City of West Haven v. Commercial Union Ins. Co.
| Decision Date | 20 March 1990 |
| Docket Number | No. 41,D,41 |
| Citation | 894 F.2d 540 |
| Parties | CITY OF WEST HAVEN, Appellant, v. COMMERCIAL UNION INSURANCE COMPANY f/k/a Employers Commercial Union Insurance Company, Appellee. ocket 89-7355. |
| Court | U.S. Court of Appeals — Second Circuit |
Keith Bradoc Gallant, New Haven, Conn. (Edward Gallant, Gallant & Gallant, New Haven, Conn. Louis Smith Votto, Corp. Counsel, City of West Haven, Conn., of counsel), for appellant.
Elizabeth A. Gallagher, New Haven, Conn. (William F. Gallagher, Gallagher, Gallagher & Calistro, New Haven, Conn., Robert J. Gillooly, Dennis W. Gillooly, Gillooly, McGrail, Carroll & Sheedy, New Haven, Conn., of counsel), for appellee.
Before OAKES, Chief Judge, KEARSE and ALTIMARI, Circuit Judges.
On February 9, 1987, the City of West Haven, Connecticut ("West Haven"), filed suit against the Commercial Union Insurance Company ("Commercial Union") alleging several causes of action relating to Commercial Union's failure to defend and indemnify West Haven for disability claims and awards made to three police officers for heart-related illnesses. On March 30, 1989, the United States District Court for the District of Connecticut, T.F. Gilroy Daly, Judge, granted summary judgment for Commercial Union on statute-of-limitations grounds.
From July 1, 1972, to July 1, 1975, Commercial Union insured West Haven under a "Workmen's Compensation and Employers' Liability Policy." Under the policy, Commercial Union was obligated in three ways: (1) to pay benefits "required of the insured by the workmen's compensation law"; (2) to pay any damages West Haven became legally obligated to pay by reason of accident or disease to an employee arising in the course of employment; and (3) to defend West Haven in any proceedings or suits brought against it within the policy coverage. 1
In Connecticut, police officers and firefighters disabled from working as a result of hypertension or heart disease may proceed along one of two avenues in seeking disability benefits. They may recover benefits under the general Workers' Compensation Act, Conn.Gen.Stat. Secs. 31-275 to -355a (1989), or under a separate, special compensation program for police officers and firefighters with hypertension or heart disease. See Conn.Gen.Stat. Sec. 7-433c (1989). In recognition of the stress placed upon police officers and firefighters, section 7-433c guarantees benefits equivalent to workers' compensation for police or fire personnel who, prior to starting their jobs, pass physical examinations not revealing any sign of hypertension or heart disease and later contract hypertension or heart disease. The practical purpose of section 7-433c is to allow a police officer or firefighter who develops hypertension or heart disease after coming on the job to recover benefits without having to prove that it arose from conditions of employment.
On July 6, 1973, police officer Harold Collins filed a claim against West Haven for acute myocardial infarction, hypertension, and heart disease. The Workmen's Compensation Commissioner for the Third Congressional District (the "Commissioner") issued an award of benefits under section 7-433c on March 1, 1976. At that time, there was a question whether section 7-433c benefits were "required of the insured by the workmen's compensation law" and thus covered under West Haven's insurance policy. Commercial Union did not offer to defend the claim or to indemnify West Haven for the awards. West Haven appealed the award to the Connecticut Court of Common Pleas, which remanded the case back to the Commissioner on December 22, 1977. The remand remained pending for the next four years, until November 30, 1981, when West Haven filed a motion under Conn.Gen.Stat. Sec. 31-315 (1989) to reopen and modify the Commissioner's finding and award on grounds that the award could not issue under section 7-433c, but must issue under the general workers' compensation law, because Collins had failed to note on his claim form that he was proceeding under section 7-433c. If West Haven were to have prevailed, the award would have fallen squarely within its insurance coverage. The Commissioner, however, denied the motion on April 23, 1986. The Compensation Review Division affirmed on April 7, 1988, and the Connecticut Supreme Court affirmed on March 21, 1989. See Collins v. City of West Haven, 210 Conn. 423, 555 A.2d 981 (1989).
On June 17, 1974, another police officer, George Spragg, filed a claim for a heart attack. As with Collins, the Commissioner issued to Spragg an award of benefits under section 7-433c on March 1, 1976. Again, Commercial Union did not defend or indemnify West Haven. The City appealed to the Court of Common Pleas, which remanded to the Commissioner by a motion dated December 6, 1977. The Commissioner issued a corrected award under section 7-433c on October 20, 1978, from which the City again appealed to the Connecticut Superior Court on November 21, 1978. At this point, the record does not conclusively show whether the claim was remanded or dismissed. Almost three years later, on June 8, 1981, the City moved the Commissioner to reopen and vacate the award on the grounds that Spragg had not given timely notice of his claim and that, because the award stemmed from a work-related injury, it should have been issued under the general workers' compensation law and not under section 7-433c. The Commissioner denied the motion on January 18, 1982, and the Compensation Review Division affirmed on both grounds on July 27, 1984. Then, on West Haven's appeal of the timely notice issue, the Connecticut Appellate Court affirmed on February 18, 1986. See Cuccuro v. City of West Haven, 6 Conn.App. 265, 505 A.2d 1 (1986).
On January 17 and April 12, 1976, yet another police officer, Cataldo Cerillo, filed notices of claims for heart disease and hypertension. The Commissioner awarded Cerillo benefits under section 7-433c on October 20, 1978. Again, Commercial Union neither defended nor indemnified West Haven. The City did not appeal the award. On February 17, 1981, the Commissioner issued a supplemental finding and award adjusting Cerillo's benefits to reflect his resumption of employment at a light duty job with the New Haven Savings Bank.
When the three officers filed their claims for benefits, it was unclear under which program they could recover: the general workers' compensation statute or the section 7-433c special program. Nevertheless, all three officers were awarded benefits exclusively under section 7-433c. As previously noted, at the time of the original awards to the three officers in 1976 and 1978, it was unclear whether West Haven's workers' compensation policy provided indemnification for benefits paid out under section 7-433c. This was no longer in question as of August 21, 1979, when the Connecticut Supreme Court, reasoning that section 7-433c benefits were enacted separately from and intended as a supplement to the general workers' compensation law, construed an insurance contract covering workers' compensation liability with language identical to the contract in this case as not covering section 7-433c benefits. See Town of Plainville v. Travelers Indem. Co., 178 Conn. 664, 425 A.2d 131 (1979).
West Haven commenced this action against Commercial Union on February 9, 1987, alleging that Commercial Union breached its duty to indemnify, its duty to defend, and its duty of good faith and fair dealing, and also violated the Connecticut Unfair Trade Practices Act ("CUTPA"), Conn.Gen.Stat. Secs. 42-110a to -110g (1989), and the Connecticut Unfair Insurance Practices Act ("CUIPA"), Conn.Gen.Stat. Secs. 38-60 to -64 (1989). The district court, ratifying the findings of a magistrate, applied Connecticut's six-year statute of limitations for breach of contract actions, see Conn.Gen.Stat. Sec. 52-576(a) (1989), to the claims alleging a duty to indemnify and a duty to defend, and concluded that the 1979 Plainville decision unequivocally placed all three awards outside of the policy's coverage, so that Commercial Union's duties to indemnify and to defend had terminated more than six years prior to the filing of this action on February 9, 1987. The district court also found that Plainville cut off Commercial Union's duty of good faith and fair dealing and its statutory duties under CUTPA and CUIPA. Applying a three-year statute of limitations to the duty of good faith and fair dealing claim, see Conn.Gen.Stat. Sec. 52-577 (1989), and a three-year statute of limitations to the CUTPA claim, see Conn.Gen.Stat. Sec. 42-110g(f), and declining to decide but assuming arguendo that a six-year statute of limitations applied to the CUIPA claim, the district court concluded all these claims were time-barred by Plainville.
On appeal, West Haven contends that Commercial Union's duties survived Plainville, so that this action is not time-barred. 2 We agree in part. We reverse the district court with respect to the awards from which appeals were taken.
Interpreting the facts, as we must, in the light most favorable to the party against whom summary judgment was sought, Commercial Union did not defend or indemnify West Haven and we assume that it acted in the manner alleged as a basis for West Haven's claims for breach of the duty of good faith and fair dealing and for violations of CUTPA and CUIPA. The issue here is when West Haven's claims for relief accrued, thus commencing the limitations periods.
We first consider which statute of limitations applies. Because federal courts sitting in diversity apply state statutes of limitations for state-created rights, see Ragan v. Merchants Transfer & Warehouse Co., 337 U.S. 530, 533, 69 S.Ct. 1233, 1234-35, 93 L.Ed. 1520 (1949), we apply Connecticut's six-year statute of limitations to West Haven's breach of contract claim for the...
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