Gordon v. HNS MANAGEMENT CO., INC.

• Decision Date: 21 December 2004
• Docket Number: No. 17139.,17139.
• Citation: 861 A.2d 1160,272 Conn. 81
• Parties: Constance GORDON v. H.N.S. MANAGEMENT COMPANY, INC. Granville Downs et al. v. H.N.S. Management Company, Inc.
• Court: Connecticut Supreme Court

861 A.2d 1160

272 Conn. 81

Constance GORDON v. H.N.S. MANAGEMENT COMPANY, INC.

Granville Downs et al. v. H.N.S. Management Company, Inc.

No. 17139.

Supreme Court of Connecticut.

Argued September 20, 2004.

Decided December 21, 2004.

Richard C. Mahoney, with whom, on the brief, was Dennis F. McCarthy, Hartford, for the appellant (defendant).

Paul S. Levin, Hartford, with whom was Jefferson D. Jelly, for the appellees (plaintiffs in both cases).

SULLIVAN C.J., and BORDEN, KATZ, VERTEFEUILLE and ZARELLA, Js.

SULLIVAN, C.J.

The defendant, H.N.S. Management Company, Inc., doing business as Connecticut Transit, appeals from the trial court's rulings that: (1) the claims of the plaintiffs, Constance Gordon and Granville Downs,¹ that the defendant was required by General Statutes §§ 14-29² and 38a-336³ to purchase uninsured and underinsured motorist insurance for the buses that it operated pursuant to contracts with the state were not barred by the doctrine of sovereign immunity; and (2) as a matter of statutory interpretation, a motor bus is a type of motor vehicle subject to the uninsured and underinsured motorist insurance provisions of the statutes. We conclude that the trial court improperly determined that the defendant was not entitled to raise sovereign immunity as a defense to the plaintiffs' claims. We further conclude that the state has not waived its sovereign immunity with respect to such claims. Accordingly, we need not consider the defendant's second claim on appeal.⁴

The record reveals the following facts and procedural history. Each plaintiff brought a separate action. In the Gordon case, the parties stipulated that Gordon was a passenger on a bus operated by the defendant in the city of Hartford on April 24, 1996. They further stipulated that she was injured when the driver of an unidentified motor vehicle cut in front of the bus and forced the bus driver to brake abruptly, thereby causing Gordon to fall. Gordon claimed that she was entitled to recover uninsured motorist benefits from the defendant pursuant to General Statutes § 38a-334 et seq.

In the Downs case, Downs alleged that he was driving a bus operated by the defendant in the city of East Hartford on August 23, 1995. He further alleged that he was injured when a motor vehicle, driven by Steven Grant, collided with the bus. Downs claimed that he had exhausted the insurance coverage available to Grant and was entitled to recover underinsured motorist benefits from the defendant. In his amended complaint, he sought a judgment declaring that the defendant had an obligation to provide underinsured motorist coverage pursuant to §§ 14-29 and 38a-336(f).

In each case, the defendant claimed as a special defense that the plaintiff's claim was barred by the doctrine of sovereign immunity. After the cases were consolidated for trial, the court held a hearing on the sovereign immunity issue on December 18, 2001.⁵ At that hearing, the defendant argued that it was entitled to assert a sovereign immunity defense under the criteria set forth in Dolnack v. Metro-North Commuter Railroad Co., 33 Conn.App. 832, 639 A.2d 530 (1994).⁶ In support of its claim, the defendant presented testimony by Michael Sanders, the transit and rideshare administrator of the state department of transportation (department); David A. Lee, the general manager of First Transit, formerly known as ATE Management and Services Company; and Stephen Botticello, the defendant's director of finance.

Sanders testified that, since 1979, the department has hired private management companies to operate public transportation services in certain areas of the state. The state has a contract for such services with First Transit and the defendant.⁷ The defendant is an operating subsidiary of First Transit and is responsible for handling the day-to-day public transportation services in the greater Hartford, greater New Haven and greater Stamford areas. Bus services in these areas originally were provided by private companies. Ultimately, the state "took over the bus system" and hired management and operating companies to keep the system going for the benefit of the public. The state, not the defendant, owns all of the capital assets required for the operation of the business, including the buses and the premises where the defendant's offices are located. Sanders also testified that, pursuant to the contracts between the defendant and the state, all bus fares become state property the moment that the defendant's employees collect them. In turn, the state supplies all of the money for the defendant's operating budget. Operating expenses exceed the revenues from fares.

Sanders testified that the "overall system" is subject to the control and oversight of the department, although the defendant handles the day-to-day operations, such as the hiring of bus drivers. The state is contractually responsible for providing liability insurance for the buses operated by the defendant. Any tort claims for which the defendant becomes liable are paid by the state as part of the defendant's operating budget. Sanders testified that the commissioner of the department is statutorily empowered both to determine whether public transportation services are a public benefit that should be provided and to take action to ensure that such services are made available. The buses operated by the defendant are registered through the ordinary procedures for state property and have "state-numbered" registration plates.

Lee testified that he is First Transit's liaison with the department and that he reports to Sanders. The defendant was created to carry out First Transit's responsibilities under its contracts with the state. Neither First Transit nor the defendant owns any assets related to the public transportation operation. The state owns the buildings in which their offices are located, everything in the buildings and the buses. First Transit is authorized to purchase small items such as stationery and office supplies. The state licenses and inspects the buses before turning them over to the defendant. First Transit contributes no money to the defendant's operating budget, which is funded entirely by the state.

Lee further testified that the state is contractually responsible for purchasing liability insurance for the buses. The defendant has authority to settle tort claims up to a certain dollar limit. Settlements above that limit require approval from the department. The defendant pays any settlements or judgments arising from tort claims against it, but the money comes out of the operating funds provided by the state. Under their contracts with the state, First Transit and the defendant agreed to waive sovereign immunity as a defense to all claims unless otherwise requested by the state. Harry P. Harris, the chief of the department's bureau of public transportation, wrote to Lee on April 10, 2000, and instructed him that the defendant was authorized to assert sovereign immunity as a defense to any claims alleging that the defendant was subject to § 38a-336, which governs uninsured and underinsured motorist coverage.⁸

Lee further testified that the state originally had purchased the assets of a former Connecticut company and had contracted with another private corporation to operate the bus services. Because the state had used federal funds to purchase the Connecticut company's assets, it was required by federal law to maintain that corporation's collective bargaining agreement with its employees. When the state entered into a contract with First Transit's predecessor corporation, that corporation inherited the collective bargaining agreement. The agreement has been in place since that time. When the agreement comes up for renegotiation, the defendant is restricted by the budget and guidelines that the department provides. The defendant is authorized to purchase small office supply items and other routine supplies, but higher cost expenditures require state approval. The defendant is self-insured for workers' compensation. In practice, that means that the defendant pays any awards and is reimbursed by the state.

Botticello testified that he is responsible for the defendant's day-to-day financial operations. He estimates monthly operating costs and submits the estimates to the state approximately one month in advance. The state transfers operating funds to the defendant in bimonthly installments. If the money is insufficient to cover the monthly costs, Botticello adds the shortfall to the next monthly cost estimate. The state is the defendant's only source of funding. The defendant deposits the fares that it collects into a state bank account on a daily basis. It collects approximately $22 million in fares annually and has an annual operating budget of approximately $66 million.

The plaintiffs did not offer any independent evidence at the December 18, 2001 hearing, but relied entirely on cross-examination of the defendant's witnesses. Sanders testified on cross-examination that he is aware that certain private companies provide bus transportation services within the state and that companies that operate without state involvement are required to obtain a certificate of necessity pursuant to General Statutes § 13b-80.⁹ The requirement in General Statutes § 13b-38k(b)¹⁰ that state agencies "provide for the maximum feasible participation of private, for-profit operators" in the provision of public transportation services is consistent with the department's philosophy and practices. Sanders testified that the defendant does not collect sufficient fares to cover its operating expenses and that the state treasury makes up the difference. The defendant "can't lose money because that really is the state's bus operation." If the defendant's performance is deficient, however, then the state can terminate the contract. The state pays a management fee of approximately $50,000 per month to First Transit.

Sanders further...