Homeowner’s Policy Did Not Cover Claim That Insured Had Negligently Misrepresented His Home’s Condition, Connecticut Appeals Court Affirms

An appellate court in Connecticut, affirming a trial court’s decision, has ruled that a homeowner’s insurance policy did not cover claims that the homeowner had misrepresented his home’s condition to a couple that purchased his home, concluding that the claim was for purely economic loss and not property damage.

The Case

Meghan and James Wishneski sued Andrew Sielski, alleging that:

• They had entered into a contract to buy a residential property from Sielski;
• As part of his contractual obligations, Sielski completed a disclosure report that included representations that he had no knowledge of any problems concerning basement water seepage, rot and water damage, water drainage problems, or driveway problems; and
• After they had purchased the property, they encountered a variety of problems, including drainage problems on the perimeter of the property, water coming into the property, severe flooding that washed away their driveway, and rotten and moldy beams in the basement.

The Wishneskis alleged that Sielski knew or should have known of these issues and had misrepresented the condition of the home because of the exposure of the property to severe flooding during the period that Sielski owned it and based on the newer beams attached to older moldy and rotten beams in the basement. The Wishneskis alleged seven theories of recovery, all of which were predicated on the alleged misrepresentations of Sielski.

Sielski’s homeowner’s insurance carrier, New London County Mutual Insurance Company, sought a judgment that it was not required to defend or indemnify Sielski in the Wishneskis’ action.

The trial court granted New London’s motion for summary judgment, holding that the theory of negligent misrepresentation and resulting injury alleged in the Wishneskis’ action did not constitute property damage as defined in the New London policy.

Sielski appealed.

The Appellate Court’s Decision

The appellate court affirmed.

In its decision, the appellate court ruled that damages arising from a negligent misrepresentation were not property damage and, therefore, did not give rise to an occurrence within the meaning of New London’s homeowner’s insurance policy.

The appellate court reasoned that although the Wishneskis’ alleged damages arose from undisclosed conditions, problems, and defects, the gravamen of their claim was that they had suffered “economic and pecuniary damages” as a result of Sielski’s alleged misrepresentations, which induced them to purchase the property. The alleged economic or pecuniary losses were not “property damage” within the ambit of the coverage of the policy.  The trial court had correctly determined that New London did not have a duty to defend Sielski, the appellate court concluded.

The case is New London County Mut. Ins. Co. v. Sielski, No. AC 36792 (Conn. Ct. App. Sept. 15, 2015).