Amica moved to dismiss.

The U.S. District Court for the District of Connecticut dismissed with prejudice the Mazzarellas' claims for damage to the “concrete basement walls” and without prejudice claims “not connected to the deterioration of the basement walls.”

The Mazzarellas appealed to the Second Circuit. They argued that the district court erred in dismissing their complaint because they sufficiently alleged that Amica had breached the contract by denying coverage for a loss covered by the policy, acted in bad faith, and violated CUTPA and CUIPA.

The Second Circuit's Decision

The Second Circuit affirmed.

In its decision, the circuit court explained that the Mazzarellas' insurance policy excluded loss caused by “water,” that the water exclusion applied to loss caused “directly or indirectly,” and that loss caused by water was “excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.”

In addition, the Second Circuit added, the Amica policy did not insure for loss caused by “[w]ear and tear, marring, [or] deterioration”; “[m]echanical breakdown, latent defect, inherent vice or any quality in property that causes it to damage or destroy itself”; or “[s]ettling, shrinking, bulging or expansion, including resultant cracking, of bulkheads, pavements, patios, footings, foundations, walls, floors, roofs, or ceilings.”

The circuit court then ruled that the Mazzarellas' claimed loss fell within the policy exclusions as a matter of law. It pointed out that the Mazzarellas' complaint alleged damage “caused by water and oxygen infiltration” and “rainwater entering the [r]esidence.” According to the Second Circuit, this asserted loss “unambiguously” fell within the exclusion for loss caused by “[w]ater,” which included “surface water,” “overflow of any body of water,” “storm surge,” water that “[b]acks up through sewers or drains,” and water “below the surface of the ground, including water which exerts pressure on, or seeps, leaks, or flows through a building, sidewalk, driveway, patio, foundation, swimming pool, or other structure.”

Moreover, the circuit court continued, to the extent the Mazzarellas' complaint alleged loss from “water and oxygen infiltration” and damage to walls and floors, the loss “would surely fall” within the policy's other exclusions for damage caused by wear and tear, deterioration, latent defects, settling, bulging, or expansion.

Thus, the Second Circuit concluded, the Mazzarellas' breach of contract claim failed as a matter of law.

The Second Circuit also found that the district court had properly dismissed the Mazzarellas' claim that Amica had breached its implied duty of good faith and fair dealing, reasoning that Amica's denial of coverage had not been wrongful and, accordingly, the Mazzarellas' bad faith claim was not independently actionable.

It concluded that the Mazzarellas had not adequately pleaded that Amica had engaged in CUTPA/CUIPA-targeted misconduct – that is, conduct distinct from the coverage denial – with “such frequency as to indicate a general business practice” and, therefore, that the district court had properly dismissed the Mazzarellas' claims under CUTPA and CUIPA.

The case is Mazzarella v. Amica Mutual Ins. Co., No. 18-1269-cv (2d Dep't May 16, 2019). Attorneys involved include: FOR PLAINTIFFS-APPELLANTS: THOMAS J. FINN (Paula Cruz Cedillo, Nicholas M. Insua, and David C. Kane, on the brief), McCarter & English, LLP, Hartford, Connecticut and Newark, New Jersey. FOR DEFENDANT-APPELLEE: CHRISTOPHER M. REILLY (Anthony J. Antonellis, John McCormack, and Michael S. Antonellis, on the brief), Sloane & Walsh, LLP, Boston, Massachusetts.