MARICULTURE PROD. v. Certain Underwriters

• Decision Date: 31 August 2004
• Docket Number: No. 23194.,23194.
• Citation: 854 A.2d 1100,84 Conn.App. 688
• Court: Connecticut Court of Appeals
• Parties: MARICULTURE PRODUCTS LTD. v. THOSE CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON INDIVIDUALLY SUBSCRIBING TO CERTIFICATE NO. 1395/91 et al.

854 A.2d 1100

84 Conn.App. 688

MARICULTURE PRODUCTS LTD. v. THOSE CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON INDIVIDUALLY SUBSCRIBING TO CERTIFICATE NO. 1395/91 et al.

No. 23194.

Appellate Court of Connecticut.

Argued January 6, 2004.

Decided August 31, 2004.

James T. Hargrove, with whom were Leonard H. Freiman, Steven D. Ecker and, on the brief, James T. Cowdery, Hartford, and James R. Smart, for the appellants-appellees (named defendants).

James D. Poliquin, pro hac vice, with whom were Robert J. Sickinger and, on the brief, John W. Cannavino, Stamford, for the appellee-appellant (plaintiff).

FLYNN, WEST and DIPENTIMA, Js.

DiPENTIMA, J.

In this protracted insurance claim dispute that arose after Hurricane Bob hit the coast of Maine in 1991, we are asked to interpret and apply Maine insurance law. The defendants, Those Certain Underwriters at Lloyd's of London Individually Subscribing to Certificate No. 1395/91,¹ appeal from the judgment of the trial court, rendered after a jury trial, in favor of the plaintiff, Mariculture Products Ltd.² On appeal, the defendants claim that the trial court (1) improperly denied their motions for a directed verdict and for judgment notwithstanding the verdict, both premised on the issue of release, and improperly instructed the jury not to consider either their related settlement with Key Bank of Maine (Key Bank) or their $150,000 payment to Key Bank as a result of the settlement, (2) failed to set off against the verdict the $150,000 payment to Key Bank and improperly instructed the jury not to consider the issue of setoff, and (3) failed to render judgment as a matter of law against the plaintiff on its claim under § 2436 of title 24-A of the Maine Revised Statutes and improperly instructed the jury to consider that claim.

The plaintiff cross appeals, claiming that the court improperly (1) determined that the interest required under § 2436 should be simple rather than compound, (2) decided not to instruct the jury on the meaning of "reserving any appropriate defenses" in response to the jury's question regarding how that language should be interpreted and (3) denied the plaintiff's motion for a directed verdict on its claims under Maine's Unfair Settlement Practices Act, Me.Rev.Stat. Ann. tit. 24-A, § 2436-A (West 2000). We affirm in part and reverse in part the judgment of the trial court.

The following facts are relevant both to the defendants' appeal and the plaintiff's cross appeal. The plaintiff owned and operated fish hatcheries at three separate locations in Maine. Gershon G. Navon served both as the president and sole shareholder of the plaintiff and its parent corporation, Mariculture Products Corporation. The plaintiff's inventory of fish at each of its hatcheries was insured by the subject insurance policy that was issued by the defendants. The policy covered fish that were lost due to death, destruction or escape.

The property insurance policy also included a clause naming Key Bank as a loss payee.³ Key Bank had loaned to the plaintiff a total of $9 million to finance the establishment of the plaintiff's business. Key Bank initially loaned to the plaintiff $5 million for construction of the hatcheries and sites. This loan was disbursed in three installments from 1988 through 1991. Key Bank loaned an additional $4 million to the plaintiff in 1992. That loan was equally divided between a working capital loan and a term loan. The working capital funds operated as a revolving line of credit.

The plaintiff entered into a series of security agreements with Key Bank to secure the loans. The plaintiff's machinery, cages and other assets related to the construction of the hatchery facilities served as collateral for the $5 million construction loan. The revolving line of credit associated with the $2 million of working capital was secured by the plaintiff's inventory of fish.

The plaintiff sustained a significant loss of fish at its Frenchboro farm on August, 19, 1991, as a result of Hurricane Bob. On March 3, 1992, the plaintiff submitted a formal claim to the defendants specifying losses of $744,070.⁴ The plaintiff later reduced this claim to $729,672. On April 2, 1992, the defendants denied the claim by letter, stating that the claim was "excessive" and providing no further explanation.

Meanwhile, between January and March, 1992, the plaintiff was engaged in negotiations with Key Bank regarding its inability to make its loan payments. Key Bank had sent a written notice of default and acceleration to the plaintiff on February 27, 1992, outlining various defaults allegedly committed by the plaintiff. During the course of these negotiations, on March 17, 1992, Key Bank physically seized the plaintiff's assets. On May 26, 1993, allegedly on behalf of the plaintiff, Key Bank submitted a proof of loss form to the defendants, claiming $150,000 in losses. This proof of loss form purported to release the defendants from all further claims by the plaintiff. Subsequently, the defendants paid $150,000 to Key Bank pursuant to a settlement between the defendants and Key Bank.

On February 9, 1998, the plaintiff filed the underlying action against the defendants, seeking to recover damages for an alleged breach of the insurance contract. The complaint sounded in breach of contract and violations of the late payment and unfair claims settlement practices provisions of the Maine Insurance Code. Following trial, the jury returned a verdict in favor of the plaintiff on its breach of contract and late payment claims, awarding damages of $445,000. The jury returned a verdict in favor of the defendants on the unfair claims settlement practices claim. The court awarded the plaintiff attorney's fees of $487,194 and interest of $768,515. This appeal and cross appeal followed. Additional facts will be set forth as necessary.

I APPEAL

A

The defendants first claim that the court improperly denied their motions for a directed verdict and for judgment notwithstanding the verdict as to their contention that they had been released from any obligation to the plaintiff pursuant to the security agreements existing between the plaintiff and Key Bank. They also contend that the court improperly instructed the jury not to consider the settlement reached between the defendants and Key Bank or the amount paid to Key Bank under that settlement.⁵ Specifically, the defendants contend that (1) the proof of loss submitted to them by Key Bank discharged them from liability for all future claims by the plaintiff, (2) the payment to Key Bank by the defendants was authorized by the plaintiff and (3) Key Bank's status as a loss payee was fixed as of the date of the loss.

The following additional facts are relevant to the resolution of the defendants' claim. The plaintiff and Key Bank executed a security agreement on October 9, 1991, approximately two months after the date of the loss. This security agreement specifically covered the fish located at the Frenchboro farm. The agreement also contained a clause granting Key Bank the authority to act as the plaintiff's attorney in fact. On the basis of those provisions, the defendants claim that their payment to Key Bank released them from any obligations they may have had to the plaintiff, as Key Bank was the designated loss payee under the subject insurance contract and had the authority to act on behalf of the plaintiff under the security agreement.

The court instructed the jury not to consider the issue of release, reasoning that § 2425⁶ of title 24-A of the Maine Revised Statutes had been triggered by the plaintiff and was, therefore, applicable to the case. The court stated that "[§ 2425] has been put into full force and effect by exhibit eighty-six, a letter addressed to Fred Plant, Jr., of Plant Adjustment Bureau, signed by Mr. Gershon G. Navon, dated June 3, 1992 before the $150,000 payment was made by the insurance company to Key Bank."⁷ The court also denied the defendants' motions for a directed verdict and for judgment notwithstanding the verdict, both of which were based on the argument of release.⁸

The defendants first argue that the court improperly denied their motions for a directed verdict and for judgment notwithstanding the verdict as to their contention that they had been released from any obligation to the plaintiff pursuant to the security agreements existing between the plaintiff and Key Bank. We disagree.

The standards of review applicable to the defendants' claim are well settled.⁹ We review a trial court's decision on a motion for a directed verdict under an abuse of discretion standard. Moran v. Eastern Equipment Sales, Inc., 76 Conn.App. 137, 144, 818 A.2d 848 (2003). "A trial court should direct a verdict for a defendant if viewing the evidence in the light most favorable to the plaintiff, a jury could not reasonably and legally reach any other conclusion than that the defendant is entitled to prevail.... The trial court's refusal to set aside the verdict is entitled to great weight and every reasonable presumption should be given in favor of its correctness." (Citation omitted; internal quotation marks omitted.) Id., at 143-44, 818 A.2d 848.

A similar standard applies in reviewing a court's decision on a motion for judgment notwithstanding the verdict. "Appellate review of a trial court's refusal to render judgment notwithstanding the verdict occurs within carefully defined parameters. We must consider the evidence, and all inferences that may be drawn from the evidence, in a light most favorable to the party that was successful at trial.... This standard of review extends deference to the judgment of the judge and the jury who were present to evaluate witnesses and testimony.... Judgment notwithstanding the verdict should be granted only if we find that the jurors could not reasonably and legally have reached the conclusion that they did reach." (Internal quotation marks omitted.) Parker v. Slosberg, 73...