Appellate Court noted that this court explicitly declined to adopt the “ ‘implied co-insured’ ” theory in DiLullo v. Joseph, supra, 259 Conn. 853. Wasko v. Manella, supra, 42. Under the implied theory, “the tenant is deemed to be a coinsured of the landlord because: (1) both parties have an insurable interest in the premises, the landlord as owner, and the tenant as possessor, of the fee; and (2) the tenant’s rent presumably includes some calculation of the landlord’s fire insurance premium.” DiLullo v. Joseph, supra, 851.
As Judge Peters noted in her dissenting opinion, the standard form of fire insurance does not require a fire insurance company to cover losses caused by permissive users of the insured property. Wasko v. Manella, supra, 74 Conn. App. 47-48. Compare § 38a-334-5 (d) of the Regulations of Connecticut State Agencies (requiring insurance companies to cover losses caused by permissive users of automobiles under automobile insurance policies issued in Connecticut).
Black’s Law Dictionary (7th Ed. 1999) defines “homeowner’s insurance” as “[i]nsurance that covers both damage to the insured’s residence and liability claims made against the insured ([especially] those arising from the insured’s negligence).”
The Appellate Court found “the reasoning in Reeder v. Reeder, [supra, 217 Neb. 120], to be persuasive. In Reeder, a guest caused fire damage to the house at which she was staying, and the trial court denied the host’s insurer the right of subrogation.” Wasko v. Manella, supra, 74 Conn. App. 40-41. For two reasons, we disagree that Reeder offers persuasive reasoning to the present case. First, Reeder involved a unique factual scenario in which one brother owned the home, yet another brother and his family were living in it for an extended period of time while they searched for a house of their own. Reeder v. Reeder, supra, 121-22. Second, there was “undisputed evidence” that the owner had told his brother that “he would ‘leave [his] insurance policy that I had on it while he was in there.’ ” Id., 128. The present case involved a more distant relationship between the parties, a much shorter stay at the home and no explicit reference by the hosts that the guest’s actions would be covered under their insurance policy.