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January 2020

Hartford Team Secures Dismissal for Extra-Contractual Damages in Insurance Coverage Case

Gordon Rees Scully Mansukhani Hartford lawyers Dennis Brown, Greil Roberts, and Kelcie Burns Reid secured dismissal of all claims for extra-contractual damages in an insurance coverage case pending the United States District Court District of Connecticut. 

Plaintiff, an energy cooperative and political subdivision of the State of Connecticut, made claims of unfair insurance practices and bad faith against a major insurance company, "Defendant," in connection with subpoenas issued by a federal grand jury which led to indictments of the CEO and various other officers and board members of an energy cooperative.  A central issue in the case is whether the grand jury information requests should be treated as a “claim” pursuant to the policy involved. 

The District Court agreed that a dispute over the proper reading of policy language was not sufficient to state a claim there had been a misrepresentation of pertinent facts or insurance policy provisions sufficient to state a cause of action under the Connecticut Unfair Insurance Practices Act. Conn. Gen. Stat. 38a-815 et seq.

Significantly the Court also agreed that this was true even where a Court in another jurisdiction had read similar policy language in the manner urged by the insured.  “The New York court’s conclusion does not bind courts in Connecticut, and National Union was entitled to advance its reading of the policy language in other courts… A reasonable reading of the Policy that is contrary to plaintiffs’ preferred reading is not a ‘misrepresentation.’”

In addition, the Court agreed that pointing to two coverage cases in other jurisdictions that did not address issues of misrepresentation was not a sufficient basis to claim a “general business practice” as required by the Connecticut statute.  The Court also agreed that the Plaintiff's claims that the Defendant failed to acknowledge or act on its request with reasonable promptness must fail when the entire process took only six weeks.   

The Court also accepted arguments made for the Defendant that the Plaintiff could not claim bad faith by setting out a “run-of-the-mill” contract dispute.  Pointing to case law cited for Defendant, the Court held that under Connecticut law bad faith implies actual or constructive fraud, some dishonest purpose.  The Court agreed that denial of a fairly debatable claim is not bad faith and disagreement over policy interpretation is not bad faith. 

The Court found that denial of a claim may further Defendant's own financial interest but falls short of showing any “sinister motive” as required by Connecticut law.  In this case, each side was able to point to prior caselaw supporting their competing interpretations of the policy.

Dennis O. Brown
Kelcie B. Reid
Greil I. Roberts