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Connecticut Appellate Court Holds Homeowners’ Policy Does Not Cover Damages Arising from Negligent Misrepresentation

Blogs, Insurance Coverage

The Connecticut Appellate Court recently affirmed the trial court’s grant of summary judgment in favor of New London County Mutual Insurance Company (“New London”), finding that damages arising from negligent misrepresentation could not be considered “property damage” and that a negligent misrepresentation did not give rise to an “occurrence” within the meaning of a homeowners’ insurance policy. New London County. Mut. Ins. Co. v. Sielski, 159 Conn. App. 650 (2015). 

New London’s insured, Andre Sielski (“Insured”) tendered the defense of an underlying suit where it was alleged he negligently misrepresented the condition of a residential property he sold to the underlying plaintiffs (the “Underlying Action”). New London commenced a declaratory judgment action against its Insured asserting it did not have a duty to defend him in the Underlying Action. In moving for summary judgment, New London argued that the alleged negligent misrepresentation and alleged injury in the Underlying Action did not constitute property damage as defined in the homeowners’ policy. The policy provides, in relevant part, that New London will defend and indemnify the Insured “if a claim is made or a suit is brought… for damages because of ‘bodily injury’ or ‘property damage’ caused by an ‘occurrence’ to which this coverage applies….” The policy defines an “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period, in a. ‘Bodily injury’; or b. ‘Property damage.” ’ “Property Damage,” in turn, is defined as “physical injury to, destruction of, or loss of use of tangible property.”

The Appellate Court affirmed the trial court’s ruling in New London’s favor. In its decision, the Appellate Court noted that neither the Appellate Court nor the Supreme Court had considered whether damages arising from negligent misrepresentation constituted “property damage.” The Appellate Court then looked to lower court decisions and found that these courts uniformly held that damages flowing from misrepresentations constituted economic or pecuniary losses, and not “property damage” within the ambit of coverage provided under homeowners’ policies.

The Appellate Court further stated that the alleged misrepresentation could not have caused the underlying plaintiff’s alleged damages. The Court reasoned that the property damage would have existed with or without the Insured’s misrepresentations and the misrepresentation was, therefore, not the actual or proximate cause of the damage to the property.