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Thurston Foods, Inc. v. Wausau Business Insurance Co.

United States District Court, D. Connecticut

May 17, 2017




         In this action, plaintiff Thurston Foods, Inc., seeks to recover benefits under a commercial property insurance policy issued by defendant Wausau Business Insurance Company. Plaintiff has alleged claims for breach of contract, bad faith, and violation of the Connecticut Unfair Insurance Practices Act (“CUIPA”) and the Connecticut Unfair Trade Practices Act (“CUTPA”).

         Defendant has moved for summary judgment, and plaintiff has moved for partial summary judgment. Defendant has also filed a motion to bifurcate the discovery and trial of plaintiff's breach of contract and extra-contractual claims alleging bad faith and CUIPA/CUTPA violation. For the following reasons, plaintiff's motion for partial summary judgment will be denied; defendant's motion for summary judgment will be granted in part and denied in part; and defendant's motion for bifurcation will be denied without prejudice.


         The parties have submitted statements of fact with supporting affidavits and exhibits. According to the parties' submissions, the following facts are not in dispute.

         Defendant is a wholly owned subsidiary of the Liberty Mutual Insurance Company or the Liberty Mutual Group of Insurance Companies. Plaintiff is a food distributor with a warehouse located in Wallingford, Connecticut. At the time relevant to this action, Patrick Thurston handled plaintiffs property insurance matters. Defendant issued plaintiff an insurance policy effective from August 1, 2010, to August 1, 2011, to insure the warehouse.

         The warehouse was constructed in 1990, and contained an industrial freezer. Plaintiff installed and utilized a passive ventilation system under the freezer floor. The passive ventilation system consists of twenty-five, six inch diameter PVC pipes spaced four-feet apart placed in a crushed stone layer that is open to the air at the front and back foundation walls. In 2003, plaintiff constructed an addition to the freezer and expanded the passive ventilation system to include the area under the addition.

         The Policy

         The commercial property insurance policy (the "Policy") provided insurance subject to provisions, terms, conditions, and exclusions. The Policy contained a $5, 000 deductible that applied to all claims arising under its "Building" coverage.

         The Policy provides, in part: "We will pay for direct physical loss or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss." The Policy specifies that it covers "loss or damage commencing ... during the policy period" of August 1, 2010 through August 1, 2011. In the "Event of Loss or Damage, " the Policy imposes a duty to: "Take all reasonable steps to protect the Covered Property from further damage

         Pursuant to the Policy section entitled "Covered Causes of Loss" under the "Causes of Loss - Special Form, " the Policy provides that "[w]hen Special is shown in the Declarations, Covered Causes of Loss means Risks of Direct Physical Loss unless the loss is: 1. Excluded in Section B., Exclusions; or2. Limited in Section C, Limitations...."

         Section B.1.b.of "Exclusions" provides, in part:

We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss..... (b)(4) Earth sinking (other than sinkhole collapse) rising or shifting including soil conditions which cause settling, cracking or other disarrangement of foundations or other parts of realty. Soil conditions include contraction, expansion, freezing, thawing, erosion, improperly compacted soil and the action of water under the ground surface.

         Section B.2.d.4. of "Exclusions" provides that defendant "will not pay for loss or damage caused by or resulting from ... settling, cracking, shrinking or expansion...."

         The Policy provides that defendant "will determine the value of Covered Property in the event of loss or damage ... [a]t actual cash value as of the time of loss or damage" subject to certain exceptions enumerated further in Policy. The Policy specifies that "Replacement Cost (without deduction for depreciation) replaces Actual Cash Value in the Valuation Loss Condition of this Coverage Form." Further, the Policy provides that an insured "may make a claim for loss or damage covered by this insurance on an actual cash value basis instead of on a replacement cost basis." The Policy states that defendant "will not pay on a replacement cost basis for any loss or damage until the lost or damaged property is repaired or replaced, " and '[u]nless the repairs or replacement are made as soon as reasonably possible after the loss or damage."

         The Policy covers "Extra Expense, " defined as "expenses you incur during the 'period of restoration' that you would not have incurred if there has been no direct physical loss or damage to property caused by or resulting from a Covered Cause of Loss, " as follows:

Extra Expense Coverage is provided at the premises ... only if the declarations show that Business Income Coverage applies at the premises .... We will pay Extra Expense (other than the expense to repair or replace property) to: (1) Avoid or minimize the suspension of business and to continue operations at the described premises or at a replacement premises or temporary location, including relocation expenses and costs to equip and operate the replacement location or temporary location. (2) Minimize the "suspension" of business if you cannot continue "operations". We will also pay Extra Expense to repair or replace property, but only to the extent it reduces the amount of loss that otherwise would have been payable under this Coverage Form.

         According to the Policy terms, "Extra Expense" will be determined based on:

(1) All expenses that exceed the normal operating expenses that would have been incurred by 'operations' during the "period of restoration" if no direct physical loss or damage had occurred. We will deduct from the total of such expenses: (a) The salvage value that remains of any property bought for temporary use during the "period of restoration, " once "operations" are resumed; and (b) Any Extra Expense that is paid for by other insurance, except for insurance that is written subject to the same plan, terms, conditions and provisions as this insurance; and

(2) Necessary expenses that reduce the Business Income Loss that otherwise would have been incurred.

         2011: Snow Accumulation and Interior Damage

         In January 2011, snow and ice accumulated on the roof of plaintiffs' building. In early 2011, Thurston noticed water leaking into the interior of its building.

         Plaintiff was advised by Stahlman Engineering to remove the snow because its weight could cause structural damage. The snow was removed from the roof and then deposited along the perimeter of the building.

         On February 16, 2011, Patrick Thurston spoke by telephone to Karolina Araszkiewicz, then a senior property adjuster, regarding its claims arising from snow removal, damage to the warehouse roof, and damage to the interior offices. During that call, he indicated that Stahlman Engineering had suggested that the snow be cleared off of the roof due to its weight; that plaintiff had paid a contractor and used internal labor to clear the snow off the roof; and that plaintiffs claim was reported late because he had been inundated with workers compensation, auto, and other insurance claims. In his deposition, Thurston later testified that notice was delayed for the additional reason that plaintiff was "taking care of the roof "and being "proactive to stop the leaking, clear the snow first" prior to making a claim.

         On February 17, 2011, Araszkiewicz inspected the claimed damage at plaintiffs facility. According to defendant, she did not observe any damage to the roof except for a possible nine-square-foot area near the gutter line over the warehouse. However, she concluded that approximately 244-square feet of ceiling tiles required replacement due to staining; 62-square feet of dry wall needed to be replaced; and 288-square feet of drywall needed painting.

         By letter dated February 23, 2011, defendant acknowledged receipt of the snow load claim and provided a summary of the damage according to Araszkiewicz's observation. By letter dated March 15, 2011, defendant advised plaintiff that the snow load claim damages did not exceed the $5, 000 deductible. In an email dated March 30, 2011, plaintiffs broker, Cecile May of USI New England ("USI"), informed defendant that there was ...

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