Gabriel v. Liberty Mutual Fire Insurance Co.

          RULING ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

          VICTOR A. BOLDEN UNITED STATES DISTRICT JUDGE

         Raymond and Kimberly Gabriel sued Liberty Mutual Fire Insurance Company after Liberty Mutual denied coverage for crumbling basement walls in the Gabriel's Ellington Home. The lawsuit alleged breach of contract, breach of the covenant of good faith and fair dealing, and unfair and deceptive trade practices. Liberty Mutual now moves for summary judgment on all counts.

         For the reasons discussed below, Liberty Mutual's motion for summary judgment is GRANTED in part and DENIED in part.

         I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

         A. FACTUAL ALLEGATIONS

         In 2006, Raymond and Kimberly Gabriel (“Plaintiffs” or the “Gabriels”) bought a home at 4 Grant Road in Ellington, Connecticut, Def. Stmt. Material Facts (“Def. SMF”) ¶ 2, ECF No. 51, and have lived there ever since. Raymond Gabriel Dep. at 32, Def. SMF, Ex. J (“Raymond Gabriel Dep.”). When the Gabriels bought the property, built in 1984, they hired a home inspector. Raymond Gabriel Dep. at 9:1-10. The home inspector addressed several cracks in the basement walls and suggested that the Gabriels consult with an engineer about them. Raymond Gabriel Dep. at 9-17; Kimberly Gabriel Dep. (“Kimberly Gabriel Dep.”) at 11:9-17, Pls. Stmt. Material Facts, Ex. AA, ECF No. 55-1. According to the Gabriels, “[w]e consulted with a local contractor who told us that there was nothing to worry about and the condition was normal.” Interrogatories at 9, Def. SMF, Ex X.

         The Gabriels obtained homeowners' insurance from Liberty Mutual (“Liberty” or “Defendant”). Their coverage began shortly after they purchased the property in 2006 and continued until after they filed the Complaint. Pls. Stmt of Material Fact (“Pl. SMF”) ¶ 7-8, ECF No. 55; see generally LibertyGuard Deluxe Homeowners Policy (“Policy”), Def. SMF, Ex. A. The operative policy in this case extended from October 18, 2013 until October 18, 2014, and covered the “risk of direct loss” to the dwelling, other structures, and personal property owned by the Gabriels. Id. at § 1.

         The policy also included a number of exclusions. First, the policy excluded coverage for damages caused by “freezing, thawing, pressure, or weight of water or ice [to a] foundation, retaining wall, or bulkhead.” Second, it excluded coverage for “inherent vice, latent defect, mechanical breakdown;” and “settling, shrinking, bulging or expansion, including resultant cracking, of pavements, patios, foundations, walls, floors, roofs, or ceilings.” Id. at 6.

         As a general matter, the policy also excluded coverage involving collapse. Id. at 1. The policy did, however, contain a carve-out for certain types of collapse under a separate section, Id. at 6:

We insure for direct physical loss to covered property involving collapse of a building or any part of a building caused only by one or more of the following:

a. Perils Insured Against in COVERAGE C - PERSONAL PROPERTY. These perils apply to covered buildings and personal property for loss insured by this additional coverage;

b. Hidden decay;

c. Hidden insect or vermin damage;

d. Weight of contents, equipment, animals or people;

e. Weight of rain which collects on a roof; or

f. Use of defective material or methods in construction, remodeling or renovation if the collapse occurs during the course of the construction, remodeling or renovation.

Loss to an awning, fence, patio, pavement, swimming pool, underground pipe, flue, drain, cesspool, septic tank, foundation, retaining wall, bulkhead, pier, wharf or dock is not included under items b., c., d., e., and f. unless the loss is a direct result of the collapse of a building Collapse does not include settling, cracking, shrinking, bulging or expansion. This coverage does not increase the limit of liability applying to the damaged covered property.

Id. at § 8.

         In 2014, the Gabriels began having problems with one of the doors in the first floor. Raymond Gabriel Dep. at 20:1-5. Several of the doors and windows on the first floor had trouble closing, and the floors were uneven in several different places. Id. at 31-32. As a result, Mr. Gabriel examined the floor joists in the basement. Id. at 20:1-5. He noticed “there seemed to be more cracks and they seemed to be different than what I recalled.” Id. The Gabriels then consulted with several contractors about the cracks; the contractors informed them that their basement might be constructed with defective concrete from the JJ Mottes Concrete Company. Id. at 31:1-9.

         One of these contractors, William Neal, an engineer, wrote that “the most likely cause of the foundation distress” was a “chemical reaction between alkali aggregate and silica in the concrete mix. It typically causes this type of distress 15 to 20 years after the foundation is poured. The [reaction] will continue to deteriorate the concrete and the basement walls will continue to bulge inward until they structurally fail.” Neal Report at 1, Def. SMF, Ex. G.

         The Gabriels then filed a claim with Liberty Mutual in early July, 2014. Def. SMF ¶ 8. On July 22, 2014, five days after a special investigator from Liberty Mutual visited the property and documented the damage to the basement, Liberty Mutual denied coverage for the claim. Def. SMF ¶¶ 10-11. In its denial letter, the company cited the insurance policy's collapse provision, as well as several other exclusions related to water damage, earth movement, and construction defects. Id.

         B. PROCEDURAL HISTORY

         On October 14, 2014, the Gabriels filed the Complaint in this case. Count I alleges breach of contract, Count II alleges breach of the implied covenant of good faith and fair dealing, and Count III alleges violations of the Connecticut Unfair Insurance Practices Act, Conn. Gen. Stat. § 38a-815, et seq. (“CUIPA”) and the Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. § 42-110a, et seq. (“CUTPA”). Id.

         Liberty Mutual moved under Federal Rule of Civil Procedure 12(b)(6) to dismiss the Complaint in its entirety for failure to state a claim. See Def. Mot. to Dismiss, ECF No. 13. The Court denied the Motion on September 28, 2015, finding that the Gabriels had plausibly alleged all three counts. See Gabriel v. Liberty Mut. Fire Ins. Co., No. 3:14-cv-01435-VAB, 2015 WL 5684063 (D. Conn. Sept. 28, 2015). The Court also denied certifying the question of what constituted a substantial impairment to the Connecticut Supreme Court, and instead found that Plaintiffs had adequately alleged a collapse. The Court further determined that the terms “foundation” and “retaining wall, ” as used in the policy, were ambiguous and ...