Zurich Am. Ins. Co. v. Expedient Title, Inc.

• Decision Date: 16 December 2015
• Docket Number: No. 3:11-cv-001633 (MPS),3:11-cv-001633 (MPS)
• Court: U.S. District Court — District of Connecticut
• Parties: ZURICH AMERICAN INSURANCE COMPANY, Plaintiff, v. EXPEDIENT TITLE, INC., FIRST AMERICAN TITLE INSURANCE COMPANY AND ROBERT TAMBINI, Defendant.

ZURICH AMERICAN INSURANCE COMPANY, Plaintiff, v. EXPEDIENT TITLE, INC., FIRST AMERICAN TITLE INSURANCE COMPANY AND ROBERT TAMBINI, Defendant.

No. 3:11-cv-001633 (MPS)

UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT

December 16, 2015

MEMORANDUM OF DECISION

In filling out a renewal application for a liability insurance policy from the plaintiff, Zurich American Insurance Company ("Zurich"), the insured, Expedient Title, Inc. ("Expedient"), answered "no" to a question about whether any of its officers was the subject of a governmental investigation. At the time, Expedient knew that one of its officers, who was an attorney, was being investigated by a grievance committee of the New York state court system. Expedient believed, however, that the investigation did not relate to its business, which involved acting as a title agent for title insurance companies in real estate transactions, and interpreted the question to ask only about investigations pertaining to this business. Zurich has sued to rescind the policy on the ground that Expedient's "no" answer was a misrepresentation, and now moves for summary judgment.

I must decide whether Expedient's "no" answer was knowingly false when made and material to Zurich's decision to issue the liability insurance policy. If it was, then Zurich would be entitled to rescission and the policy would be treated as void ab initio under Connecticut law. Because the question on the renewal application easily embraced the professional disciplinary investigation of Expedient's officer and because an insured may not escape a finding of knowing falsity by misinterpreting the plain language of a policy application, I find that Expedient's answer was knowingly false when made. It was also material. Accordingly, I grant Zurich's motion for summary judgment, and declare the policy void ab initio. In the alternative, Expedient failed to comply with the "claims made and reported" provision of the policy with respect to the liability claim for which it seeks coverage because it learned of that claim during the policy period prior to the one in which it reported the claim to Zurich. As a result, the policy by its terms thus does not afford coverage.

I. BACKGROUND

The following facts are taken from the parties' Local Rule 56(a) statements (ECF No. 95, Plaintiff's Local Rule 56(a)(1) Statement ("Pl.'s L.R. 56(a)(1) Stmt."); ECF No. 111, Defendant's Local Rule 56(a)(2) Statement ("Def.'s L.R.56(a)(2) Stmt.")), summary judgment briefs, and exhibits. These facts are undisputed unless otherwise indicated.

Zurich is a New York corporation in the insurance business. (ECF No. 1, Complaint ("Compl.") ¶ 1.) Defendant Expedient Title, Inc., was, at all relevant times, a Connecticut corporation (with its principal place of business in Greenwich, Connecticut) in the business of acting as a title agent for title insurance companies (Compl. ¶ 2), including First American Title Insurance Company of New York ("First American").

A. The E&O Policy

Zurich issued Expedient a "Title Agents, Abstractors and Escrow Agents Errors and Omissions Liability Insurance Policy," number EOC 5431154-03, on a claims-made-and-reported basis, for the policy period from May 27, 2008, to May 27, 2009 (the "E&O Policy"). (Pl.'s L.R. 56(a)(1) Stmt. ¶ 1; Def.'s L.R. 56(a)(2) Stmt. ¶ 1; Affidavit of Steven A. Coploff("Coploff Aff.") Ex. G, ECF No. 93-7.) The E&O Policy provided that Zurich, the "Company," would pay on behalf of Expedient, the "Insured,"

all amounts in excess of the Deductible that an Insured becomes legally obligated to pay as Damages and Claim Expenses because of a Claim that is both made and reported to the Company during the Policy Period or any Optional Extended Reporting Period based on an act or omission in the Insured's rendering or failing to render Professional Services for others.

(Coploff Aff. Ex. G, ECF No. 93-7 at 2.) The E&O Policy defines "Claim Expenses" as (1) "fees, costs and expenses charged by attorneys retained or approved by" Zurich; and (2) "reasonable and necessary fees, costs and expenses resulting from the investigation, adjustment, defense and appeal of a Claim . . . ." (Id. at 8.) A "Claim" is "a demand for money or Professional Services," (id.), and "Professional Services" are "services performed . . . by any Insured, on behalf of the Named Certificate Holder, for others for a fee in any of the following capacities or activities:

1. Title Insurance Agent;

2. Title Abstractor;

3. Title Searcher;

4. Escrow Agent;

5. Closing Agent;

6. Notary Public;

7. Public Records Searcher (including Uniform Commercial Code Searches);

8. Corporate Documents Searcher;

9. Flood Zone Certifications; or

10. Witness Closer."

(Id. at 10). The "Named Certificate Holder" is "the person or entity identified in Item 2 of the Certificate of Insurance," (id. at 9), which is Expedient. (Id. at 1.) Because the "Insured" is defined as the Named Certificate Holder and "any person . . . who becomes a partner, officer . .. or employee of the Named Certificate Holder" (id. at 9), the Insured includes Expedient, Matthew Kelley, its President (Pl.'s L.R. 56(a)(1) Stmt. ¶ 2; Def.'s L.R. 56(a)(2) Stmt. ¶ 2), and Robert Tambini, a 50% shareholder and vice-president of Expedient. (Pl.'s L.R. 56(a)(1) Stmt. ¶ 8; Def.'s L.R. 56(a)(2) Stmt. ¶ 8).

Under the heading "Notice of an Actual Claim," the E&O Policy provided that, "[t]he Insured, as a condition precedent to this policy, shall immediately provide Notice to the Company during the Policy Period or any Optional Extended Reporting Period of any Claim made against an Insured." (Coploff Aff. Ex. G, ECF No. 93-7 at 6.) Under the heading "Notice of a Potential Claim," the E&O Policy also provided that:

The Insured, as a condition precedent to this policy, shall immediately provide Notice to the Company during the Policy Period if any Insured has any basis to believe that any Insured has breached a professional duty or to foresee that any such act or omission might reasonably be expected to be the basis of a Claim.

(Id.) The E&O Policy defined the term "Notice" as:

the Insured's providing the following information to the Company, either in writing or as otherwise authorized by the Company:

1. the description of the alleged act or omission; and

2. the identities of the claimants or potential claimants; and

3. the identities of the responsible Insured(s); and

4. the date and circumstances by which the Insured(s) first became aware of the act or omission.

(Coploff Aff. Ex. G, ECF No. 93-7 at 9.)

B. The Renewal Application

The E&O Policy for the policy period from May 27, 2008, to May 27, 2009, was issued to Expedient (the "Applicant"), after it submitted a three-page renewal application, signed by Matthew Kelley as President, on May 2, 2008 (the "Application"). (Pl.'s L.R. 56(a)(1) Stmt. ¶ 2;Def.'s L.R. 56(a)(2) Stmt. ¶ 2.) Page three of the Application provided that, "BY SIGNING THIS APPLICATION . . . THE APPLICANT AGREES THAT AFTER INQUIRY OF ALL PROSPECTIVE INSUREDS, NO PERSON PROPOSED FOR COVERAGE IS AWARE OF ANY FACT OR CIRCUMSTANCE WHICH REASONABLY MIGHT GIVE RISE TO A FUTURE CLAIM THAT WOULD FALL WITHIN THE SCOPE OF THE PROPOSED COVERAGE." (Pl.'s L.R. 56(a)(1) Stmt. ¶ 3; Def.'s L.R. 56(a)(2) Stmt. ¶ 3; Coploff Aff. Ex. H, ECF No. 93-8 at 3.) On the same page, under the heading "NOTICE TO APPLICANT - PLEASE READ CAREFULLY," the Application stated that "[t]he discovery of any fraud, intentional concealment, or misrepresentation of material fact will render this policy, if issued, void at inception." (Pl.'s L.R. 56(a)(1) Stmt. ¶ 4; Def.'s L.R. 56(a)(2) Stmt. ¶ 4; Coploff Aff. Ex. H, ECF No. 93-8 at 3.) It also stated that "the particulars and statements made in this application . . . shall be the representations of the applicant and the prospective insureds" and "[a]fter inquiry of all prospective insureds, the undersigned authorized officer of the applicant represents that the statements set forth in this application are true and correct." (Coploff Aff. Ex. H, ECF No. 93-8 at 3.) Kelley signed below these statements as the "undersigned authorized officer of the applicant."

Page three of the Application contained questions 19, 20, and 21. Question 19 asked, "[h]as the Applicant or any prospective Insured been involved in or have knowledge of any inquiry, investigation, complaint or notice from any State or Federal Authority regarding the activities, procedures, or practices of the Applicant or any proposed Insured in the past (1) year?" (Pl.'s L.R. 56(a)(1) Stmt. ¶ 7; Def.'s L.R. 56(a)(2) Stmt. ¶ 7; Coploff Aff. Ex. H, ECF No. 93-8 at 3.) Expedient answered "No" to this question. (Pl.'s L.R. 56(a)(1) Stmt. ¶ 8; Def.'s L.R. 56(a)(2) Stmt. ¶ 8; Coploff Aff. Ex. H, ECF No. 93-8 at 3.) Question 20 asked, "[d]uring the past(1) year, has any professional liability claim or suit been made against any Applicant or prospective Insured? If "Yes," you must complete the enclosed claims addendum for each claim or suit." (Coploff Aff. Ex. H, ECF No. 93-8 at 3.) Beneath question 20, in bold letters, the Application stated, "[i]t is agreed that any claim mentioned in the statement immediately above is excluded from coverage for the renewal policy period to which this application applies." (Id.) Expedient answered "No" to question 20. (Id.) Question 21 asked, "Does the Applicant or any prospective Insured know of any circumstances, acts, errors or omissions that could result in a professional liability claim against the Applicant?" (Pl.'s L.R. 56(a)(1) Stmt. ¶ 5; Def.'s L.R. 56(a)(2) Stmt. ¶ 5; Coploff Aff. Ex. H, ECF No. 93-8 at 3.) Expedient also answered "No" to this question. (Pl.'s L.R. 56(a)(1) Stmt. ¶ 6; Def.'s L.R. 56(a)(2) Stmt. ¶ 6; Coploff Aff. Ex. H, ECF No. 93-8 at 3.)

C. Application Incorporated into E&O Policy

The E&O Policy incorporated the Application as part of the entire agreement between the parties. On page three of the Application, below the questions discussed above, the Application...