Conn. Mun. Elec. Energy Coop. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA

• Decision Date: 14 September 2021
• Docket Number: 19-cv-00839
• Court: U.S. District Court — District of Connecticut
• Parties: CONNECTICUT MUNICIPAL ELECTRIC ENERGY COOPERATIVE, Plaintiff, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendant.

CONNECTICUT MUNICIPAL ELECTRIC ENERGY COOPERATIVE, Plaintiff, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendant.

No. 19-cv-00839

United States District Court, D. Connecticut

September 14, 2021

RULING ON MOTIONS FOR SUMMARY JUDGMENT AND MOTIONS TO PRECLUDE EXPERT TESTIMONY

Janet Bond Arterton, U.S.D.J.

Plaintiff Connecticut Municipal Energy Cooperative (“CMEEC”) brings this action against Defendant National Union Fire Insurance Company of Pittsburgh, PA (“National Union”) for declaratory relief and damages in conjunction with National Union's allegedly improper denial of coverage under the Not-for-Profit Risk Protector insurance policy that National Union issued to CMEEC. (Am. Compl. [Doc. # 32].)

Each party has filed a Motion for Summary Judgment and a Motion to Preclude Expert Testimony. (See Pl.'s Mot. for Partial Summ. J. [Doc. # 61]; Nat'l Union Fire Ins. Co. of Pittsburgh, Pa.'s Mot. for Summ. J. (“Def.'s Mot. for Summ. J.”) [Doc. # 78]; Pl.'s Mot. to Exclude Testimony of Def.'s Proposed Expert, David Paige (“Pl.'s Mot. to Exclude”) [Doc. # 81] Def.'s Mot. to Preclude Expert Testimony of Pl.'s Expert James Bergenn (“Def.'s Mot. to Exclude”) [Docs. ## 85, 87].)^[1] The Court heard oral argument on these motions on August 31, 2021. (See Min. Entry [Doc. # 147].)

For the reasons stated below, the Court (1) grants in part and denies in part CMEEC's Motion for Partial Summary Judgment, (2) grants in part and denies in part National Union's Motion for Summary Judgment, (3) grants in part and denies in part CMEEC's Motion to Preclude, and (4) grants National Union's Motion to Preclude.

I. Background

A. The Parties

CMEEC is a state-charted municipal entity whose member organizations are the municipal electric utilities providers for multiple cities and boroughs in Connecticut. (Def.'s Local R. 56(a)(2) Statement of Facts in Opp'n to Pl.'s Mot. For Summ. J. (“Def.'s 56(a)(2) Stmt.”) [Doc. # 70-1] ¶ 2.)^[2] CMEEC is a political subdivision of the State of Connecticut, pursuant to sections 7-233a and 7-233e of the Connecticut General Statutes. (Id. ¶ 3.) CMEEC “operates as a nonprofit entity with a principal place of business in Norwich, Connecticut, ” and the members of CMEEC's Board of Directors are “individual representatives appointed by its member utilities and from the legislative bodies of its member utilities.” (Id. ¶¶ 4-5.)

National Union, a Pennsylvania corporation with its principal place of business in New York, “writes and issues insurance policies in Connecticut pursuant to a license issued by the Connecticut Insurance Department.” (Id. ¶¶ 6, 8.) National Union issued a “Not-For-Profit-Risk Protector insurance policy” to CMEEC. (Id. ¶ 9; Ex. A, Pl.'s Local R. 56(a)(1) Statement of Undisputed Material Facts (“the Policy”) [Doc. # 61-2].) CMEEC timely paid the premiums for the Policy. (Def.'s R. 56(a)(2) Stmt. ¶ 12.)

B. The Policy

The Policy includes a section entitled: “Directors, Officers And Not-For-Profit Organization Liability Coverage Section One”-abbreviated within the Policy as the “D&O Coverage Section.” (Policy at 29.)^[3] The “Coverage B: Organization Indemnification Reimbursement Insurance” subsection of the D&O Coverage Section states:

This policy shall pay on behalf the Organization^[4] Loss arising from a Claim first made against an Individual Insured during the Policy Period or the Discovery Period (if applicable) and reported to the Insurer pursuant to the terms of this policy for any actual or alleged Wrongful Act of such Individual Insured, but only when and to the extent that the Organization has indemnified such Individual Insured for such Loss pursuant to law, common or statutory, or contract, or the Charter or Bylaws of the Organization, duly effective under such law which determines and defines such rights of indemnity. The Insurer shall, in accordance with and subject to Clause 5^[5] of this Coverage Section, advance Defense Costs of such Claim prior to its final disposition.

(Id.)

The “Coverage C: Organization Entity Coverage” subsection of the D&O Coverage Section states:

This policy shall pay on behalf of the Organization Loss arising from a Claim first made against the Organization during the Policy Period or the Discovery Period (if applicable) and reported to the Insurer pursuant to the terms of this policy for any actual or alleged Wrongful Act of the Organization. The Insurer shall, in accordance with and subject to Clause 5 of this Coverage Section, advance Defense Costs of such Claim prior to its final disposition.

(Id.)

The “Definitions” subsection of the D&O Coverage Section defines the term “Claim” as:

(1) a written demand for monetary, non-monetary or injunctive relief (including any request to toll or waive any statute of limitations); or

(2) a civil, criminal, regulatory or administrative proceeding for monetary, non-monetary or injunctive relief which is commenced by:

(i) service of a complaint or similar pleading;

(ii) return of an indictment, information or similar document (in the case of a criminal proceeding); or

(iii) receipt or filing of a notice of charges.

(Id. at 30.)

The “Definitions” subsection contains multiple definitions for the term “Wrongful Act, ” including:

(1) with respect to Individual Insureds, any breach of duty, neglect, error, misstatement, misleading statement, omission or act by such Insureds in his/her respective capacities as such, or any matter claimed against such Individual Insured solely by reason of his/her status as an Individual Insured of the Organization;

(2) with respect to the Organization under Coverage C [Organization Entity Coverage], any breach of duty, neglect, error, misstatement, misleading statement, omission or act by or on behalf of the Organization.

(Id. at 3.)

The D&O Coverage Section's Clause 5 governs “Defense Costs, Settlements, [and] Judgments (Including the Advancement of Defense Costs).” (Id. at 32.) Clause 5 states, in pertinent part:

The Insurer does not assume any duty to defend. The Insureds shall defend and contest any Claim made against them.

Notwithstanding the foregoing, the Insureds shall have the right to tender the defense of any Claim to the Insurer, which right shall be exercised in writing by the Named Organization on behalf of all Insureds to the Insurer pursuant to the notice provisions of Clause 7 of the General Terms and Conditions....

When the Insurer has not assumed the defense of a Claim pursuant to this Clause 5, the Insurer shall advance nevertheless, excess of any applicable retention amount and at the written request of the Insured, Defense Costs prior to the final disposition of a Claim. Such advanced payments by the Insurer shall be repaid to the Insurer by each and every Insured or Organization, severally according to their respective interests, in the event and to the extent that each and every Insured or Organization shall not be entitled under the terms and conditions of this policy to payment of such Loss.

The Insureds shall not admit or assume liability, enter into any settlement agreement, stipulate any judgment or incur any Defense Costs without the prior written consent of the Insurer. Only those settlements, stipulated judgments and Defense Costs which have been consented to by the Insurer shall be recoverable as Loss under the terms of this policy. The Insurer's consent shall not be unreasonably withheld, provided that the Insurer, when it has not assumed the defense of a Claim pursuant to this Clause 5, shall be entitled to effectively associate in the defense, the prosecution and the negotiation of any settlement of any Claim that involves or appears reasonably likely to involve the Insurer; and provided further that in all events the Insurer may withhold consent to any settlement, stipulated judgment or Defense Costs, or any portion thereof, to the extent such Loss is not covered under the terms of this policy.

(Id. at 33-34.)

The Policy also lists several endorsements, including Endorsement #8 (the “Commissions Exclusion”). (Id. at 70.) The Commissions Exclusion states:

COMMISSIONS EXCLUSION (ALL COVERAGE SECTIONS)

In consideration of the premium charged, it is hereby understood and agreed that, with respect to all Coverage Sections, the Insurer shall not be liable to make any payment for Loss in connection with any Claim made against any Insured alleging, arising out of, based upon, or attributable to:

(i) payments, commissions, gratuities, benefits or any other favors to or for the benefit of any full or part-time domestic or foreign government or armed services officials, agents, representatives, employees or any members of their family or any entity with which they are affiliated; or

(ii) payments, commissions, gratuities, benefits or any other favors to or for the benefit of any full or part-time officials, directors, agents, partners, representatives, principal shareholders, or owners or employees or “affiliates” (as that term is defined in The Securities Exchange Act of 1934, including any officers, directors, agents, owners, partners, representatives, principal shareholders or employees of such affiliates) of any customers of the Organization or any members of their family or any entity with which they are affiliated; or

(iii) political contributions, whether domestic or foreign.

(Id.)

C. Undisputed Facts

The backdrop for the parties' dispute began on October 26 2016, when the United States Attorney's Office for the District of Connecticut issued a federal grand jury subpoena to CMEEC (the “2016 Subpoena.”)^[6] (Def.'s R. 56(a)(2) Stmt. ¶ 14.) The subpoena directed CMEEC to “provide any and all documentation associated with personnel from your company who attended the annual retreats in Kentucky...