Napolitano v. ACE Am. Ins. Co.
| Court | Appellate Court of Connecticut |
| Parties | THOMAS NAPOLITANO v. ACE AMERICAN INSURANCE COMPANY ET AL. |
| Decision Date | 02 May 2023 |
| Docket Number | AC 44694 |
Argued September 13, 2022
Procedural History
Action to recover damages for, inter alia, breach of contract, and for other relief, brought to the Superior Court in the judicial district of Hartford, where the case was transferred to the Complex Litigation Docket; thereafter, the plaintiff filed an amended complaint; subsequently, the court Moukawsher, J., granted the named defendant's motion to strike; thereafter, the court, Moukawsher J., granted the plaintiff's motion for summary judgment and rendered judgment thereon, from which the named defendant appealed and the plaintiff cross appealed to this court. Reversed; further proceedings.
Brian M. Paice, for the appellant-cross appellee (named defendant).
Kristen S. Greene, with whom was Michael Feldman, for the appellee-cross appellant (plaintiff).
OPINION
The defendant Ace American Insurance Company[1] appeals from the judgment of the trial court granting the motion for summary judgment filed by the plaintiff, Thomas Napolitano, doing business as Napolitano Roofing, as to counts one and two of the plaintiff's fifth amended complaint, in which he sought a declaratory judgment and asserted a breach of contract claim, respectively. On appeal, the defendant claims that the court erred in (1) granting the plaintiffs motion for summary judgment because the court improperly determined that (a) the defendant's notice of cancellation to the plaintiff, cancelling his workers' compensation insurance policy, was ineffective and (b) the defendant breached its duty under the policy to defend or indemnify the plaintiff with respect to a workers' compensation claim submitted by his employee, (2) awarding attorney's fees to the plaintiff, as damages, in connection with his defense of the workers' compensation claim and a lawsuit brought by the employee, and (3) awarding prejudgment statutory interest to the plaintiff relating to workers' compensation payments that he made to his employee. In addition, the plaintiff cross appeals from the court's granting of the defendant's motion to strike count three of his fifth amended complaint, in which he asserted a claim of bad faith. The plaintiff argues on appeal that he pleaded legally sufficient allegations that the defendant breached the implied covenant of good faith and fair dealing when it refused to defend or indemnify him under his insurance policy. With respect to the defendant's appeal, we reverse the summary judgment of the trial court rendered in favor of the plaintiff, and, as a result, we also vacate the attorney's fees and prejudgment statutory interest awarded to the plaintiff-relief that was predicated on the court's conclusion that the plaintiff was entitled to judgment as a matter of law on count two. As to the plaintiff's cross appeal, we reverse the decision of the trial court striking the third count of the plaintiffs fifth amended complaint.[2]
The following undisputed facts and procedural history are relevant to our resolution of this appeal and this cross appeal. The plaintiff had three workers' compensation insurance policies with the defendant, the first of which is not germane to this appeal. The second policy was effective from October 21, 2017, to February 9, 2018 (second policy). The third policy had effective dates of coverage from February 9, 2018, to February 9, 2019 (third policy). On March 28, 2018, the defendant mailed the plaintiff a notice of an audit noncompliance charge, stating in relevant part that the plaintiff would be charged an additional $912 for noncompliance with the required premium audit for the second policy, and requesting, inter alia, payroll records to complete the audit. On April 3, 2018, the defendant mailed the plaintiff a notice that was identical to the March 28, 2018 notice, other than the date of creation. On April 5, 2018, the defendant mailed the plaintiff a notice titled "Notice of Noncooperation with Audit Current Coverage" (first April 5 notice). The first April 5 notice stated that the plaintiff had not complied with requests to obtain "payroll, classification and tax information" for the plaintiffs second policy. The notice also stated that The effective date of cancellation, although not appearing on the first April 5 notice, appeared on a second notice sent by the defendant to the plaintiff on the same day, April 5, 2018, titled "Workers Compensation and Employers Liability Policy Cancellation" (second April 5 notice). The second April 5 notice stated in relevant part that the third policy "is cancelled in accordance with its terms as of the effective date of cancellation indicated," i.e., April 25, 2018.
On April 7, 2018, the plaintiff emailed his 2017 tax returns to his insurance producer, the defendant Lanza Insurance Agency, LLC (Lanza). On April 10, 2018, the plaintiff emailed the defendant Jazmin Echevarria, Lanza's agent, indicating that he had received a cancellation notice and inquiring whether the defendant had received his tax returns for the audit. That same day, Echevarria responded to the plaintiffs email, informing him that she "just called and they stated that you are compliant at this time."[3] On April 16, 2018, Travelers, the defendant's agent, emailed the plaintiff (April 16 email), stating in relevant part that he still had "premium audit documents missing" for the second policy period. The April 16 email notified the plaintiff that he still needed to provide a "PolicyHolder Audit Report" and to provide it "within [five] days of this notice." The parties do not appear to dispute that, prior to April 25, 2018, the plaintiff did not take any action in response to the April 16 email.
On May 29, 2018 (date of loss), Joshua Arce, an employee of the plaintiff, fell from a roof, sustaining injuries arising out of and in the course of his employment. On July 16, 2018, Arce filed a claim for compensation benefits with the Workers' Compensation Commission (commission). The defendant denied Arce's claim and refused to defend or indemnify the plaintiff under the third policy, claiming that the policy had been terminated prior to the date of loss.[4]
On April 6, 2020, after holding a formal hearing on August 26 and November 18, 2019, the Workers' Compensation Commissioner for the First District (commissioner)[5] found that, on the date of loss, Arce fell from a roof sustaining compensable injuries arising out of and in the course of his employment. The commissioner also found that the plaintiff did not have workers' compensation insurance on the date of loss because the third policy was "properly cancelled electronically with the [commission]" through the National Council on Compensation Insurance (NCCI) on April 6, 2018.[6]
During the August 26, 2019 session of the formal hearing, the commissioner stated that his determination as to whether the second April 5 notice effectively cancelled the third policy on April 25, 2018, was limited to whether the defendant had complied with the requirements of General Statutes § 31-348, in that the cancellation was reported to the commission fifteen days prior to the effective date of cancellation.[7] In that regard, the commissioner stated that he would examine only whether the NCCI reported the policy as terminated on the date of loss and not whether the second April 5 notice complied with the defendant's contractual obligations under the third policy.
On November 4, 2020, the plaintiff and the Second Injury Fund (fund) entered into a settlement agreement with Arce, wherein, inter alia, the plaintiff and the fund agreed to pay to Arce $225,000 in compensation for the prior, present, and subsequent medical care for his injuries arising out of the May 29, 2018 fall. Pursuant to that agreement, Arce agreed to withdraw the action that he had filed against the plaintiff; the fund also agreed to withdraw its intervening complaint in that action. See Arce v. Napolitano, Superior Court, judicial district of Hartford, Docket No. CV-19-6115160-S.
On November 30,2018, while the workers' compensation proceedings were ongoing, the plaintiff commenced the present action. On October 21, 2019, the plaintiff filed his fifth amended complaint (i.e., the operative complaint), in which five counts were directed to the defendant. Count one sought a declaratory judgment vis-a-vis the parties' rights under the third policy. Counts two, three, four, and eight alleged breach of contract, bad faith, negligent misrepresentation, and promissory estoppel, respectively.[8]
On November 20, 2019, the defendant filed a motion to strike, accompanied by a memorandum of law in support thereof, directed to count three of the plaintiffs fifth amended complaint asserting a claim of bad faith. On December 3, 2019, the plaintiff filed an objection to the defendant's motion to strike. On January 14, 2020, the trial court, Moukawsher, J., issued a memorandum of decision granting the defendant's motion to strike.
On February 5, 2020, the plaintiff filed a motion for summary judgment, accompanied by a supporting memorandum of law and exhibits, as to counts one and two of his fifth amended complaint, seeking a declaratory judgment and a judgment as to liability only as to the breach of contract claim respectively. On March 20, 2020, the defendant filed an objection, accompanied by a supporting...
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