A personal injury lawsuit (private individual vs. 1st additional insured) was commenced in February 2006. The plaintiffs in the personal injury action allege that the private individual, a Connecticut resident, sustained serious bodily injuries (injury) in an accident which led to her death (wrongful death) on 2 April 2004, when she exited from an elevator (defective product) in a building located in Hamden Connecticut (the “building”).
The defendants in the personal injury action were the 1st and 2nd additional insured and the elevator company. The building was owned by the 1st additional insured on the date of the accident and the 2nd additional insured is a member of the 1st additional insured. The elevator company entered into an agreement with the 1st and 2nd additional insured to maintain the elevators in the building where they were required to name each entity as an additional insured under its insurance contract. A commercial general liability insurance policy (from the 1st defendant) was obtained by the elevator company providing Commercial Liability Coverage effective on the date of the private individual’s accident.
A New York Injury Lawyer said the personal injury action was settled for a total sum of $2.5 million. The settlement in the personal injury action was paid as follows:  Plaintiff, on behalf of the 1st and/or 2nd additional insured – $1,000,000;  1st defendant on behalf of the elevator Company – $1,000,000; and  2nd defendant on behalf of 1st and/or 1nd additional insured – $500,000. Plaintiff then commenced this action on its own behalf and as subrogee of 1st and/or 2nd additional insured to the extent that it was required to fund the settlement in the personal injury action and to pay for 1st and/or 2nd additional insured’s defense in the personal injury action.
A dispute involving insurance coverage arose where plaintiffs claim that defendants, Insurance Companies (1st defendant and 2nd defendant), wrongly refused to acknowledge plaintiffs’ additional insureds (1st additional insured and 2nd additional insured) under certain insurance policies and failed to defend and indemnify the Home Properties in a separately commenced personal injury action.
Plaintiff, also an Insurance Company, brings this action both on its behalf and also as subrogee of the 1st and/or 2nd additional insured.
A Nassau County Personal Injury Lawyer said that plaintiffs allege in their complaint that the defendants each breached the duty of good faith and fair dealing, their fiduciary duty and willfully violated the Connecticut Unfair Insurances Practices Act and Connecticut Unfair Trade Practices Act. On these causes of action plaintiffs seek compensatory damages amounting to $1.25 million, punitive damages and attorneys’ fees.
In the present case, a genuine conflict of law exists on whether the New York Law or the Connecticut law should be applied.
To determine the appropriate choice of law in a contract case, a court is required to apply the law of the state with the “most significant relationship to the transaction and the parties”, under the “center of gravity” or “`grouping of contacts” test. In applying the “center of gravity” test, courts examine the following factors:  the place of contract;  the place of negotiation of the contract;  the place of performance;  the location of the subject matter of the contract; and  the domicile, residence, nationality, place of incorporation, and place of business of the parties. A Queens Personal Injury Lawyer said the court must focus on the contacts that are significant in the particular contract dispute. A court should also consider public policies underlying conflicting laws that are readily identifiable and reflect strong governmental interests. A liability insurance contract should be governed by the law of the State which the parties understood to be the principal location of the insured risk unless, with respect to the particular issue, some other state has a more significant relationship to the transaction and the parties. Where, however, the policies cover risks in multiple states, the state of the insured’s domicile is the considered the proxy for the principal location of the insured risk.
Applying the above-mentioned legal standards, the court finds that Connecticut is the principal location of the insured risk based on the fact that the elevator company’s operations at the building located in Connecticut were insured under each policy, the personal injury action was litigated in Connecticut, and and the risks for which plaintiffs seek coverage as additional insureds arose from the elevator company’s work for the 1st additional insured and 2nd additional insured performed only at the building located in Connecticut. Moreover, although plaintiffs allege in the complaint that 1st additional insuredl’s principal place of business was in Rochester, New York, plaintiffs now maintain that its principal place of business is and/or was in Hamden, Connecticut, based upon the affidavit of the Director of Risk Management for 2nd additional insured where he states that the 1st additional insured still exists, but was solely created to own the building in Hamden, Connecticut.
Accordingly, the “center of gravity” lies in Connecticut and there is no basis to find that New York has a more significant relationship to the transaction and the parties.
The defendants alternatively argue that even under Connecticut Law, the claims cannot proceed. The argument is incorrect. Civil Practice Law and Rules (CPLR) provide that every court will take judicial notice of the common law, Constitutions and public statutes of every other state. Thus, the court proceeds to consider the arguments presented regarding Connecticut common and statutory law.
Plaintiffs allege that the 2nd defendant breached the duty of good faith and fair dealing by:  structuring the settlement to benefit its own interests at the expense of plaintiffs; and  improperly and without any reasonable justification, denying coverage to the additional insureds under the policy.
Plaintiffs also allege that the 1st defendant breached the duty of good faith and fair dealing by:  improperly favoring one insured, the elevator company, to the detriment of its other insureds, 1st and 2nd additional insureds, by attempting to exhaust its policy by payment on behalf of the elevator company without any provision to protect the additional insured’s rights under the 1st defendant’s policy or to contribute to the settlement on their behalf; and  improperly and without any reasonable justification, denying coverage to the additional insured’s under the 1st defendants’ policy.
The court agrees. Plaintiffs do in fact allege that the defendants acted in bad faith.
Defendants argue that the cause of action for breach of fiduciary duty is untenable under Connecticut law. Specifically, defendants contend that no fiduciary duty can exist where the parties are business entities that engaged in an arm’s length transaction.
Under Connecticut law, to find the existence of a fiduciary duty, the relationship at issue must be examined. A “fiduciary or confidential relationship is characterized by a unique degree of trust and confidence between the parties one of whom has superior knowledge, skill or expertise and is under a duty to represent the interests of the other.” Integral to the existence of a fiduciary duty is that the superior position of one party is the keystone of the trust and confidence placed in that party by the other. Whether such a confidential relationship exists is usually a question for the finder of fact.
In the context of the relationship between insured and insurer, the trial courts of Connecticut have not yet recognized a fiduciary relationship, at least as it concerns first party claims. Some courts have, at least in dicta, distinguished rights between insured and insurer on first party benefits from situations dealing with third party claims. It was held that “while there are circumstances, particularly when dealing with third party claims, in which fiduciary-like duties may be placed on the insurer to benefit the insured, such situations do not arise in first party disputes between insurer and insured.”
At bar, the allegations concern defendants’ actions insofar as they relate to the payment of third party benefits. There is no basis in Connecticut law to rule at this time that such a claim fails as a matter of law.
Defendants’ business practices and their frequency of failing to adopt and implement reasonable standards for the prompt investigation of claims for additional insured coverage “is a proper area for discovery, particularly as such information may only be in [the insurer’s] possession”. Although on a dispositive motion pursuant to CPLR or at trial, the burden will be on the plaintiffs to prove that the defendants frequently engaged in acts in violation of CUIPA and CUTPA, plaintiffs’ burden at this point is far easier, which is to present facts that state a cause of action against the defendants. A Brooklyn Personal Injury Lawyer said the plaintiffs have easily met its burden because, at this stage, the facts are afforded every favorable inference.
On the issue of damages and attorney’s fees, under Connecticut law, plaintiffs may recover “punitive damages or damages of any nature beyond the policy limits” in a tort cause of action alleging breach of good faith and fair dealing by an insurer and for an intentional breach of a fiduciary duty. In addition, because CUIPA violations can be the basis for violations under the CUTPA, punitive damages and attorneys’ fees may be awarded.
Have you been injured for causes that are not your fault? Someone should answer for that. Contact Stephen Bilkis & Associates to know what legal remedies are available to you. Our legal teams are well-trained in personal injury cases and we assure you that you will be very well represented.