Haber v. Bankers Standard Insurance Co

          ORDER ON MOTION TO STRIKE [DKT. 23].

          Hon. Vanessa L. Bryant United States District Judge

         I. Introduction and Procedural History

         This action arises out of an insurance coverage dispute. Plaintiffs/Counter-Defendants Murray Haber, Susan, Haber, and the Murray Haber Revocable Trust (collectively, the “Habers”) allege that Defendant/Counter-Plaintiff Bankers Standard Insurance Company (“Bankers”) wrongfully withheld additional insurance benefits and proceeds of up to $2, 000, 000 due to the Habers under the insurance policy on their home for damages caused by an oil spill. [Dkt. 1-1]. It is undisputed that Bankers paid the Habers $300, 000 in policy benefits. [Dkt. 9].

         Bankers filed a counterclaim, seeking a declaratory judgment that its insurance policy has an express exclusion that applies to this loss except to the extent of “limited coverage” in the amount of $10, 000, as provided by an endorsement to the policy. [Dkt. 9 at ¶¶20-26]. In response, the Habers denied Bankers's characterization of its policy and asserted five affirmative defenses: failure to state a claim, estoppel, waiver, unclean hands, and laches. [Dkt. 19].

         Pending before the Court is Bankers's motion to strike the last four of the Habers' affirmative defenses as legally insufficient. [Dkt. 23]. The Habers oppose the motion. [Dkt. 28]. The Court requested supplemental briefing on whether insurance coverage can be expanded by estoppel or waiver, [Dkt. 43], and the parties submitted memoranda in response. [Dkt. 45 (Defs.'s Supp'l Mem.), Dkt. 46 (Pl.'s Supp'l Mem.)]. After considering the briefing, the Court GRANTS in part and DENIES in part the motion for the reasons stated below.

         II. Legal Standard for a Motion to Strike

         Under Rule 12(f) of the Federal Rules of Civil Procedure, a court may strike “any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f). An affirmative defense may be stricken if (a) it does not meet “the plausibility standard of Twombly”; (b) “it is a legally insufficient basis for precluding a plaintiff from prevailing on its claims;” or (c) it prejudices the defendant and it is “presented beyond the normal time limits of the Rules.” GEOMC Co. v. Calmare Therapeutics Inc., 918 F.3d 92, 98-99 (2d Cir. 2019). “When considering a motion to strike affirmative defenses, “the Court should construe ‘the pleadings liberally to give the defendant a full opportunity to support its claims at trial, after full discovery has been made.' ” GEOMC Co. v. Calmare Therapeutics, Inc., No. 3:14-CV-01222 (VAB), 2016 WL 6122930, at *4 (D. Conn. Oct. 19, 2016), aff'd, 918 F.3d 92 (2d Cir. 2019) (internal citations and quotation marks omitted).”

         III. Analysis

         A. Waiver

         The Habers assert waiver as their third affirmative defense, arguing that Bankers's payments, and its acts and conduct, are inconsistent with an intent to limit its responsibility for the Habers' losses to $10, 000, and thus Bankers waived enforcement of that limitation. [Dkt. 19 at 4, Dkt 28 at 5.] In response, Bankers argues that waiver cannot expand coverage under a policy where coverage does not previously exist. [Dkt. 23 at 2].

         “Waiver is the voluntary relinquishment of a known right.” MacKay v. Aetna Life Ins. Co., 173 A. 783, 787 (Conn.1934); see Heyman Assocs. No. 1 v. Ins. Co. of State of Pa., 653 A.2d 122, 134 (Conn. 1995) (same). “An insurance contract, once entered into, cannot then be ‘reformed [through waiver] to create a liability for a condition specifically excluded by the specific terms of the policy.'” Great Lakes Reinsurance (UK), PLC v. JDCA, LLC, No. CIV.A. 11-00001-WGY, 2014 WL 6633039, at *15 (D. Conn. Nov. 21, 2014) (quoting Heyman, 653 A.2d at 134)). “This limitation on the applicability of waiver to an insurance contract recognizes that because waiver requires the relinquishment of a known, and therefore existing, right within the insurance contract, a party cannot create through waiver coverage for a claim that the parties expressly had excluded from that contract.” Heyman, 653 A.2d at 134 (emphasis added).

         The Court agrees with Bankers. Here, if Bankers succeeds in proving that the insurance policy specifically excluded coverage for oil spills, with the exception of a $10, 000 limited coverage endorsement, then Bankers has also shown that it had no rights regarding such coverage that it could waive. See Heyman, 653 A.2d at 134.

         The Habers argue that this interpretation mischaracterizes their argument: they are not arguing that Bankers's waiver created additional coverage, but rather that Bankers waived the right to enforce a limit on already existing coverage. [Dkt. 28 at 5]. They cite no cases supporting this distinction, however, and the Court cannot see how it is relevant. In both cases-the case of an expansion to a new type of coverage and the expansion beyond a specified coverage limit-the underlying theory is the same: a “company should not be required by waiver… to pay a loss for which it charged no ...