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TOWN OF MONROE v. DISCOVER PROPERTY

AND CASUALTY INSURANCE COMPANY

(AC 38332)

Beach, Sheldon and Lavery, Js.

Argued September 19—officially released December 6, 2016

(Appeal from Superior Court, judicial district of

Fairfield, Kamp, J.)

Jeffrey J. Vita, with whom was Bethany L. Barrese,

for the appellant (plaintiff).

Paul G. Roche, with whom, on the brief, was Joseph

H. Carlisle, for the appellee (defendant).
Opinion

BEACH, J. The plaintiff, the town of Monroe, appeals

from the judgment of the trial court rendering summary

judgment in favor of the defendant insurer, Discover

Property and Casualty Insurance Company. The plaintiff claims that the court erred in holding that the allegations brought by a third party against the plaintiff in a

prior action (underlying action) fell within an exclusion

in the applicable policy, and, therefore, that the defendant had no duty to provide a defense to the plaintiff.

We agree with the plaintiff and, accordingly, reverse

the judgment of the trial court.

The record reveals the following facts and procedural

history. In 2005, the plaintiff purchased a ‘‘Public Entity

Errors and Omissions Liability Policy’’ (policy) from

the defendant. In 2006, Bellsite Development, LLC (Bellsite), instituted an action against the plaintiff. It alleged

that the plaintiff had agreed to assist in the ‘‘development and implementation of a wireless telecommunications tower,’’ and had harmed Bellsite by abandoning

that agreement. The operative complaint in the underlying action alleged (1) breach of contract (count one);

(2) promissory estoppel (count two); and (3) negligent

misrepresentation (count three). The plaintiffrequested

defense and indemnity from the defendant, its insurer.

The defendant denied coverage. The plaintiff retained

counsel to defend its interests in the underlying case,

and the case was tried. In the trial court, the case was

decided in favor of Bellsite on counts one and three of

the operative complaint. On appeal, this court reversed

the judgment and directed judgment in favor of the

plaintiff on all three counts. Bellsite Development, LLC

v. Monroe, 155 Conn. App. 131, 154, 122 A.3d 640, cert.

denied, 318 Conn. 901, 12 A.3d 1279 (2015).

The plaintiff then brought the present action seeking

both a declaratory judgment that the defendant had a

duty to defend and damages arising from the defendant’s alleged breach of that duty. The defendant filed a

motion for summary judgment, alleging that the plaintiff

could not prevail as a matter of law because the policy

excluded coverage for the claims as alleged in the

underlying complaint. On August 11, 2015, the court

granted the defendant’s motion. The court determined

that (1) the allegations regarding an agreement, if true,

amounted to a finding of a procurement contract, for

which coverage was excluded; and (2) Bellsite’s negligent misrepresentation claim, as alleged in the third

count, arose out of that contract. Therefore, the allegations, as alleged in the underlying complaint, all fell

within the clause of the policy excluding coverage for

contractual damages. This appeal followed.

As a preliminary matter, we set forth the appropriate

standard of review. ‘‘Our review of the trial court’s

decision to grant [a] motion for summary judgment
is plenary.’’ (Internal quotation marks omitted.) R.T.

Vanderbilt Co. v. Continental Casualty Co., 273 Conn.

448, 456, 870 A.2d 1048 (2005). ‘‘In seeking summary

judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact. The courts are

in entire agreement that the moving party for summary

judgment has the burden of showing the absence of

any genuine issue as to all the material facts, which,

under applicable principles of substantive law, entitle

him to a judgment as a matter of law.’’ (Internal quotation marks omitted.) Id., 455–56.

‘‘Construction of a policy of insurance presents a

question of law, over which our review is de novo. . . .

It is beyond dispute that an insurer’s duty to defend,

being much broader in scope and application than its

duty to indemnify, is determined by reference to the

allegations contained in the complaint . . . . The obligation of the insurer to defend does not depend on

whether the injured party will successfully maintain a

cause of action against the insured but on whether he

has, in his complaint, stated facts [that] bring the injury

within the coverage. . . . If an allegation of the complaint falls even possibly within the coverage, then the

[insurer] must defend the insured.’’ (Citations omitted;

emphasis added; internal quotation marks omitted.)

Wentland v. American Equity Ins. Co., 267 Conn. 592,

600, 840 A.2d 1158 (2004); Moore v. Continental Casualty Co., 252 Conn. 405, 409, 746 A.2d 1252 (2000); see

also Schwartz v. Stevenson, 37 Conn. App. 581, 584–85,

657 A.2d 244 (1995).

If the allegations of a complaint necessarily fall within

the terms of a policy exclusion, however, an insurer

does not have a duty to defend. New London County

Mutual Ins. Co. v. Bialobrodec, 137 Conn. App. 474,

479, 48 A.3d 742 (2012). An insurer is ‘‘entitled to prevail

under a policy exclusion [only] if the allegations of

the complaint clearly and unambiguously establish the

applicability of the exclusion to each and every claim

for which there might otherwise be coverage under

the policy.’’ (Emphasis added; internal quotation marks

omitted.) Id.; see also Wentland v. American Equity

Ins. Co., supra, 267 Conn. 592 (applicability of exclusion

for liquor liability not clearly and unambiguously established where complaint alleged driver caused accident

while intoxicated); Schwartz v. Stevenson, supra, 37

Conn. App. 586 (applicability of exclusion for vehicles

owned by third parties not clearly and unambiguously

established where complaint did not specify who owned

vehicle at issue).

Section I (2) (d) (1) of the policy excluded coverage

for ‘‘[a]ny claim . . . [b]ased upon, arising out of,

directly or indirectly resulting from, or in consequence

of construction, architectural or engineering contracts

or any other procurement contract; or (2) [f]or which

the insured has assumed the liability in a contract or
agreement.’’ The policy also stated in § I (2) (d) (2) that

‘‘[t]his exclusion does not apply to liability for damages

that the insured would have in the absence of the contract or agreement.’’

The plaintiff argues that the court erred in determining that the allegations of negligent misrepresentation

in the underlying complaint fell within the policy’s contract exclusion. Specifically, the plaintiff contends that

the allegations of the complaint could not support the

finding of an enforceable contract, or of a procurement

contract of any kind, and, therefore, it could not be

proved that the negligent misrepresentation cause of

action arose out of that contract. The plaintiff also

argues that even if the allegations supported the existence of a contract, Bellsite’s negligent misrepresentation claim was a tort claim ‘‘separate and independent

from’’ Bellsite’s contractual claims, and coverage was

not necessarily precluded by the policy’s contract exclusion. Because the claims were not necessarily excluded

by the policy language, the plaintiff argues, the defendant had a duty to defend.

In response,the defendant argues thatBellsite’s negligent misrepresentation claim did arise out of its breach

of contract claim because count three incorporated all

of the facts alleged in count one without including any

additional facts. The defendant also argues that ‘‘[n]egligent misrepresentation arises out of business transactions,’’ and that the ‘‘underlying business transaction

that the negligent misrepresentation allegedly arose out

of was the alleged underlying contract.’’ The defendant

argues that because ‘‘the allegedly breached contract

is the sole basis alleged in the underlying complaint for

the misrepresentation,’’ the negligent misrepresentation claim did not triggerthe defendant’s duty to defend.

We disagree.

The determinative issue is whether coverage for the

negligent misrepresentation claim outlined in count

three is negated by the policy’s contract exclusion. To

determine whether a complaint has triggered the defendant’s duty to defend, we must compare the language

of the complaint with the language of the policy. Community Action for Greater Middlesex County, Inc. v.

American Alliance Ins. Co., 254 Conn. 387, 398, 757

A.2d 1074 (2000). An insurer does not have a duty to

defend ‘‘if the allegations of the complaint clearly and

unambiguously establish the applicability of [a policy]

exclusion . . . .’’ (Emphasis added; internal quotation

marks omitted.) New London County Mutual Ins. Co.

v. Bialobrodec, supra, 137 Conn. App. 479. The insurer

does have a duty to defend ‘‘[i]f an allegation of the

complaint falls even possibly within the coverage

. . . .’’ (Emphasis added; internal quotation marks

omitted.) R.T. Vanderbilt Co. v. Continental Casualty

Co., supra, 273 Conn. 470. Because in the present case

it is possible that the allegations in Bellsite’s negligent
misrepresentation claim set forth a claim that is outside

the terms of the exclusion, the underlying complaint

triggered the defendant’s duty to defend.

In count three of its operative complaint, which

alleged negligent misrepresentation, Bellsite incorporated the allegation from count one that ‘‘it was promised that if Bellsite received the necessary approvals

for construction of a tower, the town would locate its

police communications systems on the tower.’’ Other

allegations refer to this promise as ‘‘an agreement’’ that

Bellsite acted ‘‘in reliance on,’’ but there is no further

description of the alleged contract between the parties.

Bellsite also alleged in count three, however, that the

plaintiff made various ‘‘statements, representations,

promises and assurances’’ that ‘‘constitute[d] negligent

misrepresentation . . . .’’ Depending on the evidence

presented, a finder of fact perhaps could find on these

allegations that a contract existed and that any alleged

negligent misrepresentation ‘‘arose out of’’ that contract, but it could also find that regardless of whether

an enforceable contract had been created, one or more

negligent misrepresentations had been made in the

course of discussions between the parties, and there

was arguably no limiting language as to when such

misrepresentations were made. Bellsite separated its

claims of breach of contract and negligent misrepresentation into separate counts in its complaint, and the

allegations of the third count quite clearly allege negligent misrepresentation.

In fact, when the underlying action reached this court

on appeal, this court treated Bellsite’s claims of breach

of contract and negligent misrepresentation as separate

and distinct. Bellsite Development, LLC v. Monroe,

supra, 155 Conn. App. 131. The defendant argues that

the manner in which the action was ultimately treated

by a court is irrelevant because the duty to defend

is dependent only on the language of the complaint.

Although the defendant’s characterization of the duty

to defend is correct; see Wentland v. American Equity

Ins. Co., supra, 267 Conn. 592; this court’s prior analysis

is useful to consider because it illustrates that the trier

could have found that the plaintiff was liable for negligent misrepresentation even in the absence of a contract between the parties. The policy exclusion

specifically states that the exclusion ‘‘does not apply

to liability for damages that the insured would have in

the absence of the contract or agreement.’’ Because

the complaint left open the possibility that the alleged

negligent misrepresentation did not arise out of a contract, the defendant’s duty to defend was not precluded

by the contract exclusion.

In recognizing the possibility that the negligent misrepresentation claim did not arise out a contract

between the parties, we acknowledge that the phrase

‘‘arose out of’’ is defined broadly in Connecticut. See
Nationwide Mutual Ins. Co. v. Pasiak, 161 Conn. App.

86, 98–99, 127 A.3d 346 (2015), cert. granted on other

grounds, 320 Conn. 913, 130 A.3d 266 (2016). This court

has previously stated that a negligent misrepresentation

may arise out of a business pursuit where the ‘‘tortious

acts and resulting injuries in the underlying action were

connected with, had their origins in, grew out of, flowed

from, or were incident to the [party’s] business pursuits

. . . .’’ Id., 101. The defendant argues that under this

broad definition, the negligent misrepresentation claim

must have arisen out of a contract between the parties

because it ‘‘flowed from’’ the same facts alleged in Bellsite’s breach of contract claim. The defendant assumes

too much. The facts alleged in the complaint may or

may not have provided the basis on which to prove an

enforceable contract, but the ‘‘statements, representations, promises and assurances’’ of the plaintiff, as

alleged in count three of the underlying complaint,

could have been made outside of contract negotiations,

or, even if made in the context of contract negotiations,

could perhaps have been severable from contract terms.

It was entirely possible from a reading of the allegations

of the complaint that the negligent misrepresentation

claim, while arising from the ‘‘same facts’’ as the contract claim, did not arise out of a contract. This possibility triggered the defendant’s duty to defend in the

underlying action.

The defendant argues two alternative grounds for

affirming the trial court’s decision: (1) that the policy’s

‘‘personal profit’’ exclusion barred coverage for the

underlying negligent misrepresentation claim; and (2)

that the underlying action did not seek ‘‘covered damages’’ under the policy. These claims do not have merit.

The policy’s personal profit exclusion barred coverage for ‘‘[a]ny liability based upon or attributable to an

insured gaining any profit, advantage, or remuneration

to which that insured is not legally entitled.’’ The defendant argues that the allegations of the underlying complaint fall within this exclusion because ‘‘the underlying

complaint specifies certain work of [Bellsite] that the

[plaintiff] allegedly received for free because the [plaintiff] allegedly failed to pay forthe work.’’ The underlying

complaint, however, does not allege that the plaintiff

received any ‘‘profit, advantage, or remuneration’’ to

which it was not entitled. Rather, it alleges that the

plaintiff failed to honor its agreement to place its equipment on a tower contemplated by Bellsite, and Bellsite

was thereby harmed. The allegations of the underlying

complaint do not necessarily fall within the exclusion.

The defendant also argues that ‘‘there is no coverage

under the policy for the underlying complaint’s allegations because the underlying complaint does not seek

covered damages under the policy.’’ The defendant

argues that the underlying complaint sought restitution

and compensation for work done by Bellsite, and that
restitution and compensation do not constitute damages. The underlying complaint clearly sought money

damages as compensation for its expenditures. The policy stated that the insurer was to pay ‘‘on behalf of the

insured those sums that the insured becomes legally

obligated to pay as damages because of a ‘wrongful act’

to which this insurance applies.’’ There is no merit to

this claim.

The judgment is reversed and the case is remanded

with direction to deny the defendant’s motion for summary judgment and for further proceedings according

to law.

In this opinion the other judges concurred.