The Connecticut Appellate Court recently affirmed a lower court’s grant of summary judgment in favor of an insurer based on its determination that the insured breached the insurance policy’s cooperation clause by failing to provide copies of requested tax returns. Double G.G. Leasing, LLC v. Underwriters at Lloyd’s, London, AC 29998 (Conn. App. August 11, 2009).
The plaintiff insured purchased real property in New Milford, Connecticut that, two weeks after the purchase, was destroyed by fires of incendiary origin that were ignited with the use of flammable liquid accelerant at two separate locations in the building. The insurer requested that the insured produce financial records as part of its arson investigation. The insured’s principal did not produce his personal or company tax returns despite the insurer’s request for them. The insurer denied the claim and the insured then filed a lawsuit against the insurer, alleging breach of contract and breach of the implied covenant of good faith and fair dealing. The insurer responded by moved for summary judgment on the ground that the action was barred because the insured failed to comply with its duties under the policy, and compliance is a condition precedent to recovery under the contract.
The trial court granted the insurer’s motion for summary judgment. The trial court held that the plaintiff breached the cooperation provision of the insurance policy by not providing the requested tax returns and, additionally, that the insured did not demonstrate that the insurer was not prejudiced by the breach.
On appeal, the insured claimed that the court failed to apply the “substantial compliance” standard when it evaluated the plaintiff’s lack of cooperation. Specifically, the plaintiff claimed that the court demanded “absolute perfection, not substantial compliance,” in determining that the plaintiff had failed to cooperate. The appellate court disagreed with the plaintiff, and agreed with the trial court that in the course of an arson investigation by an insurer, “requests for income records are certainly material inquiries” and that “in view of the fact that direct proof of arson is seldom available, courts have recognized that the requisite degree of proof can be satisfied in civil cases by circumstantial evidence.” The appellate court agreed with the lower court that “[i]nformation gleaned from the tax returns of an individual insured or the officers of a corporate insured can be of crucial significance in that regard.”