PSE CONSULTING, INC. v. FRANK MERCEDE AND SONS, INC., ET AL.

This appeal concerns the rights of a surety,
pursuant to an indemnity agreement, to indemnification
for payments made in settling a claim against a surety
bond. The sole parties in this appeal are National Fire
Insurance Company of Hartford (National) and Frank
Mercede and Sons, Inc. (Mercede), the two defendants
in the underlying action.1 National, a commercial surety
company, appeals2 from the judgment of the trial court,
rendered after a jury trial, in favor of Mercede on
National's cross complaint seeking indemnification and
on Mercede's counter cross complaint seeking damages
arising from a breach of the implied covenant of good
faith and fair dealing.

On appeal, National claims that the trial court improperly:
(1) disregarded the terms of an indemnity
agreement executed by National and Mercede by
instructing the jury that National had the burden of
proving, as an element of its claim for indemnification,
that its payments to the plaintiff, PSE Consulting, Inc.
(PSE); see footnote 1 of this opinion; pursuant to a
payment bond were proper; (2) failed to direct a verdict
for National when the jury improperly found that
National's payments to PSE had not been made in satisfaction
of PSE's claim under the payment bond; (3)
instructed the jury concerning the implied covenant of
good faith and fair dealing; (4) admitted into evidence
an e-mail message protected by the attorney-client privilege,
as well as testimony pertaining to a settlement
agreement between National and a third party unrelated
to this action; (5) submitted Mercede's special defenses
of waiver and estoppel to the jury, and refused to direct
a verdict for National as to those special defenses, when
the jury reasonably could not have found for Mercede;
and (6) refused to set aside the verdict when the jury
inconsistently had found that National had breached
the implied covenant of good faith and fair dealing but
not the indemnity agreement. We affirm the judgment
of the trial court.

The jury reasonably could have found the following
facts. In October, 1996, National and Mercede executed
a general agreement of indemnity (indemnity
agreement), whereby National agreed to issue surety
bonds on Mercede's behalf, and Mercede agreed to
indemnify National for any expenses that National
might incur as a result of issuing those bonds. In May,
1997, Mercede was hired as a general contractor to
construct an assisted living facility in Stamford (project).
As security for the contract, Mercede furnished
the owner of the project with a labor and materials
payment bond (payment bond). The payment bond was
issued by National, on behalf of Mercede as the principal
and in favor of the owner as obligee, whereby
National and Mercede agreed to be jointly and severally
responsible for the payment of all labor, materials and
equipment furnished for use in the construction of
the project.

Mercede executed a written subcontract with Dominion
Bridge, Inc. (Dominion), for the manufacture and
erection of structural steel. Dominion, in turn, entered
into an oral sub-subcontract with PSE, whereby PSE
agreed to erect steel structures for $1.5 million. This
sub-subcontract between Dominion and PSE was never
reduced to writing, however, and PSE never executed
a formal subcontract with Mercede.

PSE began work on the project in November, 1997.
Soon thereafter, PSE became concerned about the volume
of work that it was performing on the project, and
sought further assurance that it would be paid for that
work. Consequently, PSE, Dominion and Mercede executed
a joint check agreement, whereby Mercede
agreed to issue checks made payable jointly to Dominion
and PSE in satisfaction of their sub-subcontract.
The joint check agreement provided that Mercede
would pay for amounts ‘‘up to the contract amount [of
$1.5 million], plus any extra charges determined and
agreed upon subsequent to the date hereof.'' This joint
check agreement also provided for a retainage of 10
percent.3

Between January and August, 1998, PSE continued to
work on the project and to submit invoices to Dominion.
Dominion then forwarded the invoices to Mercede, and
Mercede issued joint checks pursuant to the joint check
agreement. A representative of PSE signed a release
form upon receipt of each joint check, whereby PSE
waived any potential claims it may have had against
Mercede. At the time of Mercede's final payment under
the joint check agreement on July 20, 1998, Mercede
had made six joint payments totaling $1,323,000.
Dominion filed for bankruptcy in September, 1998.
Shortly thereafter, PSE sent a letter to Mercede, stating
that Dominion still owed PSE more than $600,000, and
demanding that Mercede immediately pay this ‘‘undisputed''
amount, ‘‘plus interest, and excluding other
claims for delays, etc. that will be coming shortly.''
Mercede refused to make any further payments without
confirmation from Dominion as to the validity of
PSE's claim.

On October 13, 1998, PSE formally notified National
of its claim for $1,123,551 against the payment bond.
National thereafter assigned the claim to Laurence P.
Jortner, surety claims analyst for National's parent corporation,
CNA Surety. On November 2, 1998, Jortner
sent a letter to PSE, in response to the claim, communicating
National's position that ‘‘a number of bona fide
or otherwise unresolved disputes exist between your
company and either [Mercede] or Dominion,'' and that
much of PSE's claim was ‘‘likely to be subject to reasonable
defenses by [Mercede] or [National].'' Jortner also
requested that PSE submit further documentation in
support of its claim. PSE complied with this request
shortly thereafter.

National took no further action until February, 1999,
when Jortner met with several representatives of Mercede
to discuss defenses to the claim. At this meeting,
Mercede's representatives told Jortner that they were
disputing the claim in its entirety, including PSE's
claims for payment for extra work and for the
$150,000 retainage.

Additionally, in February, 1999, Jortner was contacted
by Robert Dunn, counsel for PSE. On February
13, Dunn sent a letter to Jortner, and a copy of that
letter to the insurance commissioner, claiming that
National had breached its obligations under paragraph
six of the payment bond to pay undisputed amounts
and to explain the basis for any disputed amounts within
forty-five days of the receipt of a claim.4 Jortner immediately
responded that National was conducting a detailed
investigation, and that, ‘‘[a]s of now, [PSE's] claim is
fully disputed by [Mercede] and [National] believes that
[Mercede] has provided it with, at [a] minimum, bona
fide legal defenses regarding [PSE's] claim.'' PSE subsequently
filed a formal complaint with the insurance
commissioner.

Soon thereafter, National shifted its position on the
PSE claim. In May, 1999, Jortner again met with representatives
of Mercede. This time, Jortner suggested that
either National or Mercede make a payment to PSE
in the amount of $177,000 - representing the $150,000
retainage plus a $27,000 balance remaining on the original
contract. Mercede agreed to pay the $27,000
remaining balance, but maintained that it would not
pay the $150,000 retainage because the project owner
had not yet paid that amount to Mercede. Mercede
continued to dispute PSE's claims for payment for
extra work.

In August, 1999, PSE filed the original complaint in
the underlying action against Mercede and National,
seeking damages from Mercede for breach of contract,
and claiming that National had acted in bad faith and
had committed violations of the Connecticut Unfair
Trade Practices Act (CUTPA), General Statutes § 42-
110a et seq. Unbeknownst to Mercede, National's counsel
contacted PSE's counsel to discuss the possibility
of a settlement of PSE's bad faith and CUTPA claims
against National. National and PSE, however, did not
reach an agreement at that time.

In September, 2000, almost two years after PSE initially
had filed its formal notice of a claim against the
payment bond, National conducted its independent
investigation of the claim. At that time, Jortner enlisted
Raymond Lemming, National's in-house chief engineer,
to evaluate the fair market value of PSE's work on the
project. Lemming concluded that PSE's work had a fair
market value of approximately $927,913. That value was
based, however, on PSE's work under the base contract
and did not include PSE's claimed extra work.

Thereafter, National persistently attempted to settle
PSE's claims. In April, 2001, Jortner attended a settlement
meeting with counsel for National and counsel
for PSE. No representatives of Mercede were present
at this meeting. In October, 2001, National made a payment
to PSE in the amount of $200,000. According to
Jortner, this payment represented the $150,000
retainage plus an additional $50,000, constituting three
years of interest at 10 percent. The payment was made
at the time of Jortner's deposition, and Mercede, who
had no prior knowledge of the settlement negotiations,
objected to the payment.

On October 31, 2001, Jortner wrote a letter to Mercede,
demanding that Mercede reimburse National for
the $200,000 payment and either comply with the settlement
of the remainder of PSE's claims, or deposit collateral
of $500,000 with National, in accordance with
National's rights under the indemnity agreement. Mercede
refused to comply with either of these demands.

On November 30, 2001, National made a payment of
$500,000 to PSE. On December 6, 2001, PSE released
its claims against National, leaving Mercede as the lone
defendant to the action brought by PSE. Mercede and
PSE reached a settlement on the first day of trial. As
a result, the trial was limited to resolution of National's
cross complaint, which sought indemnification from
Mercede, and Mercede's counter cross complaint,
which sought damages arising from a breach of contract
and breach of the implied covenant of good faith and
fair dealing. After a trial that lasted approximately two
weeks, the jury returned a verdict for Mercede on both
National's cross complaint and Mercede's counter cross
complaint. Specifically, in the interrogatories submitted
to the jury by the trial court, the jury stated its finding
that National had not proven, by a preponderance of
the evidence, ‘‘all five elements'' of its claim for indemnification.
Additionally, the jury found that Mercede had
proven its special defense that National had breached
the implied covenant of good faith and fair dealing, as
well as the special defenses of estoppel and waiver.5
Concerning Mercede's counter cross complaint, the jury
found that National had not breached the indemnity
agreement. Nonetheless, the jury also found that
National had breached the implied covenant of good
faith and fair dealing, and it awarded Mercede nominal
damages. The trial court rendered judgment for Mercede
in accordance with the jury's verdicts. This appeal
followed. Additional facts will be set forth as necessary.

I

We first address National's claim that the trial court
improperly instructed the jury that National had the
burden of proving the propriety of its payments to PSE.
Specifically, National contends that, in so instructing
the jury, the trial court disregarded the express terms
of the indemnity agreement, which provided that any
evidence of a payment by National to a claimant upon
the bond is ‘‘prima facie evidence'' of the propriety of
that payment. According to National, the trial court
should have instructed the jury that, upon a finding that
National, as the surety, had made a payment to PSE,
the claimant, upon the payment bond, the prima facie
evidence provision of the indemnity agreement shifted
the burden of proof to Mercede, the principal, and its
indemnitors6 to prove that National's payment was
improper. We agree. We also conclude, however, that
this instructional impropriety constituted harmless
error.

National takes issue with the following portion of
the trial court's jury instruction: ‘‘The five elements of
National's indemnity claim are: (1) Was the [indemnity
agreement] in existence and signed by Mercede and
National? (2) Did PSE submit a claim under the payment
bond . . . ? (3) Was the . . . payment bond in existence
and signed by the proper parties? (4) Did National
pay to PSE $700,000? (5) Was the $700,000 payment to
PSE as a result of PSE's claim and lawsuit against the
payment bond . . . ?'' The trial court further charged
the jury ‘‘that elements one, two, three and four have
been proven either by the evidence or the admissions
of the parties. National has the burden by the preponderance
of the evidence to prove element five.''

‘‘Our analysis begins with a well established standard
of review. When reviewing [a] challenged jury instruction
. . . we must adhere to the well settled rule that
a charge to the jury is to be considered in its entirety,
read as a whole, and judged by its total effect rather
than by its individual component parts. . . . [T]he test
of a court's charge is not whether it is as accurate upon
legal principles as the opinions of a court of last resort
but whether it fairly presents the case to the jury in
such a way that injustice is not done to either party
under the established rules of law. . . . As long as [the
instructions] are correct in law, adapted to the issues
and sufficient for the guidance of the jury . . . we will
not view the instructions as improper. . . . We do not
critically dissect a jury instruction.'' (Internal quotation
marks omitted.) Schoonmaker v. Lawrence Brunoli,
Inc., 265 Conn. 210, 238–39, 828 A.2d 64 (2003).
National contends that this jury instruction was
improper because it disregarded the express terms of
the indemnity agreement. Because the indemnity
agreement is a written contract, our analysis of this
issue must be guided by our well established principles
of contract interpretation. Under these principles, ‘‘[a]
contract must be construed to effectuate the intent of
the parties, which is determined from the language used
interpreted in the light of the situation of the parties
and the circumstances connected with the transaction.
. . . [T]he intent of the parties is to be ascertained by
a fair and reasonable construction of the written words
and . . . the language used must be accorded its common,
natural, and ordinary meaning and usage where
it can be sensibly applied to the subject matter of the
contract. . . . Where the language of the contract is
clear and unambiguous, the contract is to be given effect
according to its terms. . . . Although ordinarily the
question of contract interpretation, being a question of
the parties' intent, is a question of fact . . . [w]here
there is definitive contract language, the determination
of what the parties intended by their contractual commitments
is a question of law.'' (Citations omitted; internal
quotation marks omitted.) Poole v. Waterbury, 266
Conn. 68, 87–88, 831 A.2d 211 (2003). Neither National
nor Mercede contends that the terms of the indemnity
agreement are ambiguous. Accordingly, our review of
this issue is plenary.

National, relying on paragraphs two and five of the
indemnity agreement, asserts that Mercede had agreed
‘‘to waive certain rights and benefits in exchange for
National's issuance of . . . bonds on [Mercede's]
behalf.'' Paragraph two of the indemnity agreement provided
in relevant part: ‘‘[Mercede] will indemnify and
save [National] harmless from and against every claim,
demand, liability, cost, charge, suit, judgment and
expense which [National] may pay or incur in consequence
of having executed, or procured the execution
of such bonds, or any renewals or continuations thereof
or substitutes therefor, including, but not limited, to
fees of attorneys, whether on salary, retainer or otherwise,
and the expense of procuring, or attempting to
procure, release from liability, or in bringing suit to
enforce the obligation of . . . [Mercede] under this
Agreement.'' In addition, paragraph two contained the
following ‘‘prima facie evidence'' provision: ‘‘In the
event of payments by [National], [Mercede] agree[s] to
accept the voucher or other evidence of such payments
as prima facie evidence of the propriety thereof, and
of [Mercede's] liability therefor to [National].''
(Emphasis added.) Paragraph five of the indemnity
agreement is a ‘‘right-to-settle'' provision: ‘‘[National]
shall have the exclusive right to determine for itself and
[Mercede] whether any claim or suit brought against
[National] or [Mercede] upon any such bond shall be
settled or defended and its decision shall be binding
and conclusive upon [Mercede].''

The terms set forth by paragraphs two and five are
typical of indemnity agreements utilized throughout the
surety industry, and courts routinely have upheld the
validity of similar or identical provisions. See, e.g.,
Transamerica Ins. Co. v. Bloomfield, 401 F.2d 357, 362
(6th Cir. 1968) (‘‘[p]rovisions in indemnity agreements
granting to the indemnitor the right to compromise and
settle claims, and providing that vouchers and other
evidence of payment shall be prima facie evidence of
the propriety thereof, have been upheld as not against
public policy and enforced by the courts''); Engbrock
v. Federal Ins. Co., 370 F.2d 784, 786 (5th Cir. 1967)
(provisions wherein ‘‘voucher or other evidence of payment
by said [surety] . . . shall be prima facie evidence
. . . of each [i]ndemnitor's liability to said
[surety]'' and decisions of surety were ‘‘final and conclusive
and unconditionally binding upon each [i]ndemnitor''
upheld as not against public policy [emphasis in
original]); United States Fidelity & Guaranty Co. v.
Napier Electric & Construction Co., 571 S.W.2d 644,
645–46 (Ky. App. 1978) (same); Associated Indemnity
Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 281,
283 and n.5 (Tex. 1998) (principal terms of indemnity
agreement, vesting surety with ‘‘exclusive right'' to settle
claims in good faith and providing that ‘‘vouchers
for . . . payments, shall be prima facie evidence'' of
indemnitors' liability to surety, are ‘‘standard throughout
the industry, and have been widely upheld by
courts''); see also J. Hinchey, ‘‘Surety's Performance
Over Protest of Principal: Considerations and Risks,''
22 Tort & Ins. L.J. 133, 146–47 (1986) (discussing
enforceability of right-to-settle and prima facie evidence
clauses).

Right-to-settle clauses, such as paragraph five of the
indemnity agreement in this case, generally are
enforced according to their terms. In other words, in
the face of such a provision, a surety typically has wide
discretion in settling claims made upon a bond, even
where the principal is not liable for the underlying
claim. See, e.g., United States Fidelity & Guaranty
Co. v. Napier Electric & Construction Co., supra, 571
S.W.2d 646; Fidelity & Deposit Co. of Maryland v.
Fleischer, 772 S.W.2d 809, 816 (Mo. App. 1989); Hess
v. American States Ins. Co., 589 S.W.2d 548, 551 (Tex.
App. 1979); see also J. Hinchey, supra, 22 Tort & Ins.
L.J. 146. The surety's discretion to make settlement
payments is not unfettered, however, and most jurisdictions
have held that the surety is entitled to indemnification
only for payments that were made in good faith.
See part II of this opinion.

The prima facie evidence provision in paragraph two
of the indemnity agreement at issue here brings that
limitation into focus. Courts interpreting similar or identical
provisions routinely have concluded that, upon a
finding that a surety has made a payment to a claimant
upon a bond, the burden of proof shifts to the indemnitor
to prove that the surety had not made the payment
in good faith. See, e.g., Transamerica Ins. Co. v. Bloom-
field, supra, 401 F.2d 362–63; Engbrock v. Federal Ins.
Co., supra, 370 F.2d 786 (where indemnity agreement
has prima facie evidence provision, indemnitor may
avoid liability ‘‘only by pleading and proving fraud or
lack of good faith by [s]urety''); United States Fidelity&
Guaranty Co. v. Napier Electric & Construction Co.,
supra, 571 S.W.2d 646 (same). ‘‘The purpose of [prima
facie evidence] clauses . . . is to facilitate the handling
of settlements by sureties and obviate unnecessary and
costly litigation.'' Transamerica Ins. Co. v. Bloomfield,
supra, 363.

Although the prima facie evidence provision frequently
is invoked to enable a surety to prevail on a
motion for summary judgment; see, e.g., United States
Fidelity & Guaranty Co. v. Feibus, 15 F. Sup. 2d 579,
582–83 (M.D. Pa. 1998); courts explicitly and implicitly
have construed these provisions as shifting the burden
of proof at trial. See, e.g., Ideal Electronic Security Co.
v. International Fidelity Ins. Co., 129 F.3d 143, 151
(D.C. Cir. 1997) (at trial in which surety sought indemnification
for attorney's fees, prima facie evidence provision
shifted burden to indemnitor to prove fees were
excessive); Transamerica Ins. Co. v. Bloomfield, supra,
401 F.2d 362–63 (uncontroverted evidence at trial demonstrated
that surety had performed in good faith; therefore,
prima facie evidence provision required verdict
for surety); Engbrock v. Federal Ins. Co., supra, 370 F.2d
786 (under prima facie evidence provision, indemnitor
must plead and prove bad faith on part of surety);
United States Fidelity & Guaranty Co. v. Napier Electric
& Construction Co., supra, 571 S.W.2d 646 (same);
Hess v. American States Ins. Co., supra, 589 S.W.2d
551 (same); Fidelity & Deposit Co. of Maryland v. Wu,
150 Vt. 225, 228–29, 552 A.2d 1196 (1988) (indemnitor
had burden of producing evidence concerning surety's
bad faith, regardless of whether prima facie evidence
provision gave rise to presumption of good faith); see
also Hawaiian Ins. & Guaranty Co., Ltd. v. Higashi,
67 Haw. 12, 14, 675 P.2d 767 (1984) (‘‘[o]bviously, where
such a provision is in the agreement, the burden of
proof on those issues shifts'').

We note that there is an apparent disagreement as
to whether such provisions shift to the party who is
contesting the surety's claim for indemnification both
the burdens of production and persuasion, or merely
the burden of production. Compare Engbrock v. Federal
Ins. Co., supra, 370 F.2d 786 (stating that indemnitor
must plead and prove surety's bad faith) and United
States Fidelity & Guaranty Co. v. Napier Electric &
Construction Co., supra, 571 S.W.2d 646 (same) with
Associated Indemnity Corp. v. CAT Contracting, Inc.,
supra, 964 S.W.2d 283 n.5 (prima facie evidence provision
shifts burden of production only) and Fidelity &
Deposit Co. of Maryland v. Wu, supra, 150 Vt. 229 n.3
(same); see generally Potter v. Chicago Pneumatic Tool
Co., 241 Conn. 199, 235–36 n.26, 694 A.2d 1319 (1997).
We need not determine, in the present case, the scale
of the prima facie evidence provision in paragraph two
of the indemnity agreement because any impropriety
caused by the trial court's instruction was harmless.
‘‘An improper instruction on the burden of proof may
so mislead the jury as to be potentially harmful to one
of the parties and therefore may amount to reversible
error.'' (Internal quotation marks omitted.) Potter v.
Chicago Pneumatic Tool Co., supra, 241 Conn. 241.
Nonetheless, ‘‘[i]t is axiomatic . . . that not every error
is harmful. . . . [W]e have often stated that before a
party is entitled to a new trial . . . he or she has the
burden of demonstrating that the error was harmful.
. . . An instructional impropriety is harmful if it is
likely that it affected the verdict.'' (Internal quotation
marks omitted.) Schoonmaker v. Lawrence Brunoli,
Inc., supra, 265 Conn. 243; Scanlon v. Connecticut
Light & Power Co., 258 Conn. 436, 448, 782 A.2d 87
(2001); accord Godwin v. Danbury Eye Physicians &
Surgeons, P.C., 254 Conn. 131, 145, 757 A.2d 516 (2000);
Remington v. Aetna Casualty & Surety Co., 240 Conn.
309, 316, 692 A.2d 399 (1997).

At trial, Mercede asserted, as a special defense, that
National had breached the implied covenant of good
faith and fair dealing. The trial court properly instructed
the jury that Mercede bore the burden of proving this
special defense; see part III of this opinion; and the jury
subsequently found that Mercede had met that burden.
Therefore, because Mercede proved to the jury that
National had breached the covenant of good faith and
fair dealing, and had therefore performed in bad faith,
it is not likely that the jury's verdict would have been
different had the trial court properly instructed the jury
that the prima facie evidence clause shifted the burden
to Mercede to prove bad faith. Accordingly, we conclude
that any error caused by this instruction was
harmless.

II

We turn next to National's claim that the trial court
improperly denied its motion for a directed verdict on
its claim for indemnification. Specifically, National contends
that the jury improperly concluded that the
$200,000 and $500,000 payments to PSE had not been
made in satisfaction of PSE's claim under the payment
bond. As we previously have discussed, under the terms
of the indemnity agreement in this case, National's payments
to PSE presumptively were proper unless Mercede
could prove its special defense - that National had
made those payments in bad faith.7 See part I of this
opinion. Because the jury, having been instructed properly;
see part III of this opinion; reasonably could have
concluded, on the basis of the evidence and the logical
inferences drawn therefrom, that National had acted in
bad faith, we determine that the trial court did not
improperly deny National's motion for a directed
verdict.

At the close of trial, National moved for a directed
verdict.8 National claimed that Mercede's counterclaim
and numerous special defenses had not been proven.
At the heart of National's various arguments before the
trial court in support of its motion for a directed verdict
was its contention that the indemnity agreement gave
National full discretion to make the payments to PSE,
and that its exercise of that discretion did not constitute
bad faith. Mercede responded in detail identifying those
actions and omissions by National that supported a
finding of bad faith - principally, National's failure to
conduct an investigation concerning the validity of
PSE's claim against the payment bond and its self-interested
settlement of the issue. The trial court reserved
its decision on the motion.

Thereafter, on April 3, 2002, after the jury returned
its verdict, National simultaneously filed a motion to
set aside the verdict, a motion for a new trial and a
renewed motion for a directed verdict.9 National
argued, inter alia, that the jury's finding that the
$700,000 paid to PSE was not a result of the payment
bond was contrary to the law and the evidence, and
that National's exercise of its contractual rights did
not constitute bad faith. In its response to the motions,
Mercede argued, inter alia, that the issue regarding
National's payment to PSE was essentially a question
of whether National had acted in good faith and that
there was sufficient evidence before the jury from
which it could find bad faith. The trial court denied
National's motions, in part, because, on the basis of
the evidence presented, the jury reasonably could
have found that National had made payments to PSE
to settle PSE's bad faith and CUTPA claims rather
than its claims against the payment bond. On appeal,
National revives its arguments on this issue10 and
maintains that the trial court improperly failed to
direct a verdict in its favor.11

Specifically, National claims that, under the indemnity
agreement, it had the exclusive right to settle and
defend claims, and that its determination to settle with
PSE was conclusive as to Mercede. National argues
that, because it offered evidence at trial that it had
determined that some of PSE's claims on the payment
bond were valid, and that it had valued those claims at
$500,000, the jury failed to allocate properly by failing
to find that any of the money paid to PSE constituted
proper payment. Therefore, National contends, the jury
reasonably could not have concluded from the evidence
presented that it had performed in bad faith when it
merely was exercising its contractual rights under the
indemnity agreement. National further contends that
its business judgment in this matter should not be questioned
or second-guessed by a jury.

Mercede, in response, argues that the jury, properly
instructed that Mercede had the burden of proof as to
its special defense of bad faith, reasonably could have
determined from the evidence that National had made
the payments to PSE because of National's failure to
perform under the payment bond, and not because PSE
legitimately was owed any money. Mercede claims that
the evidence supports the jury's finding that National
had acted in bad faith in its settlement of PSE's claim
for the purpose of releasing itself from PSE's bad faith
and CUTPA claims, as well as avoiding an investigation
by the insurance commissioner, and in its failure to
conduct a proper investigation of the claim upon the
payment bond. We agree with Mercede that, on the
basis of the evidence presented to the jury, the trial
court's decision to deny National's motion for a directed
verdict was not improper.

We begin with a brief discussion of the standard by
which we review this claim. It is well established that
‘‘[o]ur review of a trial court's refusal to direct a verdict
or to render judgment notwithstanding the verdict takes
place within carefully defined parameters. We must
consider the evidence, including reasonable inferences
which may be drawn therefrom, in the light most favorable
to the parties who were successful at trial; Bleich
v. Ortiz, 196 Conn. 498, 501, 493 A.2d 236 (1985); giving
particular weight to the concurrence of the judgments
of the judge and the jury, who saw the witnesses and
heard the testimony . . . . The verdict will be set aside
and judgment directed only if we find that the jury
could not reasonably and legally have reached their
conclusion.'' (Internal quotation marks omitted.) Cohen
v. Yale-New Haven Hospital, 260 Conn. 747, 761, 800
A.2d 499 (2002).

Under paragraph two of the indemnity agreement
in this case, Mercede expressly agreed to indemnify
National for every ‘‘cost . . . and expense which
[National] may pay or incur in consequence of having
executed . . . bonds . . . .'' Moreover, Mercede
agreed, pursuant to paragraph five of the indemnity
agreement, that ‘‘[National] shall have the exclusive
right to determine for itself and [Mercede] whether any
claim or suit brought against [National] or [Mercede]
upon any such bond shall be settled or defended and
its decision shall be binding and conclusive upon [Mercede].''

On the basis of the indemnity agreement,
National argues that it had broad discretion to settle
claims upon the payment bond, even over the objection
of the principal, Mercede. We agree that indemnity
agreements, such as the one here, typically guarantee
the surety wide discretion in settling claims made upon
a payment bond. This discretion is, however, not
unfettered.

Other jurisdictions faced with this issue uniformly
have held that the surety is entitled to indemnification
only for payments that were made in good faith. See,
e.g., Gundle Lining Construction Corp. v. Adams
County Asphalt, Inc., 85 F.3d 201, 210–11 (5th Cir.
1996); Fidelity & Deposit Co. of Maryland v. Bristol
Steel & Iron Works, Inc., 722 F.2d 1160, 1162–63 (4th
Cir. 1983); Transamerica Ins. Co. v. Bloomfield, supra,
401 F.2d 362; Engbrock v. Federal Ins. Co., supra, 370
F.2d 786; Carroll v. National Surety Co., 24 F.2d 268,
270–71 (D.C. Cir. 1928); United States Fidelity & Guaranty
Co. v. Feibus, supra, 15 F. Sup. 2d 583–85; National
Surety Corp. v. Peoples Milling Co., 57 F. Sup. 281,
282–83 (W.D. Ky. 1944); Martin v. Lyons, 98 Idaho 102,
105–106, 558 P.2d 1063 (1977); United States Fidelity &
Guaranty Co. v. Klein Corp., 190 Ill. App. 3d 250, 255,
558 N.E.2d 1047 (1989); The Hartford v. Tanner, 22
Kan. App. 2d 64, 70, 910 P.2d 872, review denied, 259
Kan. 927 (1996); United States Fidelity & Guaranty
Co. v. Napier Electric & Construction Co., supra, 571
S.W.2d 646; International Fidelity Ins. Co. v. Spadafina,
192 App. Div. 2d 637, 639, 596 N.Y.S.2d 453 (1993);
Portland v. George D. Ward & Associates, Inc., 89 Or.
App. 452, 456–57, 750 P.2d 171, review denied, 305 Or.
672, 757 P.2d 422 (1988); Hess v. American States Ins.
Co., supra, 589 S.W.2d 550; Fidelity & Deposit Co. of
Maryland v. Wu, supra, 150 Vt. 230; but see Fireman's
Ins. Co. of Newark, New Jersey v. Todesca Equipment
Co., 310 F.3d 32, 37 (1st Cir. 2002) (common-law covenant
inapplicable given stringent language of indemnity
agreement). Although some jurisdictions have limited
the surety's duty of good faith to cases wherein the
indemnity agreement has expressly imposed that duty
upon the surety; see Associated Indemnity Corp. v.
CAT Contracting, Inc., supra, 964 S.W.2d 278 (surety
has no common-law duty of good faith under Texas
law, but there was evidence to support finding that
surety failed to satisfy contractual condition of good
faith in indemnity agreement); courts in jurisdictions
that recognize the existence of an implied covenant
of good faith and fair dealing in every contract have
concluded that a surety owes a duty of good faith to
its principal irrespective of whether the indemnity
agreement expressly imposes that duty. See, e.g., The
Hartford v. Tanner, supra, 71 (‘‘obligation of good faith
and fair dealing on the part of the surety is implied and
in a sense superimposed on the entire surety contract'');
Portland v. George D. Ward & Associates, Inc., supra,
456–57 (applying ‘‘implied obligation of good faith in
. . . every contract'' to indemnity agreement); see also
Associated Indemnity Corp. v. CAT Contracting, Inc.,
supra, 282 (‘‘[t]hose jurisdictions recognizing an affirmative
duty of good faith in surety contracts have generally
done so . . . because they impose such duty in
all contracts'').

Although the indemnity agreement at issue in the
present case did not require, expressly, that National
act in good faith, the parties recognized, both at trial
and at oral argument before this court, that the implied
covenant of good faith is an overlay that applies to
sureties. Arntz Contracting Co. v. St. Paul Fire &
Marine Ins. Co., 47 Cal. App. 4th 464, 482, 54 Cal. Rptr.
2d 888 (1996) (standard of good faith implied in every
contract to surety conduct; doctrine has ‘‘particular
application in situations where one party is invested
with a discretionary power affecting the rights of
another''); see also Portland v. George D. Ward & Associates,
Inc., supra, 89 Or. App. 457–58 (applying reasonableness
standard to bad faith where indemnity
agreement subjects right to compromise claim to surety's
sole discretion). This application of the implied
covenant of good faith and fair dealing to surety indemnity
agreements is consistent with our good faith jurisprudence.
See Home Ins. Co. v. Aetna Life & Casualty
Co., 235 Conn. 185, 200, 663 A.2d 1001 (1995) (‘‘[e]very
contract carries an implied covenant of good faith and
fair dealing requiring that neither party do anything that
will injure the right of the other to receive the benefits
of the agreement'' [internal quotation marks omitted]);
Habetz v. Condon, 224 Conn. 231, 238, 618 A.2d 501
(1992) (same); Verrastro v. Middlesex Ins. Co., 207
Conn. 179, 190, 540 A.2d 693 (1988) (‘‘[t]he concept of
good faith and fair dealing is [e]ssentially . . . a rule
of construction designed to fulfill the reasonable expectations
of the contracting parties as they presumably
intended'' [internal quotation marks omitted]). To
decide the present issue, we find it necessary, however,
to look outside our jurisdiction to seek guidance on
how the covenant of good faith applies specifically in
the surety context.

A

We note that the approach taken by our sister states
is not uniform. ‘‘Though the weight of authority seems
to be on the side of recognizing a duty of good faith,
there is no consensus about what that duty requires.''
T. Harris, ‘‘Good Faith, Suretyship, and the Ius Commune,''
53 Mercer L. Rev. 581, 587 (2002). The majority
of courts agree12 that the principal must establish something
more than mere negligence to prove bad faith.
See, e.g., Engbrock v. Federal Ins. Co., supra, 370 F.2d
787 (‘‘neither lack of diligence nor negligence is the
equivalent of bad faith''); Frontier Ins. Co. v. International,
Inc., 124 F. Sup. 2d 1211, 1214 (N.D. Ala. 2000)
(same); United States Fidelity & Guaranty Co. v. Feibus,
supra, 15 F. Sup. 2d 587 (‘‘[g]ross negligence or
bad judgment is insufficient to amount to bad faith'');
Employers Ins. Of Wausau v. Able Green, Inc., 749 F.
Sup. 1100, 1103 (S.D. Fla. 1990) (surety's actions may
have been negligent but did not rise to level of deliberate
malfeasance required to establish bad faith); American
Employers' Ins. Co. v. Horton, 35 Mass. App. 921, 924,
622 N.E.2d 283 (1993) (‘‘bad judgment, negligence or
insufficient zeal'' not evidence of bad faith); Fidelity &
Deposit Co. of Maryland v. Wu, supra, 150 Vt. 231 (‘‘[a]t
best, the jury could draw the conclusion that [the] plain-
tiff was negligent . . . there was no evidence of lack
of good faith for the jury'').13 Unfortunately, many of
these jurisdictions do not go past this label to define the
term ‘‘bad faith.'' In those jurisdictions that do further
define the term, one common characterization used
frequently, is that bad faith, in essence, means that the
surety acted with an ‘‘improper motive'' or ‘‘dishonest
purpose.'' See, e.g., Engbrock v. Federal Ins. Co., supra,
787 (improper motive); Travelers Casualty & Surety
Co. of America, Inc. v. Jadum Construction Co., United
States District Court, 2003 U.S. Dist. LEXIS 11861, *5
(July 11, 2003) (dishonest purpose); Fidelity & Guaranty
Ins. Co. v. Keystone Contractors, Inc., United
States District Court, Docket No. 02CV1328, 2002 U.S.
Dist. LEXIS 15403, *13 (E.D. Pa. August 14, 2002) (dishonest
purpose); Frontier Ins. Co. v. International,
Inc., supra, 1214 (improper motive; dishonest purpose);
United States Fidelity&Guaranty Co. v. Feibus, supra,
587 (improper motive; dishonest purpose); Safeco Ins.
Co. of America v. Criterion Investment Corp., 732 F.
Sup. 834, 841 (E.D. Tenn. 1989) (improper motive);
Associated Indemnity Corp. v. CAT Contracting, Inc.,
supra, 964 S.W.2d 285, 289 (improper motive; dishonest
purpose); Ford v. Aetna Ins. Co., 394 S.W.2d 693, 698
(Tex. App. 1965) (improper motive).

After full consideration of the issue before us, we
join those jurisdictions that define bad faith as requiring
an ‘‘improper motive'' or ‘‘dishonest purpose'' on the
part of the surety. This standard is in substantial accord
with our definition of bad faith in other contexts. See
Buckman v. People Express, Inc., 205 Conn. 166, 171,
530 A.2d 596 (1987) (jury instruction that ‘‘bad faith is
not simply bad judgment or negligence, but rather it
implies the conscious doing of a wrong because of
dishonest purpose or moral obliquity . . . it contemplates
a state of mind affirmatively operating with furtive
design or ill will'' [internal quotation marks
omitted]). Additionally, this standard preserves a
proper balance between affording the surety the wide
discretion to settle that it requires, while ensuring that
the principal is protected against serious and wilful
transgression.

We are careful to note, however, that we do not
interpret this standard as requiring the improper motive
to rise to the level of fraud. See footnote 13 of this
opinion. To do so would virtually obliterate the prophylactic
effect of the covenant of good faith and fair dealing.
See The Hartford v. Tanner, supra, 22 Kan. App.
2d 77 (‘‘[a]llowing the surety's indemnification contract
to be enforced, absent fraud, leaves the principal and
indemnitor at the mercy of the surety's unreasonable
conduct''). We further note, that, although we are not
interpreting good faith to mean reasonableness; see
footnote 12 of this opinion; whether a surety's actions
were reasonable properly may be considered when analyzing
bad faith. Unreasonable conduct can be evidence
of improper motive and is a proper consideration where
parties are bound by a contract that gives unmitigated
discretion to one party. Applying these principles, we
evaluate the evidence from which the jury reasonably
could have concluded that Mercede was not bound to
indemnify National's payments to PSE because they
had been made in bad faith.

1

The evidence from which the jury reasonably could
have concluded that National had acted in bad faith
includes National's failure to conduct a sufficient investigation.
Paragraph 6.1 of the payment bond directed
National to send an answer to PSE within forty-five
days after receiving formal notice of PSE's claim against
the bond. In its response, National was obligated to
identify what part of the claim it had determined to be
undisputed, as well as to provide the basis for challenging
any disputed amounts. Mercede presented evidence
that National improperly had failed to put into writing,
as required by the payment bond, its opinion as to
whether all or any part of PSE's claim was disputed.
Therefore, the parties involved, including Mercede,
were not notified as to what portion of PSE's claims
National considered to be undisputed and what evidence
it had in support of that assessment. Moreover,
paragraph 6.2 of the payment bond directed National
to pay only claims upon the payment bond that were
undisputed. From these facts, the jury reasonably could
have found that National was obligated to investigate
PSE's claims in a manner sufficient to determine
whether the amount claimed by PSE was in dispute.
Additionally, Mercede presented evidence from
which the jury could have concluded that Jortner had
engaged in only a superficial review of PSE's claim; in
particular, he personally never had reviewed Mercede's
project records. Mercede presented evidence that Jortner
was not himself capable of making an adequate
assessment of the claim because he lacked the knowledge
and experience necessary to do so. Mercede further
presented evidence that, in September, 2000,
almost two years after National was obligated under
the payment bond to respond to PSE's claims, Jortner
requested that Lemming, National's in-house engineer,
evaluate the claims. Lemming advised Jortner that the
reasonable value of all work performed by PSE was
$927,913, but by that point, Mercede already had paid
PSE more than $1.3 million. Despite Lemming's valuation,
Jortner made payments to PSE in October and
November, 2001, in the amounts of $200,000 and
$500,000, respectively.

First, National argues that there is no legal standard
by which it had to investigate PSE's claim. Next,
National claims that, from the evidence presented, the
jury should have found that National ultimately had
fulfilled its notification obligations under the payment
bond, as evidenced by Jortner's letters of November 2,
1998, and February 15, 1999. National further claims
that it presented evidence that Jortner adequately had
considered the information regarding the claim, and
that it was reasonable for him to have believed that PSE
would have a significant recovery against the payment
bond at a trial of the case. It argues that Mercede's
attack on Jortner's competency in evaluating whether
the claim under the payment bond should have been
paid is disparaging and, ultimately irrelevant, as the
proper legal issue is whether Jortner acted with malice
toward Mercede. National also points out that Lemming's
estimate, valuing PSE's work at just below $1
million, did not take into account PSE's claims for extra
work, and other costs. Therefore, National argues,
because Mercede did not present evidence to the jury
that Lemming actually had considered PSE's additional
claims as part of his estimate, the jury could not have
concluded that the value of PSE's claims did not exceed
$1 million.

‘‘Central to the factfinding process is the process
of drawing inferences, and central to the process of
drawing inferences is the notion that the factfinder is
not required to draw only those inferences consistent
with one view of the evidence, but may draw whatever
inferences from the evidence or facts established by
the evidence it deems to be reasonable and logical.''
(Internal quotation marks omitted.) In re Keijam T.,
221 Conn. 109, 123, 602 A.2d 967 (1992). Therefore, even
if we were to assume, as we must, that the jury rejected
National's account, finding these issues of fact entirely
in Mercede's favor, we conclude that the jury reasonably
and legally could have concluded that, despite its
obligation to conduct a proper investigation, National
failed to do so.

Whether that finding leads inexorably to the ultimate
determination of bad faith is an issue that has been
addressed in other jurisdictions. Our reading of this
authority informs us that the surety is under an obligation
to conduct a proper investigation. See, e.g., Continental
Casualty Co. v. American Security Corp., 443
F.2d 649, 650 (D.C. Cir. 1970) (upholding summary judgment
for surety where uncontradicted affidavits stated
that all claims had been paid by surety ‘‘in good faith
after investigation''), cert. denied, 402 U.S. 907, 91 S.
Ct. 1378, 28 L. Ed. 2d 647 (1971); Banque Nationale de
Paris S.A. v. Ins. Co. of North America, 896 F. Sup.
163, 165 (S.D.N.Y. 1995) (summary judgment for surety
where it was undisputed that surety ‘‘investigated and
evaluated [the principal's] alleged defenses before settling'');
United States v. D Bar D Enterprises, Inc., 772
F. Sup. 1167, 1170 (D. Nev. 1991) (parties may expect
surety to settle only after investigation of claims, counterclaims,
and possible defenses); Portland v. George
D. Ward & Associates, Inc., supra, 89 Or. App. 457–58
(parties to indemnity agreement subjecting right to
compromise claim against principal to sole discretion
of surety must reasonably expect compromise and payment
to be made only after investigation of claims,
counterclaims and defenses asserted in underlying
action). This authority from other jurisdictions further
informs us, however, that a deficient investigation is
not, by itself, sufficient to support a finding of bad faith.
See, e.g., Frontier Ins. Co. v. International, Inc., supra,
124 F. Sup. 2d 1214 (negligent investigation of claims
does not constitute bad faith in suretyship context
where undisputed evidence showed good faith); United
States Fidelity & Guaranty Co. v. Feibus, supra, 15 F.
Sup. 2d 587 (rejecting principals' argument that surety
had acted in bad faith where principals failed to submit
evidence of dishonest purpose or improper motive in
surety's failure to investigate claims); M. Klinger, G.
Judd & G. Bachrach, The Surety's Indemnity
Agreement: Law and Practice (2002) pp. 174–75 (‘‘Cases
addressing whether the surety exercised its settlement
discretion in good faith . . . usually focus on the surety's
claim handling activities. Factors courts consider
include . . . whether the surety reasonably investigated
the claim . . . .'' [Emphasis added.]); E. Gallagher,
Suretyship (2d Ed. 2000) p. 497 (same); J.
Hinchey, supra, 22 Tort & Ins. L.J. 149, citing Maryland
Casualty Co. v. R & L Construction Co., 368 S.W.2d
134, 135 (Tex. App. 1963) (‘‘the thoroughness of the
investigation performed by the surety'' is one factor to
be considering in determining whether surety has settled
in good faith).

Therefore, the failure to investigate, standing alone
and not accompanied by other evidence of an improper
motive, is not enough to constitute bad faith, and
because as we previously have stated, our standard
of bad faith requires more than mere negligence or
unreasonable conduct, we agree that evidence indicating
that National had failed to investigate PSE's claim
properly is not, by itself, sufficient evidence of bad faith.
Nevertheless, ‘‘[a]lthough mere negligence or failure to
make the inquiries which a reasonably prudent person
would make does not of itself amount to bad faith, if
a party fails to make an inquiry for the purpose of
remaining ignorant of facts which he believes or fears
would disclose a defect in the transaction, he may be
found to have acted in bad faith.'' (Internal quotation
marks omitted.) Funding Consultants, Inc. v. Aetna
Casualty & Surety Co., 187 Conn. 637, 644, 447 A.2d
1163 (1982). Accordingly, a surety's failure to conduct
an adequate investigation of a claim upon a payment
bond, when accompanied by other evidence, reflecting
an improper motive, properly may be considered as
evidence of the surety's bad faith.

2

The jury also reasonably could have found that
National settled the claim upon the payment bond solely
to protect its own self-interest. First, Mercede presented
evidence from which the jury could have concluded
that National had paid PSE because it was fearful of
possible action by the insurance commissioner based
upon National's failure to process the claim properly
as required by the payment bond. Specifically, Mercede
presented two witnesses who testified that Jortner had
expressed concern about PSE's complaint with the
insurance commissioner.14

Additionally, Mercede presented evidence from
which the jury could have concluded that National's
sole motivation to settle PSE's claim upon the payment
bond had been to release itself from PSE's claims that
National had acted in bad faith and had violated CUTPA
by failing to perform in accordance with the terms of
the bond. Specifically, Mercede submitted evidence that
in August, 1999, shortly after PSE had filed its original
complaint against National and Mercede, counsel for
National met with counsel for PSE, without Mercede's
knowledge, in an attempt to settle PSE's bad faith and
CUTPA claims against National. Moreover, the e-mail
that National unsuccessfully sought to exclude from
evidence; see part IV A of this opinion; also allowed
the jury to find that National had settled with PSE in
order to avoid the bad faith counts in PSE's complaint
against National. That e-mail expressly revealed that
National was interested in knowing how much PSE
wanted in exchange for dropping its bad faith and
CUTPA claims against National.

Furthermore, Mercede submitted to the jury evidence
suggesting that the timing and circumstances surrounding
National's settlement on the eve of trial was
suspect. On the day jury selection was to begin, National
made a $500,000 payment to PSE in exchange for a
release of all claims against National; National, however,
did not obtain a release of the claims PSE was
asserting against Mercede. Rather, National became the
beneficiary of PSE's claims against Mercede when PSE
expressly assigned its claims against Mercede to
National. On the basis of this evidence, the jury could
have inferred that, if the $700,000 in payments made to
PSE truly had been in settlement of PSE's claims against
the payment bond, as opposed to settling PSE's claims
for bad faith and CUTPA violations against National,
National would have obtained a release that released
both it and Mercede.

National argues that, from the evidence presented,
the jury should have found that its settlement with PSE
was proper, both as to motivation and execution.
National claims that the testimony of Peter Mazza and
John Nettis; see footnote 14 of this opinion; regarding
Jortner's concern about the insurance commissioner
was self-serving, and that Mercede presented no evidence
that the insurance commissioner had ever acted
on the PSE complaint. National further argues that the
jury should have found that at least $500,000 of the
$700,000 had been paid to PSE to settle PSE's legitimate
claims on the payment bond for retainage, extra work,
change order work, and delay costs. Specifically,
National claims that it presented overwhelming evidence
supporting Jortner's decision that PSE actually
was owed money under the payment bond for base
work and extra work performed. Additionally, National
argues that, at trial, Mercede's evidence never
addressed the merits of PSE's claim, but challenged
only the details surrounding National's settlement with
PSE. National claims that it had made it clear to Mercede,
in a timely manner, that National believed that
PSE was a proper claimant under the payment bond,
and that Jortner repeatedly advised Mercede that he
believed there was no defense to the claim regarding
the $150,000 retainage. Lastly, National points out that
neither the indemnity agreement, nor the law, requires
that a surety enter into a joint defense agreement with
a principal.

The issue of whether National settled with PSE solely
in its self-interest required the jury to evaluate the credibility
of several key witnesses, many of whom contradicted
one another. Issues of credibility are uniquely
within the province of the jury and therefore we will
not endorse the testimony of one witness over another.
Moreover, as we have stated earlier, ‘‘the factfinder is
not required to draw only those inferences consistent
with one view of the evidence, but may draw whatever
inferences from the evidence or facts established by
the evidence it deems to be reasonable and logical.''
(Internal quotation marks omitted.) In re Keijam T.,
supra, 221 Conn. 123. Even if we were to assume therefore,
as we must, that the jury found these issues of
fact entirely in Mercede's favor, we cannot say that the
jury could not reasonably and legally have concluded
that National acted solely out of self-interest.
Again, whether a self-interested settlement, like the
failure to investigate properly, constitutes bad faith is
an issue we have not had to consider, and the case
law purporting to answer this question is sparse.15 It
is particularly noteworthy, however, that those cases
upholding self-interested settlements have qualified the
settlement, either explicitly or implicitly, by the terms
‘‘good faith.'' See, e.g., Gundle Lining Construction
Corp. v. Adams County Asphalt, Inc., supra, 85 F.3d
210 (surety did not act in bad faith by settling claim
when principal refused to cooperate); Transamerica
Ins. Co. v. Bloomfield, supra, 401 F.2d 362 (‘‘[t]he surety
had the right to settle and compromise the claims which
were asserted against it but in so doing it was required
to act in good faith''); United States Fidelity & Guaranty
Co. v. Feibus, supra, 15 F. Sup. 2d 586 (upholding
surety's right to indemnification ‘‘for claims paid to
protect its own interests, as long as the payments were
made in good faith''); Employers Ins. of Wausau v. Able
Green, Inc., supra, 749 F. Sup. 1103 (surety did not act
in bad faith by settling claims where principal failed to
request that surety litigate claims or post collateral to
cover legal expenses as required under indemnity
agreement); Windowmaster Corp. v. Morse/Diesel, Inc.,
722 F. Sup. 1532, 1534 (N.D. Ill. 1988) (surety had exclusive
right ‘‘to determine in good faith how to handle
suits upon validly issued bonds''); Arntz Contracting
Co. v. St. Paul Fire & Marine Ins. Co., supra, 47 Cal.
App. 4th 486 (‘‘[i]t is certainly true that indemnification
is not precluded just because a surety is motivated to
settle a case ‘for its own benefit' '' [emphasis added]);
Safeco Ins. Co. of America v. Gaubert, 829 S.W.2d 274,
282 (Tex. App. 1992) (‘‘as long as [the surety] acted in
‘good faith,' its determination [to settle] would have
been ‘final and conclusive' '').

The case that is most often cited in regard to the issue
of self-interested settlement is instructive. In Fidelity &
Deposit Co. of Maryland v. Bristol Steel & Iron Works,
Inc., supra, 722 F.2d 1165–66, the United States Court of
Appeals for the Fourth Circuit concluded that sureties
were entitled to indemnification, pursuant to an indemnity
agreement, for a settlement that the sureties had
made for the sole purpose of protecting their own selfinterest.
The sureties initially had disputed a claim on
a performance bond and had asserted the principal's
defenses. Id., 1164. Consequently, the Pennsylvania
department of transportation, which had executed the
construction contract with the principal, declared the
principal and its sureties in default on the construction
contract, and as a result of that default, disqualified the
sureties from issuing bonds on any subsequent department
of transportation construction projects. Id. Faced
with the threat of being blacklisted, the sureties settled.
The District Court, after a trial without a jury, had
awarded the sureties indemnification, and the Fourth
Circuit affirmed that decision, stating that there was
‘‘no justification for a finding of bad faith or fraud simply
because [the sureties] made the payment to secure their
removal from [the Pennsylvania department of transportation's]
blacklist as a surety on road work in Pennsylvania.''
Id., 1165, citing United States Fidelity &
Guaranty Co. v. Sandoval, 223 U.S. 227, 32 S. Ct. 298,
56 L. Ed. 415 (1912).

The court began its analysis by stating the basic rule:
sureties must be indemnified for payments made in
good faith. It is clear, however, from the facts noted
by the court in Fidelity & Deposit Co. of Maryland,
that there was no evidence that could have supported
a finding of bad faith other than the self-interested settlement.
First, the principal, with full knowledge of the
sureties' payment and the purpose for it, never objected
to the payment. Fidelity & Deposit Co. of Maryland
v. Bristol Steel & Iron Workers, Inc., supra, 722 F.2d
1164–65. In fact, the principal sent a letter to the sureties
stating that the sureties' actions were reasonable under
the circumstances; it was only after receipt of this letter
that the sureties made payment to the claimant. Id.,
1165. The court also noted how the sureties ‘‘sought in
making their payment to protect fully the interests of
the [principal].'' Id. We note further that under the applicable
law in Pennsylvania, the principal was bound ‘‘not
simply to indemnify the surety but to keep it unmolested
. . . .'' (Internal quotation marks omitted.) Id. Therefore,
the court in that case faced only with a claim of
a self-interested settlement, unblemished by any other
evidence of bad faith, determined that the surety was
not barred from seeking its right of indemnification.
Those facts are distinguishable from the present case
wherein the jury reasonably could have found that the
principal, Mercede, at various times, either was
unaware of the fact that National was making payments
to PSE, or had objected to those payments once it
was made aware of them. In fact, Mercede presented
evidence showing that, initially, National actually had
supported Mercede's defenses against PSE's claims
against the payment bond. Mercede also presented evidence
that, only after PSE had filed a complaint with the
insurance commissioner and had threatened litigation
against National based upon bad faith and CUTPA
claims, did National abandon this approach. Moreover,
we observe that Pennsylvania law required the principal
in Fidelity & Deposit Co. of Maryland ‘‘ ‘not simply to
indemnify the surety but to keep it unmolested' ''; id.;
a standard not at play in the present case. Therefore,
unlike in Fidelity & Deposit Co. of Maryland, the selfinterested
settlement in the present case was not
cloaked in good faith garb, but, rather, was tainted by
a confluence of circumstances from which a jury could
properly have inferred improper motive.
We recognize, due to the unique nature of the tripartite
relationship among surety, principal and claimant,
that a surety may subject itself to bad faith claims from
the claimant simply by defending the principal and
refusing to settle the claimant's demand upon the payment
bond. Similarly, a surety may face claims, such
as in this case, by its principal, when it settles with a
claimant. Consequently, sureties, by the nature of their
business, may find themselves caught between Scylla
and Charybdis.16 As a result, even though motives of
self-interest may constitute bad faith under some circumstances,
it does not follow that the self-interested
exercise of rights under a contract necessarily constitutes
a per se violation of the implied covenant of good
faith and fair dealing. See Arntz Contracting Co. v. St.
Paul Fire & Marine Ins. Co., supra, 47 Cal. App. 4th
485–86 (‘‘[a] surety's exposure to . . . [a] bad faith
claim may be a reasonable ground for settling bond
litigation that will not preclude indemnification''
[emphasis added]).

Inherent in this determination is our appreciation of
the public policy supporting the discretion afforded
a surety under an indemnity agreement, in that, such
agreements make it possible for a surety to compensate
unpaid subcontractors and vendors or to complete a
project in response to a performance bond claim without
having to await the adjudication of every possible
defense by the principal. See, e.g., Transamerica Ins.
Co. v. Bloomfield, supra, 401 F.2d 363 (purpose of
indemnity agreement is to facilitate handling of settlements
and protect sureties from unnecessary litigation);
United States Fidelity&Guaranty Co. v. Feibus, supra,
15 F. Sup. 2d 585 (same). Additionally, we are cognizant
of how obligees or claimants can hold sureties hostage
by merely alleging bad faith against them. See Arntz
Contracting Co. v. St. Paul Fire & Marine Ins. Co.,
supra, 47 Cal. App. 4th 485 (‘‘[s]uch allegations are easily
made, and may be based on nothing more tha[n] an
obligee's [or claimant's] interest in frightening a surety
into settling'').

Although we acknowledge the policy behind a surety's
discretionary authority, we also question, however,
the wisdom of allowing potentially suspect claims to
control or interfere with the contract obligations
between a principal and its surety.17 Where a self-interested
settlement is accompanied by an improper
motive, courts have held that bad faith can preclude
indemnification. Id., 485–86 (holding indemnification
of settlement costs properly denied where costs were
attributable to obligee's action against surety for bad
faith claims and claims involving wilful malfeasance in
managing project); see also United States Fidelity &
Guaranty Co. v. Feibus, supra, 15 F. Sup. 2d 586–87
(no evidence submitted that surety made payments
because of ‘‘improper motive or purpose''). We agree.
Therefore, consistent with the aforementioned cases,
and recognizing the difficulties associated with the
surety business, we conclude that a self-interested settlement,
when accompanied by other evidence of
improper motive, can constitute bad faith.

Obviously, what constitutes good faith or lack thereof
depends on the facts of each case. In this instance, we
conclude that the jury reasonably could have determined
that National had breached the implied covenant
of good faith and fair dealing based upon all the evidence
supporting Mercede's claims that National,
inconsistent with justified expectations and unfaithful
to its duty under the implied covenant, both failed to
investigate adequately and improperly settled PSE's
claims solely out of self-interest.18 Thus, the trial court's
failure to direct a verdict in favor of National on its
indemnification claim was not improper.

B

Lastly, National argues that the jury's conclusion that
National was not entitled to recover its attorney's fees
and costs associated with its investigation and defense
of PSE's payment bond claims contradicted the express
language of the indemnity agreement. Therefore,
according to National, the verdict should be set aside
and the issue tried to the court to determine the
amounts of recoverable fees and costs.19 Our law regarding
contract interpretation is well settled. ‘‘Although
ordinarily the question of contract interpretation, being
a question of the parties' intent, is a question of fact
. . . [w]here there is definitive contract language, the
determination of what the parties intended by their
contractual commitments is a question of law.'' (Internal
quotation marks omitted.) Poole v. Waterbury,
supra, 266 Conn. 88. In the present case, however,
National stipulated,20 and conceded several times at the
charging conference, that the issue of whether it was
entitled to fees pursuant to paragraph two of the indemnity
agreement should be decided by the jury, and that
if the jury decided that National were entitled to those
fees, the court would determine the amount of those
costs and fees. By agreeing to submit the entitlement
issue to the jury, National effectively waived any right
it might have had to an automatic award of attorney's
fees under the indemnity agreement. See Lanna v.
Greene, 175 Conn. 453, 458, 399 A.2d 837 (1978) (‘‘The
general rule is that a party for whose benefit a provision
in a contract is intended may waive his rights under
such provision. 3A Corbin, Contracts 761.''). Therefore,
we review this matter to determine only whether the
jury reasonably could have concluded that National was
not entitled to attorney's fees and costs associated with
its investigation and defense of PSE's complaint. See
Cohen v. Yale-New Haven Hospital, supra, 260 Conn.
761.

The jury found that Mercede had proven by a preponderance
of the evidence that National had breached its
implied covenant of good faith and fair dealing. Subsumed
in this finding is the jury's implicit finding that
National's payments to PSE were not the result of PSE's
claims under the payment bond. Therefore, the evidence
in support of the jury's finding that National
was not entitled to receive attorney's fees and costs is
entangled with the other issues we have resolved in
this opinion.

III

We next address National's broad contention that the
trial court improperly instructed the jury concerning
the implied covenant of good faith and fair dealing.
National's arguments can be divided into three separate
categories. First, National claims that the jury instruction
was improper and harmful because it disregarded
the express terms of the indemnity agreement. Second,
National argues that when the trial court read a list of
fourteen factors that the jury might consider in
determining whether National had acted in bad faith,
the effect of the overall charge was that any one of the
items on the list would constitute a per se violation of
the implied covenant of good faith and fair dealing.
Third, National contends that the trial court improperly
excluded particular language from the instruction. We
disagree and address each contention in turn.
We reiterate the appropriate standard of review.
‘‘When reviewing [a] challenged jury instruction . . .
we must adhere to the well settled rule that a charge
to the jury is to be considered in its entirety, read as
a whole, and judged by its total effect rather than by
its individual component parts. . . . [T]he test of a
court's charge is not whether it is as accurate upon
legal principles as the opinions of a court of last resort
but whether it fairly presents the case to the jury in
such a way that injustice is not done to either party
under the established rules of law. . . . As long as [the
instructions] are correct in law, adapted to the issues
and sufficient for the guidance of the jury . . . we will
not view the instructions as improper. . . . We do not
critically dissect a jury instruction.'' (Internal quotation
marks omitted.) Schoonmaker v. Lawrence Brunoli,
Inc., supra, 265 Conn. 238–39.

National's first claim, namely, that the jury instruction
was improper because it disregarded the express terms
of the indemnity agreement, is inextricably intertwined
with National's incorrect belief that, as a matter of law,
it did not owe Mercede an implied duty of good faith.
Accordingly, in resolving this issue, we simply refer to
part II of this opinion. To the extent that National argues
that the implied covenant of good faith cannot be
applied, in and of itself, to achieve a result contrary to
the express terms of the indemnity agreement, we
agree. See Verrastro v. Middlesex Ins. Co., supra, 207
Conn. 190. We conclude, however, that the trial court's
instruction to the jury on good faith, when ‘‘considered
in its entirety . . . and judged by its total effect rather
than by its individual component parts,'' was consistent
with this proposition. Schoonmaker v. Lawrence Brunoli,
Inc., supra, 265 Conn. 238–39. In fact, on two
separate occasions, the court reminded the jury that
‘‘National [had] the exclusive right to settle any and all
construction bond claims, including those arising under
the payment bond in this case.''

We similarly reject National's second claim, that the
jury instructions were improper because a list of fourteen
factors,21 which the trial court presented to the
jury to use in determining whether National had acted
in bad faith, improperly led the jury to believe that any
one of the items on the list would constitute a per se
violation of the implied covenant of good faith and
fair dealing.

Our review of the record reveals that, although
National objected at the charging conference to six
of the fourteen items on the list,22 it did not object
specifically to either the inclusion of a list within the
jury charge or the overarching effect of such a list. In
fact, during the charging conference, National's counsel
played an active role in negotiating the phrasing of
several of the items that were on the list. More importantly,
however, we note that after setting forth the fourteen
specific factors the jury could consider in making
its finding, the trial court explicitly instructed the jury
as follows: ‘‘You need not find all of these allegations
have been proven by the evidence for you to find a
violation of the implied covenant of good faith and
fair dealing.'' (Emphasis added.) Therefore, National's
contention that the jury was led to believe that any one
of the items on the list would constitute a per se violation
of the implied covenant of good faith and fair dealing
fails.

Finally, National argues that the trial court improperly
excluded particular language from the jury instructions.
According to National, the court improperly failed
to recite the entire instruction on the covenant of good
faith and fair dealing set forth in Buckman v. People
Express, Inc., supra, 205 Conn. 171. Specifically, the
court omitted the following language from its instructions:
‘‘[Bad faith] contemplates a state of mind affirmatively
operating with furtive design or ill will.'' (Internal
quotation marks omitted.) Id. National's proposed jury
instruction regarding the good faith issue included the
‘‘furtive design or ill will'' language, and when the trial
court decided not to include it during the charging conference,
National objected; therefore, its claim concerning
this instruction is preserved.

After the trial court enumerated the fourteen factors
that the jury could consider in determining whether
National had performed in good faith; see footnote 21
of this opinion; the trial court stated the following: ‘‘You
must decide whether National fulfilled its obligation to
exercise good faith. Good faith performance or enforcement
of a contract emphasizes faithfulness to an agreed
common purpose and consistency with justified expectations
of the other party. Good faith and fair dealing
mean an attitude or state of mind denoting honesty of
purpose and freedom from intention to defraud. It
means being faithful to one's duty and obligation under
the contract. Good faith is defined as the opposite of
bad faith. If National engaged in bad faith, you must
find that it did not fulfill the implied covenant. Bad
faith generally implies a design to mislead or to deceive
another or neglect or refusal to fulfill some duty or
some contractual obligation not prompted by an honest
mistake as to one's right or duties. Bad faith is simply
not bad judgment or negligence, but it implies the conscious
doing of a wrong because of dishonest purpose.''
National argues that the trial court's failure to include
the ‘‘furtive design or ill will'' language from Buckman
was improper because that phrase is a required element
in a good faith jury instruction under Connecticut law.
Specifically, National argues that such language is necessary
because bad faith requires ‘‘proof that goes
beyond the potential ill feelings between parties when
one exercises a contractual right to the detriment of
the other'' and that the court's omission kept the jury
from understanding that ‘‘unhappiness'' was ‘‘not the
equivalent of bad faith.'' We conclude, however, after
reading the jury charge as a whole, that the charge
adequately conveyed to the jury the law regarding good
faith, and therefore was proper.23

IV

A

We next turn to National's claim that the trial court
abused its discretion24 by admitting into evidence an email
message that Bradley Wolfe, National's counsel,
had sent to Jortner. Specifically, National claims that
the trial court should have precluded this e-mail from
evidence because it is protected by the attorney-client
privilege. We disagree.

The following additional facts are relevant to our
resolution of this issue. In August, 1999, shortly before
PSE had filed its original complaint in this action, Wolfe
met with David Rosengren, counsel for PSE, to discuss
the possibility of a settlement of PSE's claims against
National. On August 6, 1999, Wolfe sent an e-mail message
to Jortner, reporting on his meeting with PSE's
counsel. The message provided in relevant part: ‘‘I again
asked what it would take to avoid the bad faith counts,
in exchange for payment of totally uncontested funds.
Rosengren again had no number in mind, but understood
the concept of the question and will be getting
back to me. The entire [conversation] was ‘off the
record.' ''25

During discovery, National inadvertently disclosed
the contents of this e-mail message, along with the
contents of two other e-mail messages sent between
National and its counsel. National thereafter filed a
motion in limine seeking to preclude Mercede from
using the contents of the messages at trial. At the beginning
of trial, the trial court issued a preliminary ruling
that the August 6, 1999 e-mail message was admissible.
Specifically, the trial court ruled that this e-mail was
not protected by the attorney-client privilege because
it merely transmitted information concerning a meeting
between counsel for National and counsel for PSE.26
Thereafter, Mercede referred to this e-mail in its opening
statement.

National renewed its objection to the admissibility
of the August 6, 1999 e-mail message at trial, during
Mercede's cross-examination of Jortner. National
argued that the message was inadmissible because it
was: (1) protected by the attorney-client privilege; (2)
irrelevant; and (3) prejudicial. The trial court overruled
National's objection and admitted the e-mail into evi-
dence as a full exhibit. Mercede used the e-mail in its
cross-examination of Jortner and relied on it during
closing arguments as circumstantial evidence that
National had made its payments to PSE in bad faith
because National was trying to avoid liability on PSE's
claims of bad faith and CUTPA violations.

On appeal, National contends that the attorney-client
privilege protected the e-mail from disclosure since the
e-mail was ‘‘inextricably linked'' to National's legal strategy
concerning PSE's claims against them. National also
claims, in the alternative, that the trial court should
have ruled that the e-mail message was inadmissible as
irrelevant evidence. Finally, National claims that the
trial court should have precluded the introduction of
the e-mail message pursuant to § 4-8 of the Connecticut
Code of Evidence,27 because the message reflected an
off-the-record settlement discussion between counsel
for National and counsel for PSE.

Before addressing the merits of National's claims, we
set forth the standard by which we review them. ‘‘The
trial court's ruling on the admissibility of evidence is
entitled to great deference. . . . [T]he trial court has
broad discretion in ruling on the admissibility . . . of
evidence. . . . The trial court's ruling on evidentiary
matters will be overturned only upon a showing of a
clear abuse of the court's discretion. . . . We will make
every reasonable presumption in favor of upholding the
trial court's ruling, and only upset it for a manifest
abuse of discretion. . . . Moreover, evidentiary rulings
will be overturned on appeal only where there was an
abuse of discretion and a showing by the defendant of
substantial prejudice or injustice.'' (Internal quotation
marks omitted.) State v. Dehaney, 261 Conn. 336, 354–
55, 803 A.2d 267 (2002), cert. denied, 537 U.S. 1217, 123
S. Ct. 1318, 154 L. Ed. 2d 1070 (2003). ‘‘When reviewing
claims under an abuse of discretion standard, the
unquestioned rule is that great weight is due to the
action of the trial court and every reasonable presumption
should be given in favor of its correctness . . . .''
(Internal quotation marks omitted.) Schilberg Integrated
Metals Corp. v. Continental Casualty Co., 263
Conn. 245, 274, 819 A.2d 773 (2003). ‘‘In determining
whether there has been an abuse of discretion, the
ultimate issue is whether the court could reasonably
conclude as it did.'' (Internal quotation marks omitted.)
Simmons v. Simmons, 244 Conn. 158, 175, 708 A.2d
949 (1998).

In the present case, however, the specific issue before
us is whether the attorney-client privilege protected
this e-mail from disclosure. ‘‘Therefore, [t]he scope of
our appellate review depends upon the proper characterization
of the rulings made by the trial court. To the
extent that the trial court has made findings of fact,
our review is limited to deciding whether such findings
were clearly erroneous. When, however, the trial court
draws conclusions of law, our review is plenary and
we must decide whether its conclusions are legally and
logically correct and find support in the facts that
appear in the record.'' (Internal quotation marks omitted.)
Blumenthal v. Kimber Mfg., Inc., 265 Conn. 1, 7,
826 A.2d 1088 (2003). Our limited task is to decide
whether, based on the facts, the trial court's conclusions
of law are legally and logically correct.

‘‘On numerous occasions we have reaffirmed the
importance of the attorney-client privilege and have
recognized the long-standing, strong public policy of
protecting attorney-client communications. . . . In
Connecticut, the attorney-client privilege protects both
the confidential giving of professional advice by an
attorney acting in the capacity of a legal advisor to those
who can act on it, as well as the giving of information to
the lawyer to enable counsel to give sound and informed
advice. . . . The privilege fosters full and frank communications
between attorneys and their clients and
thereby promote[s] the broader public interests in the
observation of law and [the] administration of justice.''
(Internal quotation marks omitted.) Id., 9–10. We note
further that ‘‘[a]lthough the existence of the privilege
encourages the candor that is necessary for effective
legal advice . . . the exercise of the privilege tends to
prevent a full disclosure of the truth in court.'' (Citations
omitted.) State v. Cascone, 195 Conn. 183, 188, 487 A.2d
186 (1985). Therefore, the privilege is strictly construed.
Ullmann v. State, 230 Conn. 698, 710, 647 A.2d 324
(1994); Turner's Appeal, 72 Conn. 305, 318, 44 A. 310
(1899).

Not every communication between client and attorney,
however, is protected by the attorney-client privilege.
‘‘As a general rule, [c]ommunications between
client and attorney are privileged when made in confidence
for the purpose of seeking legal advice.'' (Internal
quotation marks omitted.) Blumenthal v. Kimber Mfg.,
Inc., supra, 265 Conn. 10. ‘‘A communication from attorney
to client solely regarding a matter of fact would
not ordinarily be privileged, unless it were shown to
be inextricably linked to the giving of legal advice.''
(Internal quotation marks omitted.) Olson v. Accessory
Controls & Equipment Corp., 254 Conn. 145, 157, 757
A.2d 14 (2000). The burden of proving each element of
the privilege, by a fair preponderance of the evidence,
rests with National, as it is the party seeking to assert
the privilege. State v. Hanna, 150 Conn. 457, 466, 191
A.2d 124 (1963).

The August 6, 1999 e-mail resembles a progress report
from Wolfe to his client, and it merely paraphrases
the discussion that had transpired between Wolfe and
counsel for PSE. ‘‘One of the essential elements of the
claim of privilege between attorney and client is that the
communication be confidential.'' Rienzo v. Santangelo,
160 Conn. 391, 395, 279 A.2d 565 (1971). ‘‘Statements
made in the presence of a third party, on the other
hand, are usually not privileged because there is then no
reasonable expectation of confidentiality.''28 (Internal
quotation marks omitted.) Ullmann v. State, supra, 230
Conn. 711; State v. Cascone, supra, 195 Conn. 186. In
the e-mail, Wolfe merely reported back to his client
what he had said to a third party and how that third
party had responded. As the trial court described it,
‘‘[i]t is a reconstitution of an event that occurred with
third parties involved.'' Such a communication is not
confidential. Moreover, ‘‘statements that are meant to
be transmitted to another are not confidential.'' C. Tait,
Connecticut Evidence (3d Ed. 2001) § 5.23.2, p. 320,
citing State v. Yates, 174 Conn. 16, 20, 381 A.2d 536
(1977); see State v. Burak, 201 Conn. 517, 526, 518 A.2d
639 (1986) (holding statements by client's attorney to
opposing attorney concerning plea arrangement not
privileged). National's claim that the e-mail was privileged
because its contents were ‘‘inextricably linked''
to the giving of legal advice overlooks the fundamental
requirement that the communication be confidential in
order to qualify for the privilege in the first instance.29
National claims, in the alternative, that the trial court
should have determined that the e-mail was not relevant,
specifically because Wolfe had sent the e-mail
more than two years prior to making settlement payments
to PSE. The law defining the relevance of evidence
is well settled. ‘‘Relevant evidence is evidence
that has a logical tendency to aid the trier in the determination
of an issue.'' (Internal quotation marks omitted.)
State v. Andresen, 256 Conn. 313, 336, 773 A.2d 328
(2001). ‘‘The trial court has wide discretion to determine
the relevancy of evidence . . . . Every reasonable presumption
should be made in favor of the correctness
of the court's ruling in determining whether there has
been an abuse of discretion.'' (Internal quotation marks
omitted.) State v. Rizzo, 266 Conn. 171, 285, 833 A.2d
363 (2003). Wolfe sent the e-mail on August 6, 1999,
more than two years before National made the first
of its two payments to PSE. National claims that this
temporal gap negated the probative value of the e-mail.
We disagree. The e-mail in issue was probative of
National's motives in making the payments to PSE.
Accordingly, we conclude that the trial court properly
determined that the e-mail was relevant.

Finally, National claims that the trial court should
have excluded this e-mail because it was evidence of
an offer of settlement, which is inadmissible under § 4-
8 of the Connecticut Code of Evidence. The purpose
of § 4-8, however, is to preclude the admission of settlement
offers between parties who are opposing parties
at the trial in which the evidence of the settlement is
sought to be introduced. See generally Tomasso Bros.,
Inc. v. October Twenty-Four, Inc., 221 Conn. 194, 198,
602 A.2d 1011 (1992) (explaining that policy behind
exclusion of such evidence is to promote settlement of
disputes between parties). Section 4-8 does not apply
here because the e-mail pertains solely to settlement
discussions between National and PSE, and not to the
possibility of settlement between National and Mercede.
Indeed, National and Mercede were codefendants
in the underlying action. Accordingly, § 4-8 does not
preclude the admission of the e-mail into evidence.

B

We next address National's claim that the trial court
abused its discretion by overruling National's objections
to testimony concerning an unrelated settlement
agreement between an affiliate of National and the principal
of one of its bonds, a company that had been
represented in the unrelated matter by Mercede's present
counsel. National claims that, although the trial
court gave a curative charge instructing the jury to
disregard this testimony, the testimony itself was so
prejudicial as to necessitate a new trial. We disagree.
The following additional facts are relevant to our
resolution of this issue. In October, 1999, Jortner
received an e-mail message from Robert Campbell, an
underwriter for one of National's affiliates. In the e-mail,
Campbell referred to his prior dealings with Raymond
Garcia, Mercede's present counsel. The e-mail provided
in relevant part: ‘‘Having some experience with Garcia,
I'm particularly interested in your reaction to whatever
defenses he put forward. Some of them have got to
be beauties.''

At trial, Garcia conducted a direct examination of
Campbell, in which he asked Campbell to explain the
meaning of the e-mail message. Campbell testified that
he had dealt with Garcia's office in an earlier bond
dispute, which had proceeded to trial and resulted in
a jury verdict against Campbell's company. One of the
issues in that dispute involved a bad faith claim. Campbell
further testified that he had ‘‘been in this business
for thirty-two years and found a lot of outrageous claims
from a lot of attorneys. . . . You're part of that.'' In
addition to admitting that he was predisposed to believe
that some attorneys filed ‘‘outrageous claims,'' Campbell
stated that he may have conveyed this belief to
Jortner. At the conclusion of the evidence, National
requested that the trial court give a curative charge
instructing the jury to disregard the entire line of questioning
regarding the settlement of this unrelated dispute.
The trial court complied with this request.30
On appeal, National claims that the testimony concerning
the settlement and the testimony revealing how
that event had engendered negative feelings between
National's employees and counsel for Mercede imputed
bad faith to National by implying that National's motives
to settle PSE's claims were improper. National contends
that, despite the curative instruction, the testimony was
so prejudicial as to require a new trial. We disagree.
Even if we were to assume, arguendo, that the testimony
was admitted improperly, we nevertheless conclude
that the curative instruction sufficiently negated any
potential prejudice.

National requested a curative charge regarding Campbell's
testimony, and the trial court obliged in this
request. The trial court's instructions to the jury, in
relevant part, provided: ‘‘You are instructed to disregard
any of the questions, comments or answers relating to
[the settlement agreement] and you are further
instructed not to draw any negative inferences or conclusion
as to CNA [Surety] or National as a result of
that litigation or [Garcia's] line of inquiry as to his examination
of [Campbell].'' National does not claim that
the curative charge itself was inadequate; rather, citing
John T. Brady & Co. v. Stamford, 220 Conn. 432, 443,
599 A.2d 370 (1991), it claims only that the ‘‘ ‘bell of
prejudice' could not be unrung here.'' Our jurisprudence
is clear, however, that unless there is a clear indication
to the contrary, a jury is presumed to follow the court's
instructions. State v. Negron, 221 Conn. 315, 331, 603
A.2d 1138 (1992); accord State v. Fields, 265 Conn. 184,
207, 827 A.2d 690 (2003); State v. McIntyre, 250 Conn.
526, 533, 737 A.2d 392 (1999). There is no specific claim,
nor any evidence with which to support a claim, that
the jury ignored the trial court's instructions. We conclude
that the court's unambiguous limiting instruction
to the jury was sufficient to negate any potentially
adverse effect of the admission of the testimony concerning
the settlement agreement.

V

National next claims that the trial court improperly
denied its motion to set aside the verdict because the
jury's finding that National had breached the implied
covenant of good faith and fair dealing was inconsistent
with its finding that National had not breached the
indemnity agreement. Our review of the record reveals,
however, that National did not raise this issue before
the trial court either in its motion to set aside the verdict
or at oral argument on that motion. Because our review
is limited to matters in the record, we will not address
issues not decided by the trial court. Practice Book
§ 60-5 (court on appeal shall not be bound to consider
claim unless distinctly raised at trial); Celentano v. Oaks
Condominium Assn., 265 Conn. 579, 589–90 n.9, 830
A.2d 164 (2003) (claims neither addressed nor decided
by trial court are not properly before appellate tribunal).
Therefore, we decline to review this claim.

VI

Finally, National claims that the trial court improperly
submitted to the jury the special defenses of estoppel
and waiver, and failed to direct a verdict in
National's favor on those defenses, when according to
National, Mercede could not prove the necessary ele-
ments of each defense. In light of our decision that the
jury properly found that Mercede had proven its special
defense that National had breached its implied covenant
of good faith and fair dealing, thereby affirming the
judgment in favor of Mercede on National's cross claim
for indemnity, we need not address National's
remaining claim.