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

• Decision Date: 10 May 2018
• Docket Number: August Term, 2017,Docket No. 16-2082
• Citation: 890 F.3d 40
• Parties: EVANSTON INSURANCE COMPANY, Plaintiff–Appellant, v. WILLIAM KRAMER & ASSOCIATES, LLC, Defendant–Appellee.
• Court: U.S. Court of Appeals — Second Circuit

890 F.3d 40

EVANSTON INSURANCE COMPANY, Plaintiff–Appellant,

v.WILLIAM KRAMER & ASSOCIATES, LLC, Defendant–Appellee.

Docket No. 16-2082

August Term, 2017

United States Court of Appeals, Second Circuit.

Argued: August 18, 2017

Decided: May 10, 2018

MARY MASSARON, Plunkett Cooney, Bloomfield Hills, MI, for Plaintiff–Appellant.

RICHARD A. SIMPSON (Kimberly A. Ashmore, on the brief), Wiley Rein LLP, Washington, DC, for Defendant–Appellee.

Before: PIERRE N. LEVAL, REENA RAGGI, and RAYMOND J. LOHIER, JR., Circuit Judges.

LEVAL, Circuit Judge:

Plaintiff Evanston Insurance Co. (hereinafter the "Plaintiff" or the "Insurer") appeals from the entry of judgment as a matter of law by the United States District Court for the District of Connecticut (Michael P. Shea, J .) in favor of defendant William Kramer & Associates, LLC (hereinafter the "Defendant" or the "Adjuster"), which served as the Insurer's adjuster on a claim for hurricane damage. The Adjuster negligently failed to advise the Insurer of a mortgage on the insured property, with the consequence that the Insurer incurred liability in favor of the mortgagee for paying the claim without protecting the mortgagee's interest in the damaged property. The Insurer brought this action against its Adjuster, alleging negligence, but filed the suit more than the three years after the event that the Connecticut statute of limitations allows. CONN. GEN. STAT. § 52-577. Upon trial, the jury rendered a verdict in favor of the Insurer, concluding that the limitations period was tolled by a continuing course of conduct between the Insurer and the Adjuster. The District Court, however, set aside the jury's verdict, ruling that the Insurer's evidence of a continuing course of conduct was insufficient to justify tolling, so that the suit was untimely as a matter of law. Under Connecticut General Statutes § 51-199b(d), with the consent of the parties, we interrupt the course of appeal, invoking the certification process to ask the guidance of the Supreme Court of Connecticut as to whether the Connecticut doctrine of a continuing course of conduct between the parties permitted tolling of the statutory limitations period on these facts.¹

BACKGROUND

The evidence, if considered in the light most favorable to the Plaintiff, showed the following.

On October 24, 2005, Hurricane Wilma damaged a commercial property in Florida known as "the Villas." The Villas was insured under a policy written by the Insurer's predecessor, Essex Insurance Co.² The Defendant, an independent loss adjuster, had been retained by another insurer of the Villas property to perform adjustment with respect to the storm damage claim, and had already done work on the project. The Adjuster solicited the Insurer to be retained as its adjuster as well. It is commonplace for different insurers of the same property to hire the same independent adjuster for the claim so that they can share the benefits of the adjuster's work on the matter. Plaintiff accordingly hired the Adjuster to perform a "full adjustment service" under the policy Plaintiff had written. App'x at 799. The Adjuster's duties included inspecting the insured property, determining the amount of damage, reviewing the insurance policy for potential coverage issues, negotiating the loss claim with the insured and its representatives, seeking resolution of and compromises for matters in dispute, reporting on the investigation and the claim measure process, and making recommendations as to how the insurer should proceed with the adjustment.

Of particular pertinence here, the Adjuster's duties also included informing the Insurer of any mortgages on the damaged property. Proper performance of this duty was of great importance to the Insurer because payments it would make with respect to the loss would need to take account of the interest of mortgagees in the insured property. The district court instructed the jury, and it is undisputed in the parties' briefs on appeal, that when the Insurer hired the Adjuster, the Adjuster became the Insurer's "agent and therefore had a special relationship of trust with [the Insurer]." Essex Ins. Co. v. William Kramer & Assocs., Inc. , No. 3:13-cv-1537, 2016 WL 3198190, at *10 (D. Conn. June 8, 2016) (internal quotation marks omitted); see also id . at *10 n.8 (citing Taylor v. Hamden Hall Sch., Inc ., 149 Conn. 545, 552, 182 A.2d 615 (1962), for the proposition that "[a]n agent is a fiduciary with respect to matters within the scope of his agency").

On April 25, 2006, the Adjuster received a letter identifying a mortgage on the property in favor of Intervest National Bank ("Intervest"), as mortgagee. The Adjuster promptly responded, acknowledging receipt, and placed the letter in its file. Nonetheless, on June 22, 2006 and July 19, 2006, the Adjuster erroneously asserted in written reports to the Insurer that there were no mortgages, stating: "Villas at Lauderhill[:] No Mortgagee." App'x at 143, 153. The Adjuster also emailed the Insurer on August 28, 2006 that "[t]here is not a mortgage company for ‘The Villas.’ " Id . at 166. Continuing through March 2007, the Insurer repeatedly asked the Adjuster about mortgages. The Adjuster repeatedly and erroneously informed the Insurer that there were none. On or about March 6, 2007, the Insurer again, identifying the inquiry as "imperative," asked the Adjuster whether there was a mortgage on the property. Id . at 710. Again, the Adjuster failed to inform the Insurer of Intervest's mortgage. On March 19, 2007, the Insurer issued its final claim payment for the loss suffered by the Villas, without protecting the mortgagee's rights.

Throughout this period, the Adjuster stored documents concerning its adjustment work for the Villas in two locations. It kept some documents in a working file that one employee took with him as he travelled between various cities in Florida and Duluth, Minnesota. It kept other documents in an "office file" in the Adjuster's office in Palm Harbor, Florida. Id . at 996. The travelling employee eventually delivered the working file, which comprised two banker boxes of documents, to the Adjuster's Palm Harbor office. The Adjuster's employee Dennis Martin testified that it "closed its file" for the Villas circa May 8, 2007. Id. at 998.

After May 8, 2007, the Adjuster continued to treat the Insurer as a "client." Id . at 756. In relation to the Villas loss, it "reach[ed] out to" the Insurer on several occasions to bill the Insurer for services, id . at 983, and to use the Insurer's attorneys. Martin testified that the Adjuster conducted itself in this manner because it had an "ongoing relationship with [the Insurer] even to this day [February 11, 2016]." Id . at 756. In August or September of 2007, the Adjuster advised the Insurer that another insurer of the Villas had requested information about the Insurer's payment checks. The Insurer responded by discussing its payments with the other insurer. In 2009, the Adjuster again initiated contact with the Insurer, indicated that the Adjuster had received a subpoena for its complete files concerning the Villas, and "sought [the Insurer's] input" about the process of responding to the subpoena. Id. at 816. Martin explained that the Adjuster "reach[ed] out to" the Insurer after receiving the subpoena "because that's the proper thing to do," as the Adjuster was the Insurer's "agent for this loss." Id. at 983. Martin testified, "although the last – the payment check had been issued, if an issue came up regarding the Villas and [its] client, [the Adjuster] had an obligation to tell [the Insurer] ...." Id .

Upon receiving the Adjuster's notification of its receipt of a subpoena, the Insurer replied by advising the Adjuster that it "would assist with [the Adjuster's] responsibility to produce their file."Id. at 817. The Insurer then retained a lawyer to "assist [the Insurer and the Adjuster] with the document production." Id . As a result, the Insurer "continued to incur expenses associated with the subpoena and production process on behalf of [the Adjuster] and [the Insurer]." Id . In response to the subpoena, the Adjuster produced two banker boxes of documents. The Adjuster failed to produce the document that identified the Intervest mortgage.³

In January 2011, the Insurer received a civil action summons naming it as a defendant in a lawsuit filed by Intervest. The Insurer's employee Richard Verna, who had worked on the final claim payment for the Villas loss, testified that, at the point when the Insurer received the summons, he had no knowledge of "what had happened to the actual Villas property," and that he "had no reason to continue with tracking what was going on at that property." Id. at 818. He did not specify a time prior to January 2011 when he had stopped tracking the property.

Intervest's complaint asserted that the Villas' owners had failed to make mortgage payments, to pay their property taxes, or to use their insurance payments to repair the hurricane damage, and that Intervest had foreclosed on the property. After receiving the summons, the Insurer retained a new law firm to represent it in Intervest's lawsuit. The Insurer incurred legal fees and expended resources to formulate a defense and to conduct discovery and depositions, including depositions both of its own employees and of the Adjuster's employees.

On May 8, 2012, the Insurer's employee Verna was deposed for the first time. At this time, the Adjuster had still failed to produce the document in its Palm Harbor office file that identified Intervest as a mortgagee. In his deposition, Verna "emphatically denied" that either the Insurer or the Adjuster had "any knowledge" of Intervest's mortgage. Id. at 823–34.

Approximately four months later, the Adjuster's employee Martin was deposed. He testified that, in preparation for his deposition, the Adjuster "searched the office again, just to be diligent, and we found [the document identifying the Intervest mortgage]." Id. at 982....