Verrastro v. Middlesex Ins. Co.

• Court: Connecticut Supreme Court
• Writing for the Court: Before PETERS; GLASS
• Citation: Verrastro v. Middlesex Ins. Co., 540 A.2d 693, 207 Conn. 179 (Conn. 1988)
• Decision Date: 19 April 1988
• Docket Number: No. 13181,13181
• Parties: Frank VERRASTRO, et al. v. MIDDLESEX INSURANCE COMPANY.

Page 693

540 A.2d 693

207 Conn. 179

Frank VERRASTRO, et al. v. MIDDLESEX INSURANCE COMPANY.

No. 13181.

Supreme Court of Connecticut.

Argued Dec. 8, 1987.

Decided April 19, 1988.

Syllabus by the Court

The plaintiffs, whose store had been damaged by fire, sought damages from the defendant insurance company on the ground that it had wrongfully refused to pay the proceeds of a fire insurance policy issued to the plaintiffs. The trial court, concluding that the defendant had established by a preponderance of the evidence that the plaintiffs had caused the fire by arson, rendered judgment for the defendant. On the plaintiffs' appeal, held:

1. The plaintiffs' claim that the trial court erred in determining that in property insurance cases, like that here, the special defense of arson can be proved by a preponderance of the evidence rather than by clear and convincing evidence was unavailing.

2. In light of the evidence presented, there was no merit to the plaintiffs' claim that, because they had not been found near the scene of the crime, the trial court erred in finding that they had the opportunity to commit arson.

3. The defendant's objection to certain rebuttal evidence offered by the plaintiffs was properly sustained by the trial court; the question to which the defendant objected was repetitive and the testimony sought was cumulative.

4. The trial court did not err in concluding that the defendant's rejection of the plaintiffs' proof of loss was timely.

5. The defendant did not breach the implied covenant of good faith and fair dealing owed to the plaintiffs.

Leo Gold, Stamford, for appellants (plaintiffs).

John J. Cotter, with whom was Ann Marie W. Vetrosky, Bridgeport, for appellee (defendant).

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

GLASS, Associate Justice.

The plaintiffs, Frank and Leonard Verrastro, sought damages from the defendant, Middlesex Insurance Company, claiming that the defendant wrongfully refused to pay the proceeds of a fire insurance policy on a building owned by the plaintiffs and damaged by fire. The plaintiffs' four count complaint essentially alleged that the defendant breached its contract with the plaintiffs and breached the implied covenant of good faith and fair dealing. The defendant denied the material allegations of the complaint and asserted four special defenses: (1) that the plaintiffs failed to comply with the conditions of the policy; (2) that the plaintiffs were guilty of fraud and false swearing; and (3) that the plaintiffs independently, through their partnership relationship or through their agents, committed acts either directly or indirectly that caused the destruction by fire of the property in question; and (4) that the plaintiffs failed to exhaust their administrative remedies. ¹

The record establishes the following facts. On September 22, 1980, the plaintiffs operated their Carvel store business on premises located on Bedford Street in Stamford. The defendant had issued an insurance policy, effective May 29, 1980, insuring the plaintiffs' business for any loss by fire for a period of one year. On September 22, 1980, the plaintiffs' Carvel store was damaged by fire. The plaintiffs and the defendant stipulated that the fire had an incendiary origin. The firemen found all doors and windows of the building secured at the time they arrived at the fire. The floor of the store was slippery, several gas cans were found on the premises and inside the store there was the odor of a petroleum-type product.

The trial court, Lewis, J., found that the defendant had established by a preponderance of evidence that the fire was intentionally caused by arson, that the plaintiffs had the opportunity and motive to start the fire, and that the plaintiffs did start the fire. From the judgment rendered for the defendant the plaintiffs appealed to the Appellate Court. The appeal was transferred to this court pursuant to Practice Book § 4023.

On appeal the plaintiffs claim that the trial court erred in: (1) concluding that the defendant could prove its arson special defense by a preponderance of evidence rather than by clear and convincing evidence, where the policy excludes coverage for "any fraudulent, dishonest or criminal act"; (2) finding that the defendant had sustained the burden of proving that the plaintiffs had the "opportunity" to cause the fire; (3) prohibiting the plaintiffs from offering rebuttal evidence pertaining to matters upon which the defendant had the burden of proof; (4) finding that the defendant had acted timely in rejecting the proof of loss approximately five months after its receipt; and (5) finding that the defendant had not breached its implied duty of good faith and fair dealing. We find no error.

I

The plaintiffs' first claim is that the trial court erred in concluding that an insurer can prove an arson defense by a preponderance of evidence rather than by clear and convincing evidence where the policy excludes coverage for "any fraudulent, dishonest or criminal act." It is well established that fraud must be proven by " ' "clear, precise, and unequivocal evidence." ' " Bound Brook Assn. v. Norwalk, 198 Conn. 660, 666, 504 A.2d 1047, cert. denied, --- U.S. ----, 107 S.Ct. 81, 93 L.Ed.2d 36 (1986). Although the defendant asserted fraud in its second special defense, in the third special defense the defendant sought to bar the plaintiffs' claim because of arson.

In a property insurance case it is not necessary that proof of arson be established by "clear, precise, and unequivocal evidence," as is required to prove fraud. A majority of the states that have examined the burden of proof in civil arson cases have adopted the preponderance of the evidence standard. ² This rule has been applied in jurisdictions, like Connecticut, that have adopted the "clear and convincing evidence" standard for proof of fraud in a civil action. See Godwin v. Farmers Ins. Co. of America, 129 Ariz. 416, 631 P.2d 571 (1981). Furthermore, commentators have consistently held that the preponderance of the evidence standard is appropriate to prove a special defense of arson. See 21B J. Appleman & J. Appleman, Insurance Law and Practice (1980) § 12682; 18 G. Couch, Insurance Law 2d (Rhodes Rev.1983) § 74:667. Moreover, the preponderance of evidence rule was recently applied to a civil arson case by our Appellate Court. Souper Spud, Inc. v. Aetna Casualty & Surety Co., 5 Conn.App. 579, 585, 501 A.2d 1214 (1985), cert. denied, 198 Conn. 803, 503 A.2d 172 (1986).

The minority of jurisdictions that apply the clear and convincing evidence standard to the arson special defense appear to rely upon the fact that the defense of arson requires proof of an act of a criminal nature, which must be established by a standard more exacting than the preponderance of the evidence. See Mize v. Harford Ins. Co., 567 F.Supp. 550 (W.D.Va.1982); Hutt v. Lumbermens Mutual Casualty Co., 95 App.Div.2d 255, 466 N.Y.S.2d 28 (1983). We have never held, however, that proof of a criminal activity in a civil action must be established by a quantum of proof more stringent than that necessary to prove the underlying claim. Mead v. Hustead, 52 Conn. 53 (1884); Munson v. Atwood, 30 Conn. 102 (1861); see 30 Am.Jur.2d, Evidence § 1169. Thus, it is readily apparent in property insurance cases that there is no similarity between the quantum of proof required for fraud and the quantum of proof required for arson. The trial court did not err in applying the preponderance of evidence rule to the special defense of arson.

II

The plaintiffs' second claim is that the trial court erred in finding that the defendant had sustained the burden of proving that the plaintiffs had the "opportunity" to cause the fire. The defendant relied on circumstantial evidence to prove this element of the arson special defense. Although any or all of the elements of arson may be proven by circumstantial evidence, "evidence creating a mere suspicion or conjecture that [the] insured fraudulently burned the insured property is not sufficient." 18 G. Couch, supra, § 74:668; see Cora Pub, Inc. v. Continental Casualty Co., 619 F.2d 482 (5th Cir.1980). Like all of the elements of the arson special defense, opportunity must be proven by a preponderance of the evidence. Id.; see 21B J. Appleman & J. Appleman, supra, § 12682.

According to the memorandum of decision, the trial court found that the following evidence supported its finding of opportunity. A police officer noticed the fire at 5:38 a.m., investigated and found the front and back doors of the store locked. The fire fighters also found both doors locked when they arrived, and had to smash their way into the store with axes. After entering the store the firemen smelled a petroleum-type product, saw several gas cans on the floor and noticed that the floor was slippery. There was a separate fire in the utility room at the rear of the Carvel store. The door to this room required a different key to open it than the front and back door key to the store. This key was kept separately in the Carvel store. Neither the fire fighters nor the police saw any indication of a forced entry to the store. The fire marshall testified that the fire commenced at approximately 5 a.m. A Stamford arson task force member testified that he investigated the fire and found that the front and rear doors of the store had deadbolt locks, and both doors were locked shut during the fire. He reached this conclusion because his inspection revealed that a portion of the deadbolts had a different color from the remainder of the bolts, i.e., the exposed portions had burn marks that were different in color from the other portions that were in the door jambs. This evidence supports the conclusion that the arsonist had a key or was with someone who had a key to the store.

Testimony regarding the number and distribution of keys to the store was given by the named plaintiff, Frank Verrastro. He...