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Northeast Builders Supply & Home Centers, LLC v. Member Insurance Agency, Inc.

United States District Court, D. Connecticut

August 28, 2018

NORTHEAST BUILDERS SUPPLY & HOME CENTERS, LLC, Plaintiff,
v.
MEMBER INSURANCE AGENCY, INC., and PENNSYLVANIA LUMBERMENS MUTUAL INSURANCE COMPANY, Defendants.

          MEMORANDUM OF DECISION ON DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT

          WARREN W. EGINTON, SENIOR UNITED STATES DISTRICT JUDGE.

         This is an action by an insured business against its insurance broker and its insurer after a fire destroyed retail and storage facilities containing personal property and equipment. The insurance policy at issue allegedly failed to provide adequate building, personal property and equipment coverage and lacked coverage for “extra expense” or business income interruption.

         Plaintiff Northeast Builders Supply & Home Centers, LLC, alleges (1) negligence, (2) misrepresentation, (3) breach of fiduciary duty, and (4) violation of the Connecticut Unfair Trade Practices Act against defendants Member Insurance Agency, Inc., and Pennsylvania Mutual Insurance Company. Defendants have each moved for summary judgment. For the following reasons, defendants' motions will be granted in part and denied in part.

         BACKGROUND

         The following background was gleaned from the parties' statements of fact, affidavits, deposition transcripts, and other exhibits.

         Northeast Builders Supply & Home Centers, LLC, is a multi-location lumber and hardware wholesaler and retailer with its principal place of business located at 1460 Barnum Avenue, Bridgeport, Connecticut.

         Member Insurance was established in 1972, and provides insurance products for the retail, hardware, lumber, and building materials industry.

         Before 2009, Northeast procured commercial insurance through Member Insurance.

         Beginning in 2009, Northeast procured insurance through David Kelly, of the Bouvier Insurance Agency. Since 2009, Northeast's insurance carrier was Acadia.

         Regarding prior coverages provided to Northeast by Acadia, the parties dispute whether plaintiff's Cornwall Bridge and Grove Street locations had coverage for items such as business income loss and extra expense. Northeast maintains that its prior policies are not material to its claims in the instant case, as plaintiff alleges it requested blanket loss income and extra expense coverage for all locations.

         Northeast's principal, Jan Cohen, was a practicing certified public account in the state of Connecticut for approximately ten years before leaving the accounting profession to begin a career developing real estate. When he worked as a CPA at Caposella Cohen, Mr. Cohen performed audits for two lumber companies one of which, Bridgeport Lumber, he would later acquire. Mr. Cohen began his first real estate development business, 340 Orange Street, with his partner, Arnie Foster. Mr. Cohen and Mr. Foster met at Capossela Cohen in 1982 when Mr. Foster was hired as a computer consultant. Mr. Cohen began buying commercial real estate and operating his real estate business while he was still working as a CPA at Capossela Cohen.

         Mr. Cohen testified that over the years he and Mr. Foster have owned approximately 25 business entities. By 1990, Mr. Cohen entered the lumber and building materials business in addition to real estate development. Mr. Cohen had previously purchased real estate with a lumber business on it in 1988. Mr. Cohen and Mr. Foster have operated that lumber business, Bridgeport Lumber, continuously since its purchase in 1988. Bridgeport Lumber became Northeast Builders Supply. Mr. Cohen testified that he is Northeast's Chief Financial Officer and co-CEO. In addition to supervising and managing most of Northeast's real estate holdings, Mr. Cohen supervises the accounting department and makes management decisions with Mr. Foster.

         Mr. Cohen also testified that it has been his responsibility to negotiate and acquire policies of insurance for Northeast.

         Northeast disputes that Mr. Cohen's professional experience as a CPA or his role at Northeast of negotiating and acquiring insurance for the company bears any relevance. Plaintiff submits that Mr. Cohen, as an insured, is not sophisticated in commercial insurance and the procurement of such insurance. Member Insurance, as a broker, has the expertise in insuring the commercial lumber industry and had the responsibility of properly quoting and procuring coverage for Northeast's risk. Northeast contends that it was appropriate for Mr. Cohen to trust and rely on Member Insurance to properly quote and procure insurance coverage for Northeast.

         On October 7, 2013, Greg Cooper, a Member Insurance Account Executive, emailed plaintiff's principal, Jan Cohen, to submit a bid for plaintiff's commercial insurance. Jan Cohen instructed his assistant, Jessica Mandujano, to get the information that Mr. Cooper requested, so he could bid the insurance.

         Shortly after Jan Cohen directed Ms. Mandujano to provide the requested information to Mr. Cooper, Mr. Cooper emailed Jan Cohen again and asked, "Jan, before we move forward, has anything changed since last year? I certainly do not want to waste your time."

         Mr. Cohen responded three minutes later: "Our loss ratios for comp have come way down. Nothing has changed and we make no claims."

         Mr. Cooper responded five minutes later, "[w]ill you allow us to use Pennsylvania Lumbermens this year? If not, I don't see a reason to move forward."

         Two minutes later, Mr. Cohen responded, "Yes go ahead." Four minutes later, Mr. Cooper responded, "OK, I will move forward with PLM for your 1/1 renewal. They should be able to provide competitive alternative to Acadia this year. I work closely with their field underwriter, Sheila."

         Two minutes later, Mr. Cohen responded: "I will be at do it [Do It Best Corp. show] on the 18th . . . If you can provide significant savings we will change."

         On Wednesday, October 2, 2013, Jessica Mandujano sent Greg Cooper the expiring policy that was provided through the Acadia Insurance Company as well as Northeast's recent loss run and related requested information.

         That same day, Greg Cooper emailed Jan Cohen a draft "Broker of Record Letter" to allow Member Insurance to ...


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