Stonington Water Street Associates, LLC v. National Fire Insurance Co. of Hartford , 472 F. App'x 71 ( 2012 )

11-2380-cv (L)
Stonington v. National Fire Insurance Company of Hartford
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY
PARTY NOT REPRESENTED BY COUNSEL.
At a stated Term of the United States Court of Appeals for the Second Circuit, held at the
Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New York,
on the 9th day of July, two thousand twelve.
Present: PIERRE N. LEVAL,
ROSEMARY S. POOLER,
REENA RAGGI,
Circuit Judges.
_____________________________________________________
STONINGTON WATER STREET ASSOCIATES, LLC,
Plaintiff-Appellant,
-v.- 11-2380-cv(L)
11-3687-cv(CON)
NATIONAL FIRE INSURANCE COMPANY OF HARTFORD,
HODESS BUILDING CO, INC.,
Defendants-Appellees.
Appearing for Appellant: Finley T. Harckham, Anderson Kill & Olick, P.C. (Lawrence J.
Bartelemucci, on the brief), New York, N.Y.
Appearing for Appellee: Jonathan C. Burwood, Hinshaw & Culbertson LLP (Bradford R.
Carver, on the brief), Boston, Mass.
Appeal from a judgment of the United States District Court for the District of
Connecticut (Underhill, J.).
ON CONSIDERATION WHEREOF, IT IS HEREBY ORDERED, ADJUDGED,
AND DECREED that the judgment of said District Court be and it hereby is AFFIRMED.
Plaintiff Stonington Water Street Associates, LLC (“Stonington”), appeals from an order
granting summary judgment to defendant National Fire Insurance Company of Hartford
(“National Fire”), in this action arising from National Fire’s alleged breach of a performance
bond. On appeal, Stonington asserts that the district court erred in concluding that National Fire
was not liable to Stonington under the performance bond because Stonington had not performed
two conditions precedent. We assume the parties’ familiarity with the underlying facts,
procedural history, and specification of issues for review.
We review de novo a district court’s grant of summary judgment, “resolv[ing] all
ambiguities and draw[ing] all factual inferences in favor of the party against whom summary
judgment is sought.” O’Bert ex rel. Estate of O’Bert v. Vargo, 331 F.3d 29, 37 (2d Cir. 2003).
Summary judgment is appropriate when there is no genuine dispute of material fact and the
movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56. “Once the moving party
has made a properly supported showing sufficient to suggest the absence of any genuine issue as
to a material fact, the nonmoving party, in order to defeat summary judgment, must come
forward with evidence that would be sufficient to support a jury verdict in his favor. The motion
‘will not be defeated merely . . . on the basis of conjecture or surmise.’” Goenaga v. March of
Dimes Birth Defects Found., 51 F.3d 14, 18 (2d Cir. 1995) (omission in original).
As this is a diversity case arising in the state of Connecticut, we apply Connecticut law.
See Wilson v. Nw. Mut. Ins. Co., 625 F.3d 54, 60 (2d Cir. 2010). “[T]he liability of sureties is to
be determined by the specified conditions of the bond.” Ames v. Comm’r of Motor Veh., 839
A.2d 1250, 1254 (Conn. 2004). “[I]f an express ‘condition [in the contract] is not fulfilled, the
right to enforce the contract does not come into existence.’” Christophersen v. Blount, 582 A.2d
460, 462 (Conn. 1990) (second alteration in original). “As to all conditions precedent the
plaintiff sustains the burden of proof” as to whether he or she performed the condition. Benanti
v. Delaware Ins. Co., 84 A. 109, 110 (Conn. 1912).
Here, Paragraph 3 of the bond sets forth three express conditions that Stonington had to
fulfill before National Fire’s “obligation” under the bond would arise. The district court
correctly held that National Fire had no duty to Stonington under the bond because Stonington
failed to perform the conditions precedent set forth in Paragraphs 3.2 and 3.3 and we therefore
affirm.
Stonington contends principally that the district court failed to consider the holding of the
Supreme Court of Connecticut in Aetna Casualty & Surety Co. v. Murphy, 538 A.2d 219 (Conn.
1988), as modified by Arrowood Indem. Co. v. King, 39 A.3d 712, 724 (Conn. 2012), that an
insurer’s duties will not be discharged due to an insured’s failure to comply with a notice of
claim condition in an insurance contract unless (1) the insured’s delay in notifying the insurer
was unexcused and unreasonable, and (2) the insurer was materially prejudiced by the delay.
See Arrowood Indem. Co., 39 A.3d at 724.
Even assuming, arguendo, that the Supreme Court of Connecticut would apply Murphy’s
prejudice analysis to a performance bond rather than strictly and literally construing the
conditions precedent, National Fire would have no obligation under the bond. As to the
construction contract’s notice requirement, incorporated by reference in Paragraph 3.2 of the
bond, the district court correctly determined that Stonington’s delayed notice prejudiced
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National Fire because Stonington’s hiring of replacement workers during the period of delay
deprived National Fire of its contractual right under Paragraph 4 of the bond to protect itself by
participating in the selection of replacement workers. See, e.g., Enter. Capital, Inc. v. San-Gra
Corp., 284 F. Supp. 2d 166, 177 (D. Mass. 2003); Sch. Bd. v. TIG Premier Ins. Co., 110 F. Supp.
2d 1351, 1354 (N.D. Fla. 2000); accord Elm Haven Constr. Ltd. P’ship v. Neri Constr. LLC, 376
F.3d 96, 101 (2d Cir. 2004); Seaboard Sur. Co. v. Town of Greenfield, 370 F.3d 215, 220 (1st
Cir. 2004); Sleeper Village, LLC v. NGM Ins. Co., no. 09-cv-44-PB, 2010 WL 3860373, at *3-4
(D.N.H. Oct. 1, 2010). Stonington’s counter-argument that it does not seek reimbursement for
the cost of the replacement workers fails because it wrongly assumes that the only risk National
Fire had an interest in mitigating under Paragraph 4 of the bond was the price of hiring
replacement contractors; to the contrary, National Fire’s mitigation options also entitled it to
select contractors who would work on an accelerated schedule, would identify and repair any
defective work done prior to the completion of the project at a lower cost than Stonington is now
seeking to hold National Fire liable for, and would not cause any further damage that National
Fire could be held liable for.
As to the condition set out in Paragraph 3.3 that Stonington “agree[] to pay” the contract
balance, Stonington contends that its nonperformance was excused because there were no
contract funds remaining. This contention, however, is unsupported by the record insofar as
Stonington failed to demonstrate that it complied with the contract in disbursing the contract
funds. Its prejudice argument fails because the Connecticut Supreme Court has never applied
Murphy to a condition other than a notice condition. Moreover, Stonington incorrectly assumes
that the bond allows separate consideration of prejudice as to each of Stonington’s three
categories of claims, such that National Fire was obliged to perform under the bond as to any
claims for which Stonington’s nonperformance did not prejudice National Fire. The plain
language of the bond does not support this assertion, and Stonington points to no Connecticut
case analyzing prejudice in this manner.
We have reviewed the remainder of plaintiff’s arguments and found them to be without
merit. Accordingly, the judgment of the district court hereby is AFFIRMED.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk
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