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Ainsworth v. Amica Mutual Ins. Co.

United States District Court, D. Connecticut

September 17, 2018

JAMES T. AINSWORTH, et al. Plaintiffs,


          Michael P. Shea, U.S.D.J.

         I. Introduction

         Plaintiffs James T. Ainsworth and Nancy H. Ainsworth filed this action in state court against their homeowner's insurance provider, Amica Mutual Insurance Company (“Amica”), for failure to pay for damages to their basement walls caused by cracking and deterioration in the concrete. Amica removed the case to this court on July 7, 2016. (ECF No. 1.) On September 11, 2017, the plaintiffs filed a second amended complaint, bringing the following claims: (i) breach of contract (count one); (ii) declaratory judgment concerning the coverage of the plaintiffs' home (count two); (iii) breach of the implied covenant of good faith and fair dealing (count three); and (iv) violation of the Connecticut Unfair Insurance Practices Act, Conn. Gen. Stat. § 38a-816 et seq. (“CUIPA”) and the Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. § 42-110a et seq. (“CUTPA”) (count four). (ECF No. 43 (“Complaint”) at ¶¶ 8-84.) Now before me is the defendants' motion to dismiss, which chiefly contends that the plaintiffs' claims fail because the homeowner's insurance policy for their property unambiguously does not cover the losses they assert. (ECF No. 46.) For the reasons set forth below, this motion is granted in part and denied in part. It is granted with respect to the plaintiffs' breach of the implied covenant of good faith and fair dealing claim (count three) and declaratory judgment claim (count two). It is denied with respect to the plaintiffs' other claims.

         II. Factual Allegations and Pertinent Policy Language

         A. Plaintiff's Factual Allegations

         Plaintiff makes the following factual allegations, which I assume to be true.

         The plaintiffs purchased their home in 1997 and insured it since that time “with a homeowner's policy issued by [Amica].” (Complaint at ¶¶ 5-6.) The “plaintiffs have paid the premium charged by [Amica] each year and, without further action on the plaintiffs' part, the subject policy was automatically renewed by [Amica] subject to the payment of the related premiums, all of which were timely and satisfactorily paid.” (Id. at ¶ 7.)

         “In 2012, the plaintiffs noticed that the basement walls of their home had a series of horizontal and vertical cracks throughout.” (Id. at ¶ 9.) The plaintiffs subsequently hired a local engineer to look into the problem. (Id. at ¶ 10.) The engineer “suggested that the problems [the plaintiffs] were experiencing were due to defective concrete used in the construction of the basement walls of their home.” (Id. at ¶ 11.) He was of the opinion, however, “that [the plaintiffs] had discovered the condition in their walls early enough to prevent further deterioration and salvage the concrete basement walls by designing an interior support wall system constructed with properly batched concrete and abutting the existing basement walls of their home.” (Id. at ¶ 12.) Relying upon this recommendation, the “plaintiffs installed the interior support wall system designed by their engineer in spring of 2013 and were thereafter under the impression that the problems with the original basement walls were resolved and that the home had, at all times, remained structurally sound.” (Id. at ¶ 13.)

         In the late summer and early fall of 2015, however, “the plaintiffs saw local news coverage which now suggested that the cause of the deterioration of the original basement walls of their home was a chemical compound found in certain basement walls constructed between the mid-1980s and the late 1990s with concrete most likely from the J.J. Mottes Concrete Company.” (Id. at ¶ 14.) “In particular, the aggregate used by the J.J. Mottes Concrete Company in manufacturing the concrete in that particular time period contained a chemical compound which, with its mixture with the water, sand and cement necessary to form the concrete, began to oxidize (rust) and expand, breaking the bonds of the concrete internally and reducing it to rubble.” (Id. at ¶ 15.) The plaintiffs learned from local news coverage in the late summer and fall of 2015 that, “contrary to the suggestion of the engineer that they had hired earlier, there is no known scientific or engineering method or process which is effective in stopping or reversing the deterioration.” (Id. at ¶ 16.)

         “Having seen the news coverage, the plaintiffs inspected the new walls poured within their home and discovered that, despite being constructed with good and sufficient concrete, the new walls had begun to display the pattern of cracking associated with Mottes concrete suggesting that the continued expansion of the original walls had begun to adversely impact the new walls constructed in 2013.” (Id. at ¶ 17.) “At some point between the date on which the original basement walls were poured and the month of July, 2015, the basement walls suffered a substantial impairment to their structural integrity, which substantial impairment was not cured or otherwise corrected by the installation of the interior basement walls.” (Id. at ¶ 18.) “It is only a question of time until the basement balls of the plaintiffs' home will fall in due to the exterior pressure of the surrounding soil, ” causing “the entire home [to] fall into the basement.” (Id. at ¶¶ 19-20.)

         Upon realizing the extent of the damage to their home, the plaintiffs filed a claim with Amica on September 29, 2015. (Id. at ¶¶ 37-38.) Amica “denied coverage by way of a letter dated December 16, 2016, claiming that the homeowner's policies issued by the defendant do not afford coverage for the condition affecting their basement walls.” (Id. at ¶ 39.) The plaintiffs allege that Amica “breached its contractual obligation” under the policy by refusing to provide coverage for their claim. (Id. at ¶¶ 40-43.)

         The plaintiffs also assert that “[a]t some point in the early to middle 2000s, perhaps earlier, [Amica] became aware of the fact that a No. of homes it insured in the northeast corner of Connecticut, principally in Tolland County-which is well within the business service of J.J. Mottes Concrete-and which were constructed between the mid-1980s and late 1990s were highly likely to have basement walls constructed with the defective concrete [noted above].” (Id. at ¶ 56.) Amica knew that these homes would show telltale signs of cracking in the near future and that, “unless repaired, all of the homes constructed between the mid-1980s and late 1990s with the defective concrete would eventually collapse once the concrete disintegrated to the point where it could no longer support the weight of the structure above or oppose the lateral pressure of the earth against the basement walls or both.” (Id. at ¶¶ 57-58.) “Armed with this knowledge, the defendant made a change to the Additional Coverages section of its homeowner's policies to avoid liability for the potential claims of the plaintiffs' and other similarly situated insureds in northeastern Connecticut which it well knew either existed but was undiscovered or would arise upon the passage of time.” (Id. at ¶ 59.) Amica “also knew, or should have known, that the structural integrity of all of the basement walls within the homes constructed between the mid-1980s and late 1990s with the defective concrete had become substantially impaired prior to the defendant's attempts to alter the Additional Coverages section of its homeowner's policies.” (Id. at ¶ 60.) Despite this knowledge, Amica made no attempt to explain or disclose to its insureds the reasons for the changes to its homeowner's policies. ( ¶¶ 61-62.)

         Further, Amica “participates in the Insurance Services Office, Inc. (‘ISO') which is a cooperative organization formed and controlled by its participants for the purpose, among others, of collecting data on the type of claims made, the policy provisions cited for the basis of each claim, the geographic areas in which the claimed damage has occurred, and the actions taken by insurers in response to such claims.” (Id. at ¶ 71.) The plaintiffs allege that, through participation in the ISO, Amica had knowledge of many claims in northeastern Connecticut resulting from similar concrete decay, the strategies other insurers had used to deny such claims, and cases such as Bacewicz v. NGM Ins. Co., No. 3:08-CV-1530 (JCH), in which claimants were awarded judgment against an insurer for concrete decay based on “nearly identical” policy language. (Id. at ¶¶ 74-76.) The plaintiffs allege that in its denial letter Amica “gave the insured a knowingly false and misleading reason for the denial of coverage.” (Id. at ¶ 77.) Further, the Plaintiffs allege that Amica is “regularly . . . engaged” in refusing to resolve concrete decay claims in good faith, citing seven similar cases in Connecticut Superior Court in which Amica is a defendant. (Id. at ¶¶ 80-81.)

         B. The Relevant Language of the Homeowners Policies

         Amica has attached to its motion to dismiss the plaintiffs' homeowner's policies during the relevant time period. Since the plaintiffs had actual notice of these documents, rely upon them in framing their complaint, and do not contest their validity in their objection, I rely upon these documents in adjudicating Amica's motion to dismiss. See Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 48 (2d Cir. 1991) (“Where plaintiff has actual notice of all the information in the movant's papers and has relied upon these documents in framing the complaint the necessity of translating a Rule 12(b)(6) motion into one under Rule 56 is largely dissipated.”). The plaintiffs' homeowner's policies' coverage of collapse changed several times during the pertinent time period. I list the relevant versions of the policies below.

         1. Pre-2007 Policies

         The plaintiffs' homeowner's policies with Amica before 2007 contained the following coverage for collapse:

. . .
8. Collapse. 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:
. . .
b. Hidden decay;
. . .
f. Use of defective material or methods in construction, remodeling or renovation . . . .
Loss to a[] . . . foundation [or] retaining wall . . . is not included under items b. [. . .] 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.
. . .
. . .
We insure against risks of direct physical loss to property described in Coverages A and B . . . . We do not ...

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