Essex Ins. Co. v. William Kramer & Assocs., LLC

• Decision Date: 23 April 2019
• Docket Number: SC 20130
• Citation: 205 A.3d 534,331 Conn. 493
• Court: Connecticut Supreme Court
• Parties: ESSEX INSURANCE COMPANY v. WILLIAM KRAMER & ASSOCIATES, LLC

331 Conn. 493

205 A.3d 534

ESSEX INSURANCE COMPANY

v.WILLIAM KRAMER & ASSOCIATES, LLC

SC 20130

Supreme Court of Connecticut.

Argued October 16, 2018

Officially released April 23, 2019

Mary Massaron, pro hac vice, with whom was Christopher L. Jefford, for the appellant (plaintiff).

Richard A. Simpson, pro hac vice, with whom, was Christopher P. Kriesen, for the appellee (defendant).

Robinson, C.J., and Palmer, McDonald, D'Auria, Mullins, Kahn and Ecker, Js.

McDONALD, J.

This case, which comes to us on certification from the United States Court of Appeals for the Second Circuit; see General Statutes § 51-199b (d) ; requires us to consider the applicability of our continuing course of conduct tolling doctrine to a relationship between an insurance company and its independent claims adjuster in the period after an insured's claim has been fully paid. The plaintiff insurer, Essex Insurance Company, brought a negligence action against the defendant claims adjuster, William Kramer & Associates, LLC, in the United States District Court for the District of Connecticut, alleging that the defendant had breached its duty to advise the plaintiff of a mortgage on the insured property before the plaintiff issued the final claim payment check to the insured for hurricane related damage, thereby causing the plaintiff to incur liability to the mortgagee. The plaintiff contended that the limitation period for commencing an action was tolled until the defendant discovered and produced a document in one of its files that reflected the mortgagee's interest during the course of litigation between the mortgagee and the plaintiff. The District Court set aside the jury's verdict in favor of the plaintiff on the ground that there was insufficient evidence to support the jury's finding that a continuing course of conduct tolled the otherwise untimely filed action. See Essex Ins. Co. v. William Kramer & Associates, LLC , United States District Court, Docket No. 3:13-cv-1537 (MPS), 2016 WL 3198190 (D. Conn. June 8, 2016). The Second Circuit concluded that Connecticut law regarding the contours of this tolling doctrine is unclear and sought our advice as to whether the evidence is legally sufficient to support the jury's finding. See Evanston Ins. Co . v. William Kramer & Associates, LLC , 890 F.3d 40 (2018).¹ We conclude that the evidence is not legally sufficient to toll the statute of limitations on this factual record.

The District Court's decision set forth the following facts that the jury reasonably could have found, which, for context, we supplement with uncontested facts reflected in the record certified to this court. In 2005, a hurricane damaged properties in Florida, including four commercial properties owned by IDM Management, Inc. The property directly relevant to the present action is an apartment complex, The Villas at Lauderhill, LLC, known as the "Villas." IDM had several layers of insurance to protect itself against such a loss for its properties: an initial layer of coverage from Aspen Specialty Insurance Company; an excess layer from the plaintiff; and an additional excess layer from a third insurer.² The plaintiff received notice from IDM that the loss might reach the plaintiff's layer of coverage.

After Aspen hired the defendant to adjust the loss to the IDM properties for its initial layer of coverage, the plaintiff agreed to hire the defendant as its independent adjuster for the IDM properties. It is customary industry practice for excess layer insurers to engage the same independent adjuster as the initial layer insurer to allow all insurers to share the information and work product generated in the original adjustment.

The plaintiff hired the defendant to perform a " ‘full adjustment’ " on the properties. Although the parties did not execute a written contract, it was understood that a full adjustment included inspecting the property, estimating the value of the loss, working with IDM to agree to an amount of loss, reviewing all coverage aspects of the plaintiff's policy, identifying any potential coverage issues, and reporting all elements associated with the investigation and the claim measuring process. Significantly, for purposes of the present case, it also included identifying any mortgages on the insured property. The need to identify such mortgages stemmed from the fact that the mortgagee could have an interest in the insurance proceeds.

Two of the defendant's employees were involved with the adjustment of IDM's claims: Dennis D. Martin, the defendant's general executive adjuster who had solicited the plaintiff's business, and Robert Oberpriller, the defendant's general adjuster. Oberpriller did the work in the field, traveling between his home in Minnesota and the damaged properties in Florida. Because those properties were approximately 250 miles from the defendant's closest Florida offices, Palm Harbor and Tampa, and Oberpriller did not work out of those offices, he kept a "working file" with him.

In April, 2006, IDM's retail broker sent a letter to the defendant's Palm Harbor office addressed to Oberpriller, requesting reissuance of a check from Aspen for one of IDM's properties because the banks listed as payees were incorrect. The letter provided the names of the correct payees and noted, "I have also enclosed a copy of the mortgagees showing Wachovia Securities for Park Apartments for your files."

The enclosed document, captioned "schedule of mortgagees," did not list mortgagees for just Park Apartments, but for all four IDM properties. Intervest National Bank was listed last as mortgagee for the Villas. The letter from IDM's retail broker and its accompanying schedule of mortgagees were placed in a file in either the Palm Harbor or Tampa office (Aspen file).³

Even though the defendant had the mortgagee schedule in its Aspen file and was obligated to share information obtained while working for Aspen, Oberpriller and Martin sent periodic status reports to the plaintiff indicating that there were mortgages on the other three IDM properties but that there was no mortgage on the Villas.⁴ Just before the plaintiff issued its final claim payment check to IDM, the plaintiff's executive claims examiner contacted Oberpriller and Martin specifically to inquire whether there was a mortgage on the Villas. They replied that they had not received a response from the policyholder in their most recent inquiry, but there was "no indication" that there was a mortgage on the Villas. Because the plaintiff's executive claims examiner was not licensed in Florida as an insurance adjuster, he could not contact IDM directly on this matter. As a result, when the plaintiff issued the final claim payment check to IDM on March 19, 2007, exhausting IDM's policy limit, it did not list Intervest as a payee or inform Intervest that it was going to make its final claim payment.

The defendant closed its file on the Villas claim on May 8, 2007. At some point around that date, Oberpriller delivered his working file on the IDM properties, consisting of two boxes of documents, to the defendant's Palm Harbor office.

After the plaintiff issued the final claim check, there were three instances of contact between the defendant and the plaintiff relating to the Villas. First, in August or September, 2007, Martin contacted the plaintiff to inform it that the insurance company holding the final excess layer of coverage on the Villas had inquired as to whom the plaintiff had issued its payment checks. In response, the plaintiff's executive claims examiner contacted that insurer.

Second, in 2009, after Intervest, the mortgagee on the Villas, brought an action against third parties concerning their failure to protect its mortgage interest (Intervest action),⁵ Martin informed the plaintiff that Intervest had served the defendant with a subpoena, demanding production of the defendant's files relating to the Villas. Martin did so because he believed that the defendant had an obligation to inform the plaintiff if an issue came up that could affect the plaintiff. The plaintiff offered to assist with the defendant's production responsibility and had its attorney who had assisted in the loss adjustment process open her files to do so. The plaintiff also offered to cover the defendant's expenses related to the Intervest action.

In response to the 2009 subpoena, the defendant produced the two boxes of documents that Oberpriller had returned to the office after he completed the adjustment. It did not produce the Aspen file containing the mortgagee schedule at that time.

In December, 2010, Intervest filed an amended complaint in the Intervest action, adding the plaintiff as a defendant; civil process was served on the plaintiff in January, 2011. The amended complaint alleged, among other things, that the plaintiff knew that Intervest was a mortgagee on the Villas and should have paid insurance proceeds to Intervest.

The third contact between the parties occurred in 2012, when Martin informed the plaintiff that he was being deposed in the Intervest action. Thereafter, while Martin was preparing for his deposition, his secretary came upon the Aspen file when the offices were searched again, "just to be diligent."⁶ Martin, in turn, disclosed to the plaintiff the existence of the mortgagee schedule in that file. The plaintiff's attorney prepared Martin for, and attended, the deposition. Martin produced the schedule to Intervest at his deposition. Thereafter, the defendant billed the plaintiff for the time that Martin spent at his deposition because, according to Martin, the defendant still considered the plaintiff its "client" and continued to have an "ongoing relationship" with the plaintiff.

On the basis of the discovery of the mortgage schedule in the Aspen file and the concern that the defendant's knowledge of this information could be imputed to it, the plaintiff reevaluated its litigation strategy. Ultimately, the plaintiff settled Intervest's claims against it for $ 1...