Halloran & Sage recently obtained a favorable judgment in Prudential Property & Casualty Insurance Company v. Scott Anderson, et al. , 101 Conn. App. 438, 922 A.2d 236, cert. denied , 283 Conn. 911, 928 A.2d 537 (2007). In Prudential , the Connecticut Appellate Court concluded that pursuant to General Statutes § 38a-321 and Nazami v. Patrons Mutual Insurance Company , 280 Conn. 619, 910 A.2d 209 (2006) , the plaintiff homeowner insurer was not entitled to recoup benefits paid to its insured from a commercial risk insurer, under a policy issued to the general contractor responsible for the loss. The principal issue was whether the commercial risk insurer, Zurich American Insurance Company (Zurich), should be permitted to disclaim coverage after it issued a certificate of coverage and then failed to notify the certificate holder that the policy had been cancelled.

The underlying facts were undisputed. Michelle and Kevin Leville were provided with a certificate of risk insurance from Zurich in connection with a home improvement contract executed with Scott Anderson and Anderson Company Inc. (collectively Anderson). Shortly thereafter, the Levilles' home suffered significant water damage due to Anderson's negligence. Prudential Property and Casualty Insurance Company (Prudential), which had issued a homeowner's policy to the Levilles, paid for the loss. Prudential then brought a subrogation action against Anderson. Anderson was granted permission to implead Zurich as a third party defendant. Subsequently, Prudential and Anderson stipulated that judgment might enter in favor of Prudential and Prudential amended its complaint to assert a direct claim against Zurich, pursuant to General Statutes § 38a-321, Connecticut's direct action statute.

Zurich moved for summary judgment, claiming there were no genuine issues of material fact that prior to receiving notice of the Levilles' loss, it had properly cancelled the policy issued to Anderson for nonpayment of premium, pursuant to General Statutes § 38a-324. Prudential conceded that the policy was properly cancelled but objected to Zurich's motion arguing that Anderson was entitled to equitable subrogation because Zurich had permitted its agent to issue a certificate of insurance when there was no coverage. The trial court granted Zurich's motion and Prudential appealed.

On appeal, Prudential claimed that the trial court improperly granted summary judgment in favor of Zurich because (1) Prudential stands in Anderson's shoes and in equity Anderson was entitled to indemnification because the certificate was issued on its behalf, (2) Prudential stands in Anderson's shoes and Zurich should be estopped from denying Anderson coverage because the certificate was issued on its behalf, and (3) Zurich failed to provide notice of cancellation to the Levilles or to provide a means for notifying them that coverage had been cancelled. The Appellate Court affirmed pursuant to General Statutes § 38a-321 and Nazami .

The Appellate Court summarily dismissed Prudential's first two claims of error, concluding in essence that Prudential's rights were no greater than Anderson's and that Anderson could not reasonably have relied on the certificate where it knew the policy would be cancelled if the premium due was not paid, it failed to pay the premium due, several of its partial payment checks were not honored for lack of sufficient funds, and it had received a cancellation notice from Zurich.

With respect to the third issue, the Appellate Court concluded that under Nazami , Zurich owed no duty to the Levilles or Prudential and therefore, Zurich's failure to give the Levilles notice of cancellation or to implement notice procedures was immaterial.

The certificate issued on behalf of Zurich named Kevin Leville as the certificate holder and provided in pertinent part: "This certificate is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not amend, extend or alter the coverage afforded by the policies below." Prudential, 101 Conn. App. at 446. The certificate further addressed cancellation as follows: "[s]hould any of the above described policies be canceled before the expiration date thereof, the issuing insurer will endeavor to mail [ten] days written notice to the certificate holder named to the left, but failure to do so shall impose no obligation or liability of any kind upon the insurer, its agents or representatives." The certificate at issue in Nazami contained identical language.

In Nazami, the Supreme Court held that "an agent's issuing a certificate of liability insurance outlining insurance coverage of home improvement contractor and the insurer's subsequent cancellation of the policy without notice to the plaintiff homeowner were insufficient to state a cause of action under CUTPA, CUIPA or for common law-law fraud or negligence." Prudential, 101 Conn. App. at 448. The Court explained that the plaintiff's allegations of reliance conflicted with the language of the certificate, which contemplated cancellation and disclaimed any liability in the event the policy was cancelled and, further, that a certificate of coverage, which was issued "as a matter of information only," conferred no rights upon the homeowner and did not constitute a contract between the plaintiff, insurer, and the agent.

Recognizing the identity between Nazami and the case at bar, the Appellate Court concluded that the Supreme Court's reasoning in Nazami was controlling and that the allegations in the plaintiff's complaint did not state a cause of action against Zurich. The Court further held that this result comported with equity in that the Levilles had been compensated pursuant to their homeowner's insurance, for which they had paid a premium.