Nash St., LLC v. Main St. Am. Assurance Co.

• Decision Date: 14 January 2020
• Docket Number: SC 20389
• Court: Connecticut Supreme Court
• Parties: NASH STREET, LLC v. MAIN STREET AMERICA ASSURANCE COMPANY et al.

337 Conn. 1

251 A.3d 600

NASH STREET, LLC

v.MAIN STREET AMERICA ASSURANCE COMPANY et al.

SC 20389

Supreme Court of Connecticut.

January 14, 2020

Officially released September 9, 2020^**

David G. Jordan, Trumbull, with whom, on the brief, was Samantha M. Oliveira, for the appellant (plaintiff).

Scott T. Ober, with whom was Colleen M. Garlick, for the appellee (named defendant).

Robinson, C. J., and Palmer, McDonald, D'Auria, Mullins, Kahn and Ecker, Js.^*

Opinion

McDONALD, J.

The dispositive issue before us is whether the defendant insurer had a duty to defend an action brought against its insured in an underlying action alleging property damage resulting from a house that collapsed while being lifted off its foundation. The insurance policy under review contained clauses excluding coverage for damage that occurs to ‘‘that particular part’’ of real property on which the insured was working. In this case, brought under the direct action statute; see General Statutes § 38a-321 ; the plaintiff, Nash Street, LLC, appeals from the judgment of the trial court, which granted the motion for summary judgment filed by the named defendant, Main Street America Assurance Company.¹ The plaintiff claims that the trial court improperly granted the defendant's motion for summary judgment because, at the time the insured, New Beginnings Residential Renovations, LLC, tendered defense of the underlying action to the defendant, there existed at least a possibility that the complaint alleged a liability that was covered under New Beginnings’ insurance policy and, thus, triggered the defendant's duty to defend. We agree with the plaintiff and reverse the judgment of the trial court.

The parties stipulated to the following facts in the direct action. The plaintiff's property in Milford needed repairs after being damaged by Hurricanes Sandy and Irene. The plaintiff contracted with New Beginnings to renovate the house, including site grading and foundation work for which the house would be lifted and temporarily placed onto cribbing. A subcontractor was retained to lift the house and to do concrete work on the foundation.

While the subcontractor was lifting the house in preparation for the foundation work, the house ‘‘shifted off the supporting cribbing and collapsed.’’ At the time of the collapse, the only work being performed on the house was related to the lifting. New Beginnings and/ or its subcontractor caused the collapse by failing to ensure that the cribbing was secure. As a result, the house sustained ‘‘extensive physical damage ....’’

The plaintiff brought an action against, inter alios, New Beginnings for property damage arising out of the collapse. The complaint alleged, in pertinent part, that ‘‘New Beginnings was negligent in the performance of its work in the following respects ... New Beginnings and/or its subcontractors negligently constructed or assembled the cribbing [that] caused the collapse; and ... New Beginnings and/or its subcontractors failed to ensure that the cribbing properly supported the house. ... As a result of New Beginnings’ negligence, the cribbing failed, causing damage to the house and the renovation work therein.’’ New Beginnings tendered defense of the case to the defendant pursuant to a commercial general liability insurance policy, and the defendant declined to defend. The plaintiff was awarded a default judgment against New Beginnings for its failure to plead in the amount of $558,007.16. No part of the judgment has been paid.

The record reveals the following additional facts. The plaintiff brought the present action against the defendant under the direct action statute, seeking recovery for the judgment against New Beginnings. In response, the defendant filed an answer and five special defenses, each claiming that the alleged damages were not covered by the insurance policy.² Both parties moved for summary judgment. The plaintiff argued that there was no genuine issue of material fact that there is coverage under the policy and that the exclusions are inapplicable. The defendant argued that there is no genuine issue of material fact that two of the policy's ‘‘business risk’’ exclusions—k (5) and (6)—preclude coverage.

Under exclusion k (5), the policy excludes coverage for property damage to ‘‘[t]hat particular part of real property on which you or any contractor or subcontractor working directly or indirectly on your behalf is performing operations, if the ‘property damage’ arises out of those operations ....’’ Under exclusion k (6), the policy excludes coverage for property damage to ‘‘[t]hat particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it.’’

The plaintiff argued that ‘‘that particular part’’ of the property on which New Beginnings and/or its subcontractor were working was ‘‘the site grading and foundation work underneath the house ... [and that] New Beginnings [and/or its subcontractor were] not performing any renovation or other work on the house itself.’’ Thus, the plaintiff contended, it did not seek to recover for the damage to the work being done underneath the house—that work would be excluded under k (5) and (6). Rather, the plaintiff sought to recover for the damage to the house, including renovation work that had allegedly been completed a year before the collapse.

The defendant argued that ‘‘that particular part’’ of the property on which the subcontractor was performing operations was the whole house because the whole house was being lifted. It further argued that the possibility that the house might collapse while being raised was a foreseeable risk in undertaking those operations. The defendant reasoned that all damage that occurs to a house under these circumstances is a ‘‘business risk’’ that falls squarely within exclusions k (5) and (6).

In due course, the trial court issued a memorandum of decision, denying the plaintiff's motion for summary judgment and granting the defendant's motion for summary judgment. The court stated that the parties agreed that the only issue was whether exclusions k (5) or (6) ‘‘preclude[d] coverage for the property damage to the entire house that occurred as a result of the [house's] shifting [off of] the cribbing and collapsing at the time that grading and foundation work was being performed.’’ The court concluded that exclusions k (5) and (6) were clear and unambiguous, and ‘‘ ‘that particular part of real property’ ’’ on which New Beginnings or the subcontractor was performing operations was the entire house. As such, the court concluded that these exclusions precluded coverage, and, thus, the defendant had no duty to defend or to indemnify New Beginnings.

The plaintiff appealed to the Appellate Court from the trial court's judgment in favor of the defendant, and the appeal was transferred to this court.

On appeal, the plaintiff contends that the trial court improperly granted the defendant's motion for summary judgment because the court conflated the duty to defend, which arises when there is a possibility of coverage, with the duty to indemnify, which arises when there actually is coverage. The plaintiff argues that the defendant had a duty to defend New Beginnings because the plaintiff's complaint alleged damage to the house and interior renovation work, which, under a correct interpretation of exclusions k (5) and (6), was separate from the foundation work. Specifically, the plaintiff argues that, under Connecticut law, either the exclusions must be read narrowly, so as not to preclude coverage, or, alternatively, the exclusions are ambiguous and must be construed in favor of coverage. Under either interpretation, the plaintiff contends, there was a possibility of coverage because the exclusions preclude coverage only for the defective work to the foundation itself and not for the damage to the rest of the house. For its part, the defendant contends that the trial court's granting of summary judgment in its favor was proper because exclusions k (5) and (6) unambiguously preclude coverage. We conclude that summary judgment was improper because exclusions k (5) and (6) did not relieve the defendant of its duty to defend New Beginnings in the underlying action.³

Whether the trial court properly rendered summary judgment in favor of the defendant is a question of law subject to our plenary review. See Tannone v. Amica Mutual Ins. Co. , 329 Conn. 665, 671, 189 A.3d 99 (2018). ‘‘ Practice Book § 17-49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party. ... The party moving for summary judgment has the burden of showing the absence of any genuine issue of material fact and that the party is, therefore, entitled to judgment as a matter of law. ... On appeal, we must determine whether the legal conclusions reached by the trial court are legally and logically correct and whether they find support in the facts set out in the memorandum of decision of the trial court.’’ (Internal quotation marks omitted.) Bellemare v. Wachovia Mortgage Corp. , 284 Conn. 193, 198–99, 931 A.2d 916 (2007).

We begin that review by noting that the plaintiff brought this action under our direct action statute, § 38a-321, which places the plaintiff in the shoes of the insured, subject to all the same rights and protections as the insured. See Samelko v. Kingstone Ins. Co. , 329 Conn. 249, 262, 184 A.3d 741 (2018) ; Black v. Goodwin, Loomis & Britton, Inc. , 239 Conn. 144, 149 n.7, 681 A.2d 293 (1996). The plaintiff's claim, then, turns only on whether there was a possibility of coverage that triggered the insurer's duty to defend. See R.T. Vanderbilt Co. v. Continental...