Rego v. Connecticut Ins. Placement Facility, 14133

• Decision Date: 18 June 1991
• Docket Number: No. 14133,14133
• Citation: 219 Conn. 339,593 A.2d 491
• Court: Connecticut Supreme Court
• Parties: Zelia S. REGO v. CONNECTICUT INSURANCE PLACEMENT FACILITY.

Page 491

593 A.2d 491

219 Conn. 339

Zelia S. REGO v. CONNECTICUT INSURANCE PLACEMENT FACILITY.

No. 14133.

Supreme Court of Connecticut.

Argued April 25, 1991.

Decided June 18, 1991.

Stephen E. Goldman, with whom was Linda L. Morkan, Hartford, for appellant (defendant).

Joseph A. Mengacci, Waterbury, for appellee (plaintiff).

Before PETERS, C.J., and SHEA, CALLAHAN, GLASS and COVELLO, JJ.

CALLAHAN, Associate Justice.

The principal issue in this appeal is whether an insurer who pleads concealment or misrepresentation as a special defense in an action to recover on a fire insurance policy is required to prove that defense by clear and convincing evidence or by a preponderance of the evidence. We conclude that the preponderance of the evidence standard is the appropriate burden of proof.

The plaintiff, Zelia S. Rego, was the owner of two adjacent multi-family houses in Waterbury that were insured against fire loss under policies issued by the defendant, the Connecticut Insurance Placement Facility. After both of the dwellings were damaged by fire during the early morning hours of July 15, 1984, and the defendant subsequently denied coverage, the plaintiff filed a two count complaint to recover under the policies. Each count represented a claim for one of the dwellings. The defendant alleged in its answer that the plaintiff was not entitled to recover because: (1) the fire was set by or with the assistance of the plaintiff; and (2) the plaintiff "intentionally concealed and misrepresented material facts and circumstances relating to the fire at issue, including, but not limited to, her knowledge of the cause and origin of the fire." ¹ The jury returned a verdict for the plaintiff. The defendant filed an appeal in the Appellate Court, which affirmed the judgment of the trial court. Rego v. Connecticut Insurance Placement Facility, 22 Conn.App. 428, 577 A.2d 1105 (1990). We granted certification, limited to the following issues: "(1) Was the Appellate Court correct in determining that an insurer's special defense of material misrepresentation must by proven by clear and convincing evidence? (2) Was the Appellate Court correct in determining that the trial court's limiting instruction to the jury to consider only misrepresentations 'related to the cause and origin of the fire' as proof of the special defense, thereby excluding certain evidence, was not likely to have misled the jury." Rego v. Connecticut Insurance Placement Facility, 216 Conn. 824, 582 A.2d 204 (1990). We now reverse.

The circumstances surrounding the cause and origin of the fire were disputed at trial. The plaintiff testified that at the time the fire began she and Eliud Rivera, with whom she was living at the time and whom she subsequently married, were asleep in a bedroom on the third floor of one of the two buildings. Rivera testified that after being awakened by an explosion, he went into the hallway outside the bedroom to investigate. While there he was struck by what he described as an explosion of flames and liquid that burned his body. He then ran back into the bedroom and rolled on the bed to extinguish the flames. The plaintiff and Rivera both testified that they then went out through a bedroom window onto the roof and were subsequently rescued by fire fighters. In addition to stating that she did not know how the fire had begun, the plaintiff maintained that there had been no gasoline or kerosene in her home at the time of the fire, but that there had been some paint and paint thinner in the hallway.

The defendant presented evidence that shortly after the fire Rivera had said that an unidentified man had poured gasoline on him when he went out into the hallway. ² On cross-examination, however, Rivera admitted that it was not possible that anyone had been in the house at the time of the fire except the plaintiff and him. Martin Egan, a Waterbury detective, testified that he arrived at the scene while the fire was still in progress and that there had been a strong smell of gasoline in the building that the plaintiff and Rivera had occupied. He also stated that he had found containers in their apartment that held a liquid that looked and smelled like gasoline. Robert Dee, an insurance investigator called by the defendant, testified that it was his conclusion that the fire had been set intentionally ³ and that it had been started in the kitchen through the use of a flammable liquid, most likely gasoline. The defendant also presented evidence that empty containers found at the scene of the fire had contained gasoline and that liquid found in another container was in fact gasoline. ⁴

I

The defendant contends that the trial court improperly rejected its request for an instruction to the jury that the defendant had to prove its special defense of concealment or misrepresentation by a preponderance of the evidence. We agree.

It is not disputed that a claim of common law fraud must be proven by a higher burden of proof than the preponderance of the evidence standard. We have described this standard alternatively as "clear and satisfactory" evidence, or "clear, precise and unequivocal" evidence. Kilduff v. Adams, Inc., 219 Conn. 314, 327-28, 593 A.2d 478 (1991). ⁵ In Verrastro v. Middlesex Ins. Co., 207 Conn. 179, 181-83, 540 A.2d 693 (1988), we adopted the majority rule that an insurer who pleads the special defense of arson in an action to recover fire insurance proceeds must prove that defense only by a preponderance of the evidence. We noted in Verrastro that other jurisdictions that apply the clear and convincing standard to proof of fraud in a civil action have adopted the preponderance of the evidence standard for the defense of arson. Id., at 182, 540 A.2d 693. Contrary to the position of the plaintiff, in Verrastro v. Middlesex Ins. Co., supra, we did not decide what standard of proof is applicable to an insurer's defense of concealment or misrepresentation in a claim for coverage under an insurance contract. To the extent that we suggested that the clear and convincing standard should be applied to that defense, it was dictum. We now interpret our reference in Verrastro to the elevated burden of proof required for proof of fraud in a civil action as applying solely to claims of common law fraud, the elements of which are distinct from an insurer's defense of concealment or misrepresentation. Compare Davis-Scofield Co. v. Reliance Ins. Co., 109 Conn. 686, 689-90, 145 A. 42 (1929) (elements of concealment or misrepresentation defense) and Kilduff v. Adams, Inc., supra (elements of common law fraud).

The plaintiff contends that the clear and convincing standard charged by the trial court is the correct burden of proof because the defendant's allegation of concealment or misrepresentation is tantamount to a claim of common law fraud. The defendant, on the other hand, argues that in light of the fact that the special defenses of arson and concealment or misrepresentation are usually raised together, it would be illogical and impractical to apply different standards to the two defenses. The defendant also contends that a claim that an insured has concealed or misrepresented material facts concerning a claim for coverage is distinct from a claim of common law fraud and, therefore, the clear and convincing standard should not be applied to that defense. We agree.

The majority of courts that have addressed this issue have concluded that the preponderance of the evidence standard is the appropriate burden of proof to apply to an insurer's defense that a policy is void because the insured has concealed or misrepresented material facts concerning a claim for coverage. ⁶ The leading commentators take the same position. 22A J. & J. Appleman, Insurance (1979) § 14062, p. 132; 7 G. Couch, Insurance (2d Ed.1961) § 35:117, p. 136. In addition, we are aware of no jurisdictions that have ruled that the preponderance of the evidence standard applies to an arson defense while a higher burden of proof applies to a defense of concealment or misrepresentation. Furthermore, several jurisdictions that, like Connecticut, apply an elevated standard to claims of common law fraud apply the preponderance of the evidence standard to an insurer's defense of concealment or misrepresentation. Riley Hill General Contractor, Inc. v. Tandy Corporation, 303 Or. 390, 407, 737 P.2d 595 (1987), citing Mutual of Enumclaw Ins. Co. v. McBride, 295 Or. 398, 667 P.2d 494 (1983); St. Paul Mercury Ins. Co. v. Salovich, 41 Wash.App. 652, 655-58, 705 P.2d 812, review denied, 104 Wash.2d 1029 (1985); see Pacheco v. Safeco Ins. Co. of America, 116 Idaho 794, 800-801, 780 P.2d 116 (1989); Italian Fisherman v. Commercial Union Assurance Co., 215 N.J.Super. 278, 281-82, 521 A.2d 912, cert. denied, 107 N.J. 152, 526 A.2d 211 (1987).

We note that, as in the present case, insurers commonly raise the special defenses of arson and concealment or misrepresentation in tandem. See, e.g., Verrastro v. Middlesex Ins. Co., supra, 207 Conn. at 180, 540 A.2d 693; Dairy Queen of Fairbanks, Inc. v. Travelers Indemnity Co., 748 P.2d 1169, 1170 (Alaska 1988); St. Paul Mercury Ins. Co. v. Salovich, supra. The reason that these two defenses are often raised together is obvious. If an insurer believes that the insured intentionally set fire to property covered under a fire policy, the insurer is equally likely to suspect that the insured is concealing or misrepresenting facts concerning the fire. In St. Paul Mercury Ins. Co. v. Salovich, supra, 41 Wash.App. at 658, 705 P.2d 812, the court observed that it would create an "illogical and impractical inconsistency" to impose two different standards of proof in cases where the insurer raises the special defenses of arson and material misrepresentation in the same lawsuit. Accord Hendrix v. Insurance Co. of North America, 675 S.W.2d 476, 480-81 (Tenn.App.1984). We agree that there is no practical reason to apply two different burdens of proof...