United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 10-3099

___________

Employers Reinsurance Company, *

*

Appellant, *

* Appeal from the United States

v. * District Court for the

* Western District of Missouri.

Massachusetts Mutual Life Insurance *

Company, *

*

Appellee. *

___________

Submitted: June 14, 2011

Filed: September 7, 2011

___________

Before BYE and MELLOY, Circuit Judges, and ERICKSEN, District Judge. 1

___________

ERICKSEN, District Judge.

The primary issue in this appeal is whether a reinsurance agreement between

Employers ReinsuranceCompany(“ERC”) and Massachusetts Mutual Life Insurance

Company (“Mass Mutual”) contains a follow-the-settlements provision. Granting

The Honorable Joan N. Ericksen, United States District Judge for the District 1

of Minnesota, sitting by designation.
partial summary judgment in Mass Mutual’s favor, the district court concluded that 2

it does. The district court also concluded that ERC had breached the agreement by

offsetting disputed damages. Later, the district court concluded that the statute of

limitations barred most of ERC’s challenges that survived the conclusion regarding

the follow-the-settlements provision. We affirm.

I.

In late 1992 and early 1993, ERC and Connecticut Mutual Life Insurance

Company (“CML”) discussed entering into a reinsurance agreement, but they did not

reach an agreement at that time. Later in 1993, ERC and CML entered into an Excess

Disability Income Reinsurance Agreement (“Treaty”). In 1996, Mass Mutual merged

with CML and assumed CML’s rights and obligations under the Treaty.

Article I of the Treaty provides that the “agreement applies to loss sustained

by the Reinsured [Mass Mutual] under the disability income policies described in the

Schedule . . . (hereinafter called policies or policy) as a result of disabilities

commencing on or after the effective date and prior to the termination date of this

agreement.” It also provides that “[t]he date each disability commences shall be

determined by the Reinsured in accordance with policy provisions.”

Under Article II, Mass Mutual retains a part of the loss, and ERC indemnifies 

Mass Mutual for a part of the loss:

RETENTIONAND REINSURANCE. As respects loss pertaining

to each person as a result of each disability regardless of the number of

policies involved, the Reinsured shall retain as its own net retention

under this agreement the part thereof indicated in Schedule Item 5, and

The Honorable Fernando J. Gaitan, Jr., Chief Judge, United States District 2

Court for the Western District of Missouri.

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the Corporation will indemnify the Reinsured against the part of such

loss indicated in Schedule Item 6.

. . . .

As respects each disability pertaining to each person, the

Corporation shall indemnify the Reinsured for damages to which this

agreement may apply by virtue of subparagraph (b) of Article IV in the

same proportion that the amount of the loss ultimately borne by the

Corporation bears to the total amount of the loss exclusive of such

damages.

According to Schedule Items 5 and 6, Mass Mutual retained 100% of the loss for an

initial period, Mass Mutual retained 10% of the loss after the initial period, and ERC

indemnified Mass Mutual for the remaining 90% of the loss after the initial period.

Article IV defines “loss”:

DEFINITION OF LOSS. The word “loss” shall mean only such

amounts as are actually paid by the Reinsured for disability benefits

afforded under the policies,in settlement of claims for disability benefits

under the policies, or in satisfaction of judgments for disability benefits

under the policies. The word “loss” includes the amount of premium

currently waived under the policies. The word “loss” shall not include:

(a) claim expenses or salaries paid to employees of the Reinsured;

(b) punitive, exemplary or compensatory damages arising out of the

conduct of the Reinsured in the investigation, trial or settlement

of any claim or failure to pay or delay in payment of any benefits

under any policy; provided that, this subparagraph (b) shall not

apply if the Corporation concurs in the Reinsured’s course of

conduct;

(c) any statutory penalty imposed upon the Reinsured on account of

any unfair trade practice or any unfair claim practice.

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Article IX addresses Mass Mutual’s obligation to investigate, pay, settle, or

defend claims, and to give notice to ERC of certain claims; ERC’s obligation to

reimburse Mass Mutual upon receipt of proof of payment; ERC’s right to participate

in the investigation, adjustment, or defense of certain claims; Mass Mutual’s

obligation to send to ERC quarterly summaries; and the allocation of lump sum

settlements:

CLAIMS. The Reinsured agrees that it will cause to be

investigated, paid, settled or defended all claims arising under the

policies and that it will give prompt notice to the Corporation of any

event or development which, in the judgment of the Reinsured, might

result in a claim upon the Corporation hereunder, and will forward

promptly to the Corporation copies ofsuch claim documentation as may

be requested by the Corporation.

The Corporation shall reimburse the Reinsured or its legal

representative promptly for loss against which indemnity is herein

provided, upon receipt in the home office of the Corporation of

satisfactory evidence of payment of such loss.

The Corporation shall have the right, at its own expense, to

participate jointly with the Reinsured in the investigation, adjustment or

defense of any claim which, in the judgment of the Corporation, it is or

might become exposed.

Within 35 days after the end of each calendar quarter, the

Reinsured shall mail to the Corporation a summary of the estimated

values for the outstanding claims reinsured by this agreement as of the

last day of the quarter.

As respects lump sum settlements, the amount of each settlement

shall be divided by the person’s monthly benefit and the quotient shall

be expressed in months. Loss shall then be allocated between the

Reinsured and the Corporation based on this number of months in

accordance with Items 5 and 6 of the Schedule.

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Article XII sets forth the ability of either Mass Mutual or ERC to offset:

OFFSET. The Reinsured or the Corporation may offset any

balance, whether on account of premiums, commissions, loss or claim

expenses due from one party to the other under this agreement or under

any other reinsurance agreement heretofore or hereafter entered into

between the Reinsured and the Corporation, whether acting as assuming

reinsurer or ceding company.

After Mass Mutual had assumed CML’s rights and obligations under the

Treaty, ERC expressed concerns about its ability to participate in the investigation,

adjustment, or defense of claims, and about Mass Mutual’s claim adjudication. In

1999, Mass Mutual and ERC agreed to a Pilot Project in which ERC and its

representative, Disability Management Services (“DMS”), reviewed disability claim

files that were subject to the Treaty and provided recommendations to Mass Mutual. 

Mass Mutual and ERC did not extend the Pilot Project past its six-month term.

In 2002, Mass Mutual and ERC entered into a Claims Review Agreement

(“2002 CRA”). Under the 2002 CRA, Mass Mutual and ERC agreed to allow ERC’s

representative, DMS, to review claims and to make non-binding recommendations to

Mass Mutual. Mass Mutual and ERC agreed that the process envisioned by the 2002

CRA, known as the Engagement, did “not constitute a waiver of any rights or

privileges of either party under The Treaty.” In their “Engagement Guidelines,” they

also agreed that Mass Mutual “shall be the final decision-maker in all benefit

determinations” and that the “agreement asto proceduresfor ‘The Engagement’ does

not affect the contractual rights, duties and/or obligations of either party under their

Reinsurance Agreement, nor limit any remedies available for either party.” Mass

Mutual terminated the 2002 CRA.

ERC sought another agreement that would allow a third party to review claim

files, and Mass Mutual agreed so long as ERC did not use DMS. In September 2003,

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Mass Mutual and ERC entered into a Claims Review Agreement (“2003 CRA”) that

was similar to the 2002 CRA. Under the 2003 CRA, Mass Mutual and ERC agreed

to allow ERC’s representative, this time Disability Insurance Specialists, LLC

(“DIS”), to review claims and to make non-binding recommendations to Mass

Mutual. Mass Mutual and ERC agreed that the Engagement under the 2003 CRA did

“not constitute a waiver of any rights or privileges of either party under The Treaty.” 

As in 2002, the Engagement Guidelines provided that Mass Mutual “shall be the final

decision-maker in all benefit determinations” and that the “agreement as to

proceduresfor ‘The Engagement’ does not affect the contractual rights, duties and/or

obligations of either party under their Reinsurance Agreement, nor limit any remedies

available for either party.”

After implementing a new reserve system and a new claim administration

system, Mass Mutual notified ERC in September 2004 that it (Mass Mutual) had,

over the span of the reinsurance relationship, overcharged ERC $6 million due

primarily to misidentification ofsome claims as “continuing” instead of “new.” Mass

Mutual also revealed that it had miscalculated, and thus undercharged for, residual

benefits under certain policies. Mass Mutual made offsets according to the $6 million

calculated overcharge and the undercharge, which amounted to $712,305.

According to ERC’s Claims Counsel, the 2003CRA revealed “serious breaches

of the Treaty by Mass Mutual, including mishandling of claims, seeking

reimbursement for claims that were not subject to the Treaty, and seeking

reimbursements for other amounts not reimbursable under the Treaty.” In December

2005, ERC presented twelve claims that it questioned for reimbursement to Mass

Mutual. Invoking “follow the fortunes” and “follow the settlements,” Mass Mutual

rejected ERC’s request for reimbursement in late January 2006.

In early March 2006, ERC sued Mass Mutual. ERC claimed that Mass Mutual

had breached the Treaty and the implied duty of good faith and fair dealing. ERC

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also sought an accounting and a declaration that “ERC is not obligated under the . . .

Treaty to follow Mass Mutual’s settlement actions.” ERC stopped reimbursing Mass

Mutual for all claims under the Treaty shortly after the action’s commencement. 

Mass Mutual asserted counterclaims, including one for breach of contract and one for

breach of the implied duty of good faith and fair dealing based on ERC’s cessation

of reimbursements.

Mass Mutual moved for summary judgment on its counterclaim for breach of

contract; moved for summary judgment on ERC’s claims based on Connecticut’s

statute of limitations, waiver, estoppel, and laches; and moved for partial summary

judgment on ERC’s claims on the ground that ERC must follow the fortunes and

settlements of Mass Mutual under the Treaty. Seeking a declaration that the Treaty

does not contain a follow-the-settlements provision, ERC moved for partialsummary

judgment. The district court concluded that the Treaty contained an express followthe-settlements provision, and denied ERC’s motion for partial summary judgment,

granted Mass Mutual’s motion for partial summary judgment, and denied as moot

Mass Mutual’s motion for summary judgment based on Connecticut’s statute of

limitations, waiver, estoppel, and laches. The district court stated that “ERC may not

question the claims handling practices of Mass Mutual” and that “ERC may only now

question those claims that are not covered under the Treaty or that were made in bad

faith.” Concluding that ERC had breached the Treaty when it stopped

reimbursements to Mass Mutual in April 2006, the district court granted Mass

Mutual’s motion for summary judgment on its counterclaim for breach of contract. 

The district court also granted summary judgment in Mass Mutual’s favor on its

counterclaim for breach of the implied duty of good faith and fair dealing, and shortly

thereafter ERC reimbursed Mass Mutual for the amounts withheld.

After determining that the Treaty contained a follow-the-settlements provision,

the district court ordered ERC to disclose whether it intended to challenge individual

reinsured claims on a case-by-case basis and, if so, to identify them and the

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underlying theory of liability. Of the claims that ERC intended to challenge on a

case-by-case basis, the district court concluded that eight presented “a genuine issue

of material fact as to whether Mass Mutual exercised its discretion outside of the

Treaty.” Later, the district court concluded that Connecticut’s statute of limitations

barred six of the eight. ERC abandoned the remaining two. After determining the

amount of interest due on the reimbursements withheld by ERC from April 2006 to

August 2008, the district court entered judgment. On appeal, ERC asserts that the

district court erroneously concluded that the Treaty has a follow-the-settlements

provision; that the district court erroneously concluded that Connecticut’s statute of

limitations barred six of its challenges; and that the district court erroneously

concluded that ERC had breached the Treaty by stopping reimbursements to Mass

Mutual in April 2006.

II.

“In a diversity action such as this, we apply state substantive law.” Eng v.

Cummings, McClorey, Davis & Acho, PLC, 611 F.3d 428, 432 (8th Cir. 2010). The

district court determined, and the parties agree, that Connecticut law governs. “We

review de novo a district court’s grant of summary judgment, as well as its

interpretation of state law and the terms of a contract.” Ace Elec. Contractors, Inc.

v. Int’l Bhd. of Elec. Workers, Local Union No. 292, 414 F.3d 896, 899 (8th Cir.

2005).

A.

ERC asserts that the district court erroneously concluded that the Treaty has a

follow-the-settlements provision. ERC maintains that such a provision is neither

expressly nor impliedly in the Treaty, and that the district court improperly resorted

to extrinsic evidence.

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Under Connecticut law, a court construes a reinsurance treaty to effectuate the

intent of the parties as expressed by their words and purposes. Hartford Accident &

Indem. Co. v. Ace Am. Reinsurance Co., 936 A.2d 224, 231 (Conn. 2007). 

Unambiguous terms receive their plain and ordinary meaning. Id. A reinsurance

treaty’s provision is ambiguous when it is reasonably susceptible to more than one

reading. Id. The issue of whether an ambiguity exists is one of law. Id.

Primary insurers reinsure to diversify risk. The mechanics of

reinsurance can be simply described. One insurer (a “ceding insurer”)

“cedes” all or part of the risk relating to a policy, or a group of policies,

to a reinsurer. A portion of risk not “ceded” is “retained.” The reinsurer

indemnifies the ceding insurer for any liability incurred that is covered

by the reinsurance. The relationship created is strictly one of

indemnification. The reinsurer has no privity with, and is generally not

liable to, the original purchaser of the underlying policy.

Travelers Indem. Co. v. Scor Reinsurance Co., 62 F.3d 74, 76 (2d Cir. 1995). A

follow-the-fortunes clause requires “a reinsurer to accept the cedent’s good faith

decisions on all things concerning the underlying insurance terms and claims against

the underlying insured.” N. River Ins. Co. v. Ace Am. Reinsurance Co., 361 F.3d 134,

139-40 (2d Cir. 2004). A follow-the-settlements clause “requires a reinsurer to

indemnify a cedent for a settlement as long as that settlement is reasonable and made

in good faith.” Id. at 139. The wording of follow-the-settlements clauses may vary. 

See generally William C. Hoffman, Common Law of Reinsurance Loss Settlement

Clauses: A Comparative Analysis of the Judicial Rule Enforcing the Reinsurer’s

Contractual Obligation to Indemnify the Reinsured for Settlements, 28 Tort & Ins.

L.J. 659, 660 n.1 (1993).

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Discerning no ambiguity in the Treaty, we conclude that it contains a followthe-settlements provision. Article I of the Treaty provides that the “agreement

3

applies to loss sustained by [Mass Mutual] under the disability income policies

described in the Schedule . . . (hereinafter called policies or policy) as a result of

disabilities commencing on or after the effective date and prior to the termination date

of this agreement.” Under Article II, ERC “will indemnify [Mass Mutual] against the

part of such loss indicated in Schedule Item 6.” Article IX states that ERC “shall

reimburse [Mass Mutual] promptly for loss against which indemnity is herein

provided, upon receipt in the home office of the Corporation of satisfactory evidence

of payment of such loss.” Article IV defines “loss” to “mean only such amounts as

are actually paid by [Mass Mutual] for disability benefits afforded under the policies,

in settlement of claims for disability benefits under the policies, or in satisfaction of

judgments for disability benefits under the policies.” Thus, ERC agreed to promptly

reimburse Mass Mutual for a part of amounts actually paid by Mass Mutual for

disability benefits afforded under the policies, in settlement of claims for disability

benefits under the policies, or in satisfaction of judgments for disability benefits

under the policies.

We have no occasion here to precisely distinguish “follow the fortunes” from

3

“follow the settlements.” Cf. ReliaStar Life Ins. Co. v. IOA Re, Inc., 303 F.3d 874,

878 n.3 (8th Cir. 2002) (“We note that the case law and the analysis of certain

scholarly works disagree as to the exact scope and meaning of the

‘follow-the-fortunes’ doctrine. . . . [W]e do not endeavor to resolve the ambiguities

noted in these sources.”); 1A Steven Plitt et al., Couch on Insurance § 9:25 n.1 (3d

ed. 2010) (noting that many courts refer to the concept of following settlements,

“somewhat confusingly, as part of the ‘follow the fortunes clause’”). Before the

district court, ERC noted that “[c]ourts have frequently used the terms ‘follow the

fortunes’ and ‘follow the settlements’ interchangeably, although ‘follow the

settlements’ is more precisely a subset of the ‘follow the fortunes’ doctrine.” ERC

used “follow the settlements” to refer to both “follow the settlements” and “follow the

fortunes” before the district court and on appeal. Similarly, Mass Mutual has used

“follow the fortunes” to refer to both “follow the settlements” and “follow the

fortunes.”

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We are not persuaded by ERC’s assertion that reimbursable loss does not

extend to payments or settlements made by Mass Mutual to its insureds that are

beyond the benefits afforded under the policies. “Loss” under the Treaty doesinclude

amounts that Mass Mutual pays “for disability benefits afforded under the policies,”

but it also includes amounts that Mass Mutual pays “in settlement of claims for

disability benefits under the policies.” A claim for disability benefits under a policy

might be covered by the policy, or it might not. Amounts paid by Mass Mutual in

settlement of such a claim unambiguously constitute reimbursable loss, subject to

ERC’s well established,limited abilityto challengeMass Mutual’s coverage decision. 

See, e.g., Travelers Cas. & Sur. Co. v. Ins. Co. of N. Am., 609 F.3d 143, 149 (3d Cir.

2010) (“[A] reinsurer seeking to avoid payment must show either that the coverage

decisions that led to the reinsurer’s liability to the insurer were made in bad faith, or

that the coverage provided clearly fell outside the scope of the policies the reinsurer

agreed to reinsure.”); Am. Employers’ Ins. Co. v. Swiss Reinsurance Am. Corp., 413

F.3d 129, 132 (1st Cir. 2005) (“The certificates also contained ‘follow-the-fortunes’

provisions, often described as‘follow-the-settlements’ provisions. They preclude the

reinsurer from challenging a cedent’s decision to settle so long as the settlement is

‘reasonably within the terms of the [cedent’s] policy, even if not technically covered

by it’ and so long as the cedent has acted in good faith.” (alteration in original)); N.

River Ins., 361 F.3d at 139-40 (stating that follow-the-fortunes doctrine “insulates a

reinsured’s liability determinations from challenge by a reinsurer unless they are

fraudulent, in bad faith, or the payments are ‘clearly beyond the scope of the original

policy’ or “in excess of [the reinsurer’s] agreed-to exposure’” (alteration in original)

(quoting Christiania Gen. Ins. Corp. of N.Y. v. Great Am. Ins. Co., 979 F.2d 268, 280

(2d Cir. 1992))).

We reject ERC’s assertion that the district court improperly resorted to

extrinsic evidence. In concluding that the Treaty contains a follow-the-settlements

provision, the district court stated that the Treaty was unambiguous and that extrinsic

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evidence was unnecessary. Finally, having concluded that the Treaty unambiguously

requires ERC to follow the settlements of Mass Mutual, we express no opinion as to

whether follow the settlements is an implied term of the Treaty under Connecticut

law.

B.

ERC contends the district court erroneously concluded that Connecticut’s sixyear limitations period, Conn. Gen. Stat. § 52-576(a), barred ERC’s challenges to

several claims submitted by Mass Mutual. “‘The question of whether a party’s claim

4

is barred by the statute of limitations is a question of law, which [we review] de

novo.” Watts v. Chittenden, 22 A.3d 1214, 1219 (Conn. 2011) (quoting Certain

Underwriters at Lloyd’s, London v. Cooperman, 957 A.2d 836, 850 (Conn. 2008)).

ERC first contends that Article VII of the Treaty constitutes a tolling

agreement. The district court found no ambiguity in Article VII and concluded that

the article’s plain language revealed no intent to toll the statute of limitations. Article

VII provides:

REINSURANCE PREMIUM ADJUSTMENT. The first

reinsurance premium adjustment for each liability period shall be made

one year after the close of the liability period. Reinsurance premium

adjustment for each liability period shall be made annually thereafter

until all losses resulting from disabilities commencing during the

liability period and during each preceding liability period and for which

[ERC] is liable shall have been paid.

We decline to consider ERC’s assertion that the statute of limitations does not

4

bar its challenges “as a matter of fact” because ERC raised the issue for the first time

on appeal in its reply brief. See Bank of Am., N.A. v. UMB Fin. Servs., Inc., 618 F.3d

906, 911 n.4 (8th Cir. 2010).

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. . . .

Reinsurance premium adjustments shall continue after the

termination date of this agreement and the event of termination of this

agreement shall not affect [ERC’s] obligation under this article to return

reinsurance premium or [Mass Mutual’s] obligation under this article to

pay additional reinsurance premium.

Article VII provides for annual reinsurance premium adjustments that continue after

the Treaty’s termination, but we agree with the district court that nothing in Article

VII indicates that the parties agreed to toll the statute of limitations.

5

ERC next argues that Mass Mutual’s continuing course of conduct tolled the

statute of limitations. The district court concluded that tolling of the statute of

limitations pursuant to a continuing course of conduct would not be proper under

Connecticut law.

“Connecticut courts. . . have recognized that where there is a continuing course

of conduct constituting a breach of duty, the limitations period does not begin to run,

or is tolled, until that conduct terminates.” City of W. Haven v. Commercial Union

Ins. Co., 894 F.2d 540, 545 (2d Cir. 1990). “To support a finding of a ‘continuing

course of conduct’ that may toll the statute of limitations there must be evidence of

the breach of a duty thatremained in existence after commission ofthe original wrong

related thereto.” Fichera v. Mine Hill Corp., 541 A.2d 472, 474 (Conn. 1988). 

“Where [the Connecticut Supreme Court has] upheld a finding that a duty continued

to exist after the cessation of the ‘act or omission’ relied upon, there has been

evidence of either a special relationship between the parties giving rise to such a

The language of Article VII differs substantially fromthe language considered 5

in the cases on which ERC relies. See Photopaint Techs., LLC v. Smartlens Corp.,

335 F.3d 152, 160-61 (2d Cir. 2003); SEC v. DiBella, 409 F. Supp. 2d 122, 129 (D.

Conn. 2006). 

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continuing duty or some later wrongful conduct of a defendant related to the prior

act.” Id. “The issue . . . of whether a party engaged in a continuing course of conduct

that tolled the running of the statute of limitations is a mixed question of law and

fact.” Giulietti v. Giulietti, 784 A.2d 905, 925 (Conn. App. Ct. 2001).

The district court carefully analyzed the issue of whether the statute of

limitations could be tolled under Connecticut law on the basis of a continuing course

of conduct by Mass Mutual. We agree with the district court’s analysis of

Connecticut law and its reading of Vanliner Insurance Co. v. Fay, 907 A.2d 1220

(Conn. App. Ct. 2006), where the defendant’s conduct prevented the plaintiff from

taking action to remedy the initial breach. 907 A.2d at 1231. ERC does not contest

the district court’s conclusion that there was no specialrelationship between ERC and

Mass Mutual, and we do not discern a triable issue of fact with respect to whether

Mass Mutual engaged in subsequent wrongful conduct that would toll the statute of

limitations under Connecticut law. We agree with the district court that Mass

Mutual’s conduct–none of which would have prevented an earlier commencement of

a lawsuit–does not give rise to tolling under Connecticut law. Cf. Blanchette v.

Barrett, 640 A.2d 74, 85 (Conn. 1994) (“The continuing course of conduct doctrine

reflects the policy that, during an ongoing relationship, lawsuits are premature

because specific tortious acts or omissions may be difficult to identify and may yet

be remedied.”), overruled on other grounds by Grey v. Stamford Health Sys., Inc.,

924 A.2d 831 (Conn. 2007); Sanborn v. Greenwald, 664 A.2d 803, 808 (Conn. App.

Ct. 1995) (“The doctrine of continuing course of conduct as used to toll a statute of

limitations is better suited to claims where the situation keeps evolving after the act

complained of is complete . . . rather than one where the situation cannot change . .

. .”).

Finally, ERC asserts that the district court erred by concluding that a cause of

action alleging a breach of contract on the theory that the claim is not reinsured

accrues when it is ceded to the reinsurer. Analogizing to installment contracts, ERC

asserts that a new cause of action accrues each time that Mass Mutual submits a

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request for reimbursement. We do not find a basis in Connecticut law for treating

ERC’s challenges to Mass Mutual’s reimbursement requests for accrual purposes as

installment contracts. Cf. Fleet Nat’l Bank v. Lahm, 861 A.2d 545, 548 (Conn. App.

Ct. 2004).

The Connecticut Supreme Court “has stated that ‘[i]n an action for breach of

contract . . . the cause of action is complete at the time the breach of contract occurs,

that is, when the injury has been inflicted.’ Although the application of this rule may

result in occasional hardship, ‘[i]t is well established that ignorance of the fact that

damage has been done does not prevent the running of the statute, except where there

is something tantamount to a fraudulent concealment of a cause of action.’” Tolbert

v. Conn. Gen. Life Ins. Co., 778 A.2d 1, 5 (Conn. 2001) (alterations in original)

(citations omitted). “[T]he occurrence of an act or omission—whether it is a breach

of contract or of duty—that causes a direct injury, however slight, may start the

statute of limitations running against the right to maintain an action even if the

plaintiff is not aware of the injury, and even if all resulting damages have not yet

occurred; it is sufficient if nominal damages are recoverable for the breach or for the

wrong, and where that is the case, it is unimportant that the actual or substantial

damage is not discovered or does not occur until later.” Burke v. Klevan, 23 A.3d 95,

98-99 (Conn. App. Ct. 2011); see Amoco Oil Co. v. Liberty Auto & Elec. Co., 810

A.2d 259, 266 (Conn. 2002). The six claims that were dismissed pursuant to the

statute of limitations were submitted by Mass Mutual to ERC more than six years

before ERC brought this action. We agree that the statute of limitations bars ERC’s

challenges to the six claims. See Conn. Gen. Stat. § 52-576(a) (“No action for an

account, or on any simple or implied contract, or on any contract in writing, shall be

brought but within six years after the right of action accrues . . . .”).

C.

Mass Mutual asserted counterclaims for breach of contract and for breach of

the implied covenant of good faith and fair dealing based on ERC’s cessation of

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reimbursements shortly after this action’s commencement. ERC asserts that the

district court erroneously granted summary judgment to Mass Mutual on the two

counterclaims.

ERC contends that it did not breach the Treaty. See Keller v. Beckenstein, 979

A.2d 1055, 1060 (Conn. App. Ct. 2009) (summarizing elements of cause of action for

breach of contract). It maintains that, when it stopped all reimbursements to Mass

Mutual in April 2006, it was complying with the plain and unambiguous offset

provisions of Article XII. Article XII indeed provides that either ERC or Mass

Mutual “may offset any balance, whether on account of premiums, commissions, loss

or claim expenses due from one party to the other.” The district court determined,

however, that a balance is not “due” under this provision if the balance is in fact

contested. We agree: no fair reading of this provision would permit ERC to cease all

reimbursements on the basis of its own unilateral conclusion that Mass Mutual had

improperly submitted claims in the past.

ERC also maintains that it did not breach the implied duty of good faith and

fair dealing when it withheld payments. Connecticut recognizes an implied covenant

of fair dealing: “It is axiomatic that the implied duty of good faith and fair dealing is

a covenant implied into a contract or a contractual relationship.” Hoskins v. Titan

Value Equities Grp., Inc., 749 A.2d 1144, 1146 (Conn. 2000). “In other words, every

contract carries an implied duty requiring that neither party do anything that will

injure the right of the other to receive the benefits of the agreement.” De La Concha

of Hartford, Inc. v. Aetna Life Ins. Co., 849 A.2d 382, 388 (Conn. 2004) (internal

quotation marks omitted). “‘To constitute a breach of [the implied covenant of good

faith and fair dealing], the acts by which a defendant allegedly impedes the plaintiff’s

right to receive benefits that he or she reasonably expected to receive under the

contract must have been taken in bad faith.’” Id. (alteration in original) (quoting

Alexandru v. Strong, 837 A.2d 875, 883 (Conn. App. Ct. 2004)). “[B]ad faith may

include one party’s performance or interpretation of the contract in a manner that

evades its spirit and is unfaithful to its purpose, resulting in a denial of the justified

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expectations of the other party.” Landry v. Spitz, 925 A.2d 334, 345 (Conn. App. Ct.

2007). “Whether a party has acted in bad faith is a question of fact . . . .” 

Renaissance Mgmt. Co. v. Conn. Hous. Fin. Auth., 915 A.2d 290, 298 (Conn. 2007). 

ERC unilaterally withheld all reimbursements to Mass Mutual for more than two

years. The district court properly concluded that there was no genuine issue that this

did not constitute good faith or fair dealing.

III.

Accordingly, we affirm.

______________________________

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