Ins. Co. of North America v. Town of Manchester

• Decision Date: 16 June 1998
• Docket Number: Civil Action No. 3-94-cv-1918 (JCH).
• Citation: 17 F.Supp.2d 81
• Court: U.S. District Court — District of Connecticut
• Parties: INSURANCE COMPANY OF NORTH AMERICA, Plaintiff, v. TOWN OF MANCHESTER, et al., Defendants.

17 F.Supp.2d 81

INSURANCE COMPANY OF NORTH AMERICA, Plaintiff, v. TOWN OF MANCHESTER, et al., Defendants.

Civil Action No. 3-94-cv-1918 (JCH).

United States District Court, D. Connecticut.

June 16, 1998.

Louis R. Pepe, Pepe & Hazard, Hartford, CT, for Plaintiff.

John Stephen Papa, Howard, Kohn, Sprague & Fitzgerald, Hartford, CT, for Defendant Town of Manchester.

Vincent J. Dowling, Cooney, Scully & Dowling, Hartford, CT, for Defendant Fuss & O'Neill, Inc.

MEMORANDUM OF DECISION ON DEFENDANT, FUSS & O'NEILL'S MOTION FOR SUMMARY JUDGMENT

HALL, District Judge.

BACKGROUND

The defendant, Fuss & O'Neill, Inc., moved this court on December 18, 1996 for summary judgment, [Dkt. # 36], on the sixth count of the original complaint¹ on the ground that no cause of action in tort seeking "purely economic" losses exists in Connecticut against a design professional not in privity with the plaintiff. This Court concludes that it does.

This lawsuit arises out of a multi-million dollar construction project known as "Construction of Main Street, Manchester, Connecticut." After following the state competitive bidding process, the Town of Manchester (hereinafter referred to as the "Town")² entered into a contract with Della Construction Company (hereinafter referred to as "Della") for construction of the Project.³ Prior to the execution of the general contract with Della, the Town had entered into two contracts with Fuss & O'Neill, an architectural and engineering firm, pursuant to which Fuss & O'Neill was to provide all the design and engineering services for the Project. In addition to these services, Fuss & O'Neill agreed to take responsibility for utility coordination, contract administration, bid analysis, project accounting, scheduling monitoring, costs control, change order processing, progress payment processing, progress meeting management, contract document interpretation, inspection, supervision, and inspection assistance, before, during and after the Project. Exhs. 1 & 2 to Plaintiff's Opposition to Defendant's Motion for Summary Judgment. Plaintiff claims, based on the contract and on deposition testimony, that Fuss & O'Neill had to know that Della's performance of its contract with the Town was dependent in large part upon Fuss & O'Neill's proper performance of its role in the Project. For example, the plaintiff cites to the inspection contract that provides that Fuss & O'Neill is to "cooperate fully" with those rendering construction services on the Project, clearly including Della. Exh. 2 to Plaintiff's Opposition at ¶ 13 (Inspection Contract).

Plaintiff claims that the Main Street Project became a "boulevard of broken promises" as a result of Fuss & O'Neill's negligent performance of its duties and its intentional misconduct. In particular, plaintiff contends that Della was harmed by the negligence of Fuss & O'Neill. "The dependance of Della's success and economic well being on Fuss & O'Neill's performance of these duties made foreseeable the harm Della would suffer as a result of Fuss & O'Neill's failure to exercise such care, skill and diligence and gave rise to a duty of care owed Della by Fuss & O'Neill." Amended Complaint at ¶ 15.

Apparently at the suggestion of the court (Arterton, J.), the defendants filed this Motion for Summary Judgment to address what was viewed as a purely legal issue: whether a cause of action sounding in tort and seeking purely economic losses against a design professional by a construction contractor, not in privity with the design professional, was recognized under the law of the State of Connecticut.

STANDARD

A motion for summary judgment may be granted only when it is shown that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Federal Rules of Civil Procedure 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Donahue v. Windsor Locks Bd. of Fire Comm'rs., 834 F.2d 54, 57 (2d Cir.1987). The burden falls on the moving party to establish that no relevant facts are in dispute. Id.

ANALYSIS

In the present matter, Fuss & O'Neill apparently claims that, although there are a myriad of disputed factual issues, summary judgment is proper because none of the disputed facts are material. See Bellomo v. United Arab Shipping Co., 863 F.Supp. 107 (E.D.N.Y.1994) ("only disputes over facts that might affect the outcome of the suit under governing law will property preclude the entry of summary judgment.") Specifically, Fuss & O'Neill argues that, because all of Della's claims sound in tort, and because their damages are purely economic in nature, it is wholly without remedy. Fuss & O'Neill does not assert that the facts surrounding the parties' relationship, performance or duties are undisputed. See Defendant's Rule 9(c) Statement of Material Facts to which there is No Genuine Issue to be Tried. [Dkt. # 38] The only issue raised by Fuss & O'Neill is whether the "economic loss" rule bars INA's claims.

The parties agree that the Connecticut Appellate and Supreme Courts have never directly addressed the issue of whether a contractor can recover purely economic losses against a design professional in the absence of contractual privity and in the absence of personal injury or property damage to the contractor. Both parties cite to several Superior Court decisions on the issue, the results of which are acknowledged to be "mixed." See Reiner & Reiner v. Connecticut Natural Gas Corp., Case No. CV 950551260, 1995 WL 780933 (Conn.Super., Dec.12, 1995)(claim for recovery of economic damages against CNG for negligently caused gas leak survived motion to strike); DeVillegas v. Quality Roofing, Inc., Case No. CV 920294190S, 1993 WL 515671 (Conn.Super., Nov.30, 1993)(motion to strike granted pursuant to "long established common law rule in this state ... that in the absence of privity of contract between the plaintiff and defendant, or of an injury to the plaintiff's person or property, a plaintiff may not recover in negligence for purely economic loss."); City of Danbury v. Flaherty, Giavara Associates, Inc., 15 CLT 1 (Conn.Super.1988) (absence of privity of contract not a bar to negligence actions by construction professionals against one another when purely economic damages are sought). Construing the allegations of the Amended Complaint, and the facts alleged by plaintiff to be in dispute, see plaintiff's Statement of Material Facts as to Which There Exists a Genuine Issue to be Tried, [Dkt. # 45], in the light most favorable to the non-moving party this court concludes that plaintiff, as a contractor, has successfully stated a cause of action under Connecticut law for purely economic losses against defendant, a design professional, despite the absence of contractual privity between the parties and/or personal injury or property damage to plaintiff.

In 1977, the Connecticut Supreme Court held for the first time that a subsequent purchaser of a home could recover in negligence against the contractor for the faulty installation of a septic system in the absence of privity. Coburn v. Lenox Homes, Inc., 173 Conn. 567, 569, 378 A.2d 599 (1977). The court dealt first with the issue of the requirement of privity and held that that requirement was "irrelevant to tort actions." Id. at 574, 378 A.2d 599. On the issue of foreseeability of the harm to the plaintiff, the court held that a defectively constructed home was likely to result in damage to the owner, and that there was "no reason why the builder/vendor should not be liable for the effects of his negligence if they were foreseeable." Id. at 575-576, 378 A.2d 599. Thus, the Supreme Court reversed the trial court's striking of the claim for negligence against the contractor.

The defendant attempts to distinguish Coburn. At oral argument, counsel for the defendant suggested that Coburn does not support the plaintiff's position here because in Coburn, unlike the instant case, the plaintiff sought "property damages" arising from the defendant builder's negligence in constructing the septic system.⁴ The Coburn court, although not expressly addressing this issue, clearly suggests that the distinction between property damage or personal injury, on one hand, and economic loss, on the other, would not be material to its holding. "It is clear that a defectively constructed house is likely to result in damage to the owner ..." Id. at 575, 378 A.2d 599 (emphasis added). Clearly, the damage at issue in the Coburn case was not solely personal injury to the plaintiff/owner — repair to the septic system was obviously necessary. The use by the court of the phrase "damage to the owner" suggests that the Coburn Court was not adopting the distinction between "economic loss" and non-economic loss.⁵ To the contrary, the language of the Coburn case suggests that any reasonably foreseeable damage suffered by the owner, including nonproperty or non-personal damages such as, for example, the costs of habiting elsewhere while the defect in the home was repaired, would be recoverable by the plaintiff/owner.⁶

It has long been established in Connecticut that the concept of foreseeability is key to the determination of a cause of action in negligence. "The ultimate test of the existence of a duty to use care is found in the foreseeability that harm may result if it is not exercised." Burns v. Board of Educ., 228 Conn. 640, 647, 638 A.2d 1 (1994)(internal citations omitted). "The test is, would the ordinary man in the defendant's position, knowing what he knew or should have known, anticipate that harm of the general nature of that suffered was likely to result?" Neal v. Shiels, Inc., 166 Conn. 3, 12-13, 347 A.2d 102 (1974). In Connecticut Mutual Life Ins. Co. v. New York and New Haven R.R. Co., 25 Conn. 265 (1856), the Supreme Court refused to recognize a cause of action by an insurance company against a railroad. The insurance company had paid a death...