2023 Case Updates

In Connecticut Dermatology Group, PC v. Twin City Fire Insurance Company, 346 Conn. 33 (2023), three healthcare facilities sought to recover COVID-19-related losses from their insurance companies, under policies requiring the insurers to “pay for direct physical loss of or physical damage to” covered property.  The plaintiffs claimed that as a result of the pandemic, they had suffered a loss of business income, and had incurred the expense of daily sanitation and the construction of physical barriers within the workspace.  The Connecticut Supreme Court disagreed that losses of this type were covered, and affirmed the trial court’s entry of summary judgment for the defendant insurance companies.

The plaintiffs argued that they were “seeking coverage for a ‘direct physical loss’ of their properties because the COVID-19 pandemic physically transformed their ‘ordinary business properties’ into ‘potential viral incubators that were imminently dangerous to human beings.’” The court credited “the ingenuity of this argument,” but rejected the notion that there had been a “physical transformation” of the properties; “[r]ather, the COVID-19 pandemic caused a transformation in governmental and societal expectations and behavior that had a seriously negative impact on the plaintiffs’ businesses.”

The plaintiffs also argued that the loss of productive use of their properties was equivalent to physical loss.  The court rejected that proposition, instead “agree[ing] with the multiplicity of courts that have concluded that ‘use of property’ and ‘property’ are not the same thing, and the loss of the former does not necessarily imply the loss of the latter.”

The court also distinguished the plaintiffs’ case from various decisions in which “contamination of a property by harmful substances or bacteria was deemed to be a direct physical loss.”  The court noted that in those cases, “it was the physical presence of the contaminants at the properties that caused the loss,” whereas the threat posed by COVID-19 was “the potential for person to person transmission of the virus within the building.” On this issue, the court was persuaded by “the cases that have held that the virus is not the type of physical contaminant that creates the risk of a direct physical loss because, once a contaminated surface is cleaned or simply left alone for a few days, it no longer poses any physical threat to occupants.”

In sum, “the plain meaning of the term ‘direct physical loss of … [p]roperty’ does not include the suspension of business operations on a physically unaltered property in order to prevent the transmission of the coronavirus.  Rather, in ordinary usage, the phrase ‘direct physical loss of … [p]roperty’ clearly and unambiguously means that there must be some physical, tangible alteration to or deprivation of the property that renders it physically unusable or inaccessible.”

In Solon v. Slater, 345 Conn. 794 (2023), the Connecticut Supreme Court resuscitated a widow’s claim that her late husband’s son and attorney had tortiously interfered with the amendment of the couple’s prenuptial agreement.  The trial court and Appellate Court had ruled that her claim was barred, under the doctrine of collateral estoppel, due to an earlier ruling in the Probate Court.

The plaintiff was the second wife of Michael Solon (decedent), who died in 2014, less than a year after their marriage.  On the eve of their wedding, in May of 2013, they had signed a prenuptial agreement granting her a life estate in the decedent’s house in Stamford.

Shortly thereafter, the decedent was diagnosed with inoperable cancer.  Several months later, in February of 2014, he executed a new will.  At about that time, he and the plaintiff discussed the possibility of an amended prenuptial agreement, on terms that would have been more generous to her, but no such amendment was ever finalized.

In March of 2014, the decedent moved out of the marital home, and into his former wife’s home on Long Island – an arrangement that the plaintiff would later characterize as a “kidnapping” orchestrated by the defendants.  A month later, still residing in Long Island, the decedent died.  In probate proceedings, the plaintiff objected to the admission of the decedent’s 2014 will, claiming it was the product of the defendants’ undue influence, and that the decedent had lacked testamentary capacity.

While the probate matter was pending, she sued the defendants in Superior Court, claiming among other things tortious interference with contractual relations (the proposed amendment of the prenuptial agreement) and tortious interference with right of inheritance (a possible amendment of the will).  The trial court dismissed those claims due to lack of jurisdiction, given that the decedent’s assets were under the jurisdiction of the Probate Court.

In 2015, the Probate Court admitted the 2014 will, over the plaintiff’s objections.  The court found insufficient evidence of undue influence or lack of capacity.  The plaintiff did not appeal from that decision.

The plaintiff then filed a second suit in the Superior Court, presenting claims that were substantially the same as those asserted in the dismissed first action.  The trial court granted the defendants’ motion for summary judgment as to both tortious interference claims, based on collateral estoppel.  The court noted the “interrelationship between the [antenuptial] agreement and the [2014] will with respect to the ultimate disposition of the decedent’s estate.”  The Appellate Court affirmed.

The Supreme Court agreed with the judgment below with respect to the plaintiff’s claim based on the proposed amendment of the will.  “Because the Probate Court determined that the defendants’ conduct regarding the testamentary disposition of the Solon assets was not tortious, we conclude that the plaintiff’s tortious interference with the right of inheritance claim is barred by the doctrine of collateral estoppel.”

But that did not hold true with respect to the plaintiff’s claim of tortious interference with amendment of the prenuptial agreement.  In the court’s view, “the plaintiff’s claim of tortious interference with the amendment of the antenuptial agreement is predicated on different (albeit partly overlapping) conduct relating to a different legal instrument, not the 2014 will.  The sole issue in the Probate Court was whether to admit the decedent’s 2014 will to probate.  Notably, the plaintiff did not challenge the validity of the preexisting antenuptial agreement …”  While the Probate Court did consider and reject the plaintiff’s claim of undue influence and capacity concerning the will, that court “made no factual findings regarding the defendants’ conduct pertaining to the proposed amendment of the antenuptial agreement.”

The court recognized “there is some overlap between the facts underlying the plaintiff’s undue influence claim in the Probate Court and her tortious interference with contractual relations claim in the present case, because both claims are predicated on the defendants’ allegedly wrongful conduct during the same general time period regarding the Solon assets.”  But, “[a]n overlap in issues is not enough to trigger application of the doctrine of collateral estoppel; the doctrine becomes operative only if the issue decided in the prior proceeding and the issue presented in the subsequent proceeding are identical.”

In its recent decision in Schimenti Construction Co., LLC v. Schimenti, 217 Conn.App. 224 (2023), a non-compete case, the Appellate Court reversed the trial court’s grant of summary judgment in favor of the defendant ex-employee. That ruling had been based on the premise that, when an established employee-at-will is required to sign a non-compete, the employer must provide consideration above and beyond continuation of the employment relationship. The Appellate Court disagreed.

The court noted a split among Superior Court decisions on the issue of whether continued employment may suffice as consideration for a non-compete. As for those decisions holding that additional consideration is required as a matter of law, the court held they could not be reconciled with the Connecticut Supreme Court’s decision in Roessler v. Burwell, 119 Conn. 289 (1934). The court in Roessler had observed:

The underlying purpose of the defendant in entering into the agreement was to continue thereafter in the employment of the plaintiff at a mutually agreeable salary; the benefit offered him was such a continuance, in return for which the plaintiff was to receive his services and the benefit of the restrictive covenant in the agreement. The defendant received the benefit he sought in that he was continued in the employment more than four years after the agreement was made, until he voluntarily left it. In such a situation … there is consideration for the agreement, and it can be enforced.

But the Appellate Court did not go so far as to hold that continued employment necessarily constitutes sufficient consideration for a non-compete; the court found only that there was at least a genuine issue of material fact in this regard. “Because he was an at-will employee, the defendant’s employment could have been terminated by the plaintiff at any time, and, thus, the defendant’s continued employment could constitute sufficient consideration to support the nondisclosure agreement.” The court’s observation that continued employment “could” support the non-compete underscores the need for fact finding.

The court also pointedly noted that – like the defendant in Roessler – the defendant “voluntarily resigned from his employment with the plaintiff four years after executing the nondisclosure agreement.” The court added that the defendant “may present evidence that there was no connection between the nondisclosure agreement [which included the covenant not to compete] and his continued employment; but, if connected, continued employment can be sufficient consideration for a restrictive covenant.”

Because a factbound inquiry was required, the trial court erred in granting summary judgment. The Appellate Court reversed the judgment below, and remanded the case for further proceedings.

This decision is notable for the fact that in many of the Superior Court cases on this issue, the court’s approach to consideration seems binary: either it exists or it does not. In Schimenti, the court frames the issue as the sufficiency, not mere existence, of consideration.

Bill O’Sullivan