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Roberts v. Liberty Mutual Fire Insurance Co.

United States District Court, D. Connecticut

August 28, 2017



          Stefan R. Underhill, United States District Judge

         Michael and Annette Roberts sued their insurer, Liberty Mutual Fire Insurance Co. (“Liberty Mutual”), after Liberty Mutual denied coverage for the deterioration of their concrete basement walls. The Robertses allege (1) that Liberty Mutual breached its insurance contract with them by denying coverage; (2) that Liberty Mutual breached the implied covenant of good faith and fair dealing by baselessly denying coverage; and (3) that Liberty Mutual committed unfair and deceptive practices proscribed by the Connecticut Unfair Insurance Practices Act (“CUIPA”) and the Connecticut Unfair Trade Practices Act (“CUTPA”). Liberty Mutual has moved for summary judgment, principally arguing that the damage to the walls is excluded from coverage under the insurance policy. Because I conclude there is a genuine dispute of material fact with regard to whether the damage to the walls is covered under the policy, I deny Liberty Mutual's motion for summary judgment with respect to the Robertses' breach of contract claim. At the same time, because the Robertses have not shown that Liberty Mutual's coverage position was unreasonable or taken in bad faith, I grant the motion for summary judgment with respect to the Robertses' claims for breach of the implied covenant of good faith and fair dealing and violation of CUTPA/CUIPA.

         I. Standard of Review

         Summary judgment is appropriate when the record demonstrates that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). When ruling on a summary judgment motion, the court must “view the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in its favor.” Sologub v. City of New York, 202 F.3d 175, 178 (2d Cir. 2000); Aldrich v. Randolph Ctrl. Sch. Dist., 963 F.2d 520, 523 (2d Cir. 1992) (court is required to “resolve all ambiguities and draw all inferences in favor of the nonmoving party”). “The burden of showing that no genuine factual dispute exists rests upon the moving party.” Carlton v. Mystic Transp., 202 F.3d 129, 133 (2d Cir. 2000). When a motion for summary judgment is properly supported by documentary and testimonial evidence, however, the nonmoving party may not rest upon the mere allegations or denials of the pleadings, but must present sufficient evidence supporting its position “to require a jury or judge to resolve the parties' differing versions of the truth at trial.” Anderson v. Liberty Lobby, 477 U.S. 242, 249 (1986); Colon v. Coughlin, 58 F.3d 865, 872 (2d Cir. 1995).

         “The trial court's function at this stage is to identify issues to be tried, not decide them, ” Graham v. Long Island R.R. Co., 230 F.3d 34, 38 (2d Cir. 2000), and so “[o]nly when no reasonable trier of fact could find in favor of the non-moving party should summary judgment be granted.” White v. ABCO Eng'g Corp., 221 F.3d 293, 300 (2d Cir. 2000). Summary judgment therefore is improper “[w]hen reasonable persons, applying the proper legal standards, could differ . . . on the basis of the evidence presented.” Sologub, 202 F.3d at 178. Nevertheless,

the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact. . . . Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.

Anderson, 477 U.S. at 247-48.

         “[A] complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial, ” and in such circumstances, there is “no genuine issue as to any material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); accord Goenaga v. March of Dimes Birth Defects Found., 51 F.3d 14, 18 (2d Cir. 1995) (movant's burden satisfied if it can point to an absence of evidence to support an essential element of nonmoving party's claim). To present a “genuine” issue of material fact and avoid summary judgment, the record must contain contradictory evidence “such that a reasonable jury could return a verdict for the non-moving party.” Anderson, 477 U.S. at 248.

         II. Background

         I begin with a general overview of the problem of crumbling foundations in northeastern Connecticut, and then turn to the specific background of this case. The description of the broader problem is for informational purposes only, and does not provide grounds upon which I rely in ruling on the motion for summary judgment.

         A. Concrete deterioration in northeastern Connecticut

         The present lawsuit is one of a series of cases in this district in which Connecticut homeowners have brought claims against their insurers related to the deterioration of their concrete basement walls.[1] See, e.g., Alexander v. Gen. Ins. Co. of Am., 3:16-cv-00059 (SRU); Roberge v. Amica Mut. Ins. Co., 3:15-cv-01262 (WWE); Kim v. State Farm Fire & Cas. Co., 3:14-cv-01150 (VLB); Belz v. Peerless Ins. Co., 3:13-cv-01315 (VAB); Bacewicz v. NGM Ins. Co., 3:08-cv-01530 (JCH). The plaintiffs in those cases all allege that their basement walls have failed structurally due to cracking, crumbling, and bulging caused by a chemical reaction within the concrete. See, e.g., Belz, Compl., Doc. No. 1, at 3. They assert that the reaction will continue to impair the stability of the basement walls until the walls-and the house that they support- entirely collapse. See, e.g., Kim, Compl., Doc. No. 1, at 3. The defendants in the cases all have denied coverage under the insurance policies, and generally dispute that the walls have “collapsed.” See, e.g., Belz, Answer, Doc. No. 46, at 7; Kim, Answer, Doc. No. 45, at 8.

         According to news reports, [2] homeowners in northeastern Connecticut began to alert state officials about crumbling basements as early as 2001. See Lisa W. Foderaro & Kristin Hussey, Financial Relief Eludes Connecticut Homeowners with Crumbling Foundations, N.Y. Times, Nov. 14, 2016, The problem apparently came to widespread attention after it was the subject of an investigation by Hartford's NBC affiliate in 2015. Id. To date, more than 400 complaints about deteriorating foundations have been submitted to Connecticut's Department of Consumer Protection, and as many as 34, 000 homes across dozens of towns ultimately may be affected. Id.

         In 2016, the State of Connecticut commissioned a scientific report that found the deterioration was “caused, at least in part, by a naturally existing mineral present in the concrete mix used to pour the foundations.” Conn. Dep't of Consumer Prot., Report on Deteriorating Concrete in Residential Foundations 1 (Dec. 30, 2016) (“DCP Rep.”). That mix included stone aggregate taken from Becker's Quarry, which was used in concrete by the J.J. Mottes Concrete Company (“J.J. Mottes”) of Stafford Springs between approximately 1983 and 2016. Id. at 7. Becker's Quarry sits in “a vein of rock that contains significant amounts of pyrrhotite” (Fe1-xS), a mineral that the state investigation found to be “a necessary factor in the chemical reaction leading to the deterioration of the concrete foundations.” Id. at 8.

         Pyrrhotite is a “highly reactive” mineral that looks similar to pyrite (fool's gold), but “degrades much more rapidly than pyrite.” A. Brian Hawkins, Engineering Implications of the Oxidation of Pyrite, in A. Brian Hawkins, Implications of Pyrite Oxidation for Engineering Works 1, 2-4 (2014). In the presence of oxygen and water, pyrrhotite oxidizes, producing various forms of rust such as goethite and limonite, as well as sulfuric acid. Kay Wille & Rui Zhong, Investigating the Deterioration of Basement Walls Made of Concrete in CT (2016), App'x D to DCP Rep., at 52; Josée Duchesne & Benoît Fournier, Deterioration of Concrete by the Oxidation of Sulphide Materials in the Aggregate, 7 J. Civil Eng'g & Architecture 922, 930 (2013). The sulfuric acid then “reacts with the solid of the cement paste” to form “secondary minerals that cause expansion” such as gypsum, ettringite, and thaumasite. Wille & Zhong, supra, at 52; Duchesne & Fournier, supra, at 930. The products of pyrrhotite oxidation “are expansive” and, according to the state's scientific investigation, “might ultimately lead to the premature deterioration of the concrete foundation[s].” Wille & Zhong, supra, at 52.

         B. The present litigation

         Sometime in the spring or summer of 2012, Michael and Annette Roberts noticed that a series of horizontal and vertical cracks had appeared in their basement's concrete walls. See Michael Roberts Depo. (Apr. 14, 2016), Ex. K to Local Rule 56(a)1 Statement, Doc. No. 74-11, at 24; Annette Roberts Depo. (Apr. 14, 2016), Ex. DD to Mem. Opp'n Mot. Summ. J., Doc. No. 78-4, at 6. When the Robertses consulted a building contractor, Dean Soucy, he told them that “the walls were deteriorating” and needed to be replaced. Michael Roberts Depo., Doc. No. 74-11, at 33; Annette Roberts Depo., Doc. No. 78-4, at 11.

         On December 14, 2012, the Robertses reported a claim under their homeowners' insurance policy to Liberty Mutual, which has insured their house since 2007.[3] Local Rule 56(a)1 Statement, Doc. No. 74, at 1-2. Liberty Mutual sent an engineer, Michael Berry, to inspect the house on January 3, 2013. Id. at 3. Berry reported that, despite “various deficiencies, ” the walls “remain[ed] plumb and mostly water resistant, ” and he concluded that the cracks were caused by a lack of “adequate reinforcing bars” in the concrete. Berry Rep. (Jan. 4, 2013), Ex. G to Local Rule 56(a)1 Statement, Doc. No. 74-7, at 2. Berry suggested the Robertses “careful[ly] monitor[]” the cracks using calibration strips. Id. If the cracks grew by more than one-eighth of an inch, he “recommend[ed] foundation repair using carbon fiber wall straps.” Id.

         After Berry's inspection, Liberty Mutual wrote to the Robertses denying their claim on the basis that the cracks were “due to faulty construction” and therefore excluded by the policy. Denial Letter (Jan. 10, 2013), Ex. H to Local Rule 56(a)1 Statement, Doc. No. 74-8, at 1. In Coverage A, the policy provides that Liberty Mutual “insure[s] against risk of direct [physical] loss to property, ” but adds that Liberty Mutual “do[es] not insure” for loss:

1. Involving collapse, other than as provided in Additional Coverage 8;
2. Caused by: . . .
e. Any of the following:
(1) Wear and tear, marring, deterioration;
(2) Inherent vice, latent defect, mechanical breakdown;
(3) Smog, rust or other corrosion, mold, wet or dry rot; . . . [or]
(6) Settling, shrinking, bulging or expansion, including resultant cracking of pavements, patios, foundations, walls, floors, roofs, or ceilings . . . .

         Liberty Pol'y, Ex. A to Local Rule 56(a)1 Statement, Doc. No. 74-1, at 12. In addition, under “Exclusions, ” Liberty Mutual provides that it also “do[es] not insure for loss” caused by:

c. Faulty, inadequate, or defective: . . .
(2) Design, specifications, workmanship, repair, construction, renovation, remodeling, grading, ...

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