Opinion
No. CV 04 0489527
February 25, 2005
MEMORANDUM OF DECISION MOTION TO STRIKE
FACTS
On May 5, 2004, the plaintiff, Asmus Electric, Inc. (Asmus) filed a ten-count complaint against the defendants: G.M.K. Contractors, LLC. (GMK), Gary Kramer (Kramer) and Nautilus Insurance Company (Nautilus). Essentially, Asmus alleges that on or about January 2, 2003, it entered into an oral contract with the defendants GMK and Gary M. Kramer. The contract called for the defendant GMK to perform roof construction at the business property of the plaintiff. Asmus alleges that the defendant GMK breached the contract in that despite the full payment of the contract price of $7,000.00, the work contracted for was never completed.
Asmus alleges that from May 31, 2002 through May 31, 2003, Nautilus had issued an insurance policy to GMK covering losses and any negligence of GMK. In an effort to be compensated for the losses it sustained, Asmus alleges that it filed a claim for the negligence of GMK with Nautilus. According to Asmus's complaint, Nautilus assigned a claim number to the claim and agreed to send an adjuster to investigate the claim. In addition, Asmus states that Nautilus agreed to send Asmus a copy of the insurance policy.
According to Asmus, Nautilus did not send an adjuster to investigate the claim nor did it ever send a copy of the insurance policy as promised. As a result, Asmus alleges that it has been damaged not only by GMK, but also by Nautilus, in that Nautilus has refused to pay Asmus the fair, just and equitable amount due under the terms of the "contract" relating to the cost of repairing the damages caused by GMK.
In the first and second counts of the complaint, directed towards GMK, the plaintiff alleges breach of contract and unjust enrichment respectively. The third and fourth counts of the complaint are directed towards Kramer (as manager and a member of GMK), for breach of contract and unjust enrichment respectively. Count five is against GMK and Kramer for a violation of the Connecticut Unfair Practices Act (CUTPA) General Statutes § 42-110a et seq. In counts six and seven the plaintiff alleges negligence against GMK and Kramer respectively. Counts eight, nine and ten are against Nautilus for a breach of contract, breach of the covenant of good faith and fair dealing and a violation of CUTPA, respectively.
On June 25, 2004, Nautilus filed a motion to strike counts eight, nine and ten and the corresponding prayers for relief seeking punitive damages and damages pursuant to the Connecticut Unfair Trade Practices Act (CUTPA) General Statutes § 42-110a. Nautilus moved to strike on the grounds of legal insufficiency.
In response, on August 20, 2004, Asmus filed a "Notice of Substitute Pleading in Reply to Motion to Strike" and a first revised complaint. Asmus stated therein that it was filing the above pursuant to the rules of practice § 10-44 and requested that the court "consider this a substitute pleading and therefore render[ing] an objection to the pending motion unnecessary."
Counts eight and nine against Nautilus were revised; count ten was deleted.
Count eight is now entitled Bad Faith Settlement, CUIPA. Asmus alleges a claim therein against Nautilus under the Connecticut Unfair Insurance Practices Act (CUIPA) General Statutes § 38-816(6) for; refusing to pay Asmus the fair, just and equitable amount due under the terms of the policy relating to the cost of repairing the damages caused by the negligence of GMK; for the express and implied representations by Nautilus that it would in good faith investigate and process any claims submitted by Asmus; for undertaking to "provide [Asmus] with insurance coverage [and] . . . to act fairly and in good faith with regard to handling [Asmus's claim]"; and for engaging in similar conduct with other persons, all of which Asmus maintains are unfair and deceptive acts and practices proscribed under CUIPA.
Count nine is entitled Bad Faith Settlement under CUTPA. Asmus alleges therein that the same allegations as those made in count eight also constitute a violation of CUTPA, § 42-110(b)(a) et seq., and adds that Nautilus is engaged in trade or commerce in Connecticut and has engaged in unfair or deceptive acts and practices in violation of CUTPA by failing to pay Asmus the full and reasonable value of its covered loss and has failed in good faith to effectuate a prompt, fair and equitable settlement of its claim.
On September 3, 2003, Nautilus moved to strike counts eight and nine of the revised complaint on the grounds that Asmus, a third-party claimant, has no standing to pursue these claims and, even if it had standing, these claims are legally insufficient.
Asmus filed a response on November 5, 2004. In its response, the totality of the argument by Asmus is "that the court [should] consider the factual allegations of the first revised complaint as legally sufficient" that "[Asmus] has asserted that it is a third-party beneficiary to the insurance contract between the Defendant GMK Contractors and [Nautilus]" and, therefore, "the voluminous motion and myriad of cases cited by [Nautilus] do not apply to the facts as [pleaded]."
Nautilus filed a reply on November 18, 2004. The motion was heard on the short calendar on November 22, 2004.
The short calendar designated the motion to strike as #102, rather than #107. Since Nautilus' first motion to strike, #102, was rendered moot after Asmus filed its revised complaint, the court will address its second motion to strike, #107, notwithstanding the identification of the motion on the short calendar list.
I
"The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). "It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted." (Internal quotation marks omitted.) Commissioner of Labor v. C.J.M Services, Inc., 268 Conn. 283, 292, 842 A.2d 1124 (2004). "[I]f facts provable in the complaint would support a cause of action, the motion to strike must be denied." (Internal quotation marks omitted.) Broadnax v. New Haven, 270 Conn. 133, 173, 851 A.2d 1113 (2004). "A motion to strike [however] is properly granted if the complaint alleges mere conclusions of law that are not supported by the facts alleged." (Internal quotation marks omitted.) In re Michael D., 58 Conn.App. 119, 122, 752 A.2d 1135 (2000).
II
As to count eight, Nautilus argues that (1) as a third-party or stranger to the insurance contract, Asmus does not have standing to maintain a cause of action under CUIPA; (2) CUIPA is a regulatory statute which does not expressly or implicitly provide for a private cause of action; and (3) Asmus has failed to allege a proper factual predicate for CUIPA. Without legal citation or any factual analysis, Asmus responds that count eight is legally sufficient because it has stated therein that it is a third-party beneficiary to the insurance contract.
Asmus is not a party to the insurance policy between Nautilus and GMK, the alleged tortfeasor. Asmus is a third-party claimant in the present case. "An insurance company does not have a duty to settle fairly with third-party claimants . . . nor does a claimant have a direct cause of action against an insurance company of the tortfeasor." (Internal quotation marks omitted.) Chieffo v. Yannielli, Superior Court, judicial district of Waterbury, Docket No. CV 00 0159940 (July 10, 2001, Doherty, J.); see also Patel v. Allstate Ins. Co., Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 99 170676 (May 25, 2000, Karazin, J.); Banatoski v. Sheridan, Superior Court, judicial district of New Britain, Docket No. CV 97 483809 (September 17, 1998, Leheny, J.) ( 23 Conn. L. Rptr. 344); Imperial Casualty Indemnity Co. v. ITT Hartford Ins. Group, Superior Court, judicial district of Hartford-New Britain at Hartford, Docket No. CV95 0551251 (January 31, 1997, Spada, J.); Martin v. Marino, Superior Court, judicial district of Hartford-New Britain at Hartford, Docket No. CV 96 566135 (April 9, 1997, Aurigemma, J.); Grant v. Colonial Penn Ins. Co., Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 96 321277 (January 16, 1996, Hauser, J.) ( 16 Conn. L. Rptr. 49).
Thus, the question becomes whether a third-party claimant such as Asmus, as opposed to the insured, has a private right of action under CUIPA. The Connecticut Supreme Court has not decided that issue. Mead v. Burns, 199 Conn. 651, 657, 509 A.2d 11 (1986).
There is also a split of authority in Superior Court decisions as to whether a private right of action exists separately under CUIPA. "The Superior Court majority holds . . . that there is no express authority under CUIPA for a private cause of action. CUIPA is not ambiguous; by its express terms CUIPA is a regulatory act, authorizing the insurance commissioner to investigate alleged unfair insurance practices." (Internal quotation marks omitted.) Ganetti v. Greater Bridgeport Individual Practice Assn., Superior Court, judicial district of Fairfield at Bridgeport, Docket No. No. CV 02 0396581 (May 28, 2004, Doherty, J.); see Walsh v. Allstate Ins. Co., Superior Court, judicial district of Tolland at Rockville, Docket No. CV 02 080039 (May 9, 2003, Scholl, J.).
"In light of the existing remedy to redress a CUIPA violation, and the unlikelihood that the legislature intended two statutory causes of action to redress the same conduct, there is no private cause of action under CUIPA." (Internal quotation marks omitted.) Lee v. Scottsdale Ins. Co., Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 98 350438 (February 8, 1999, Nadeau, J.). "An allegation of a violation of CUIPA alone is not enough to maintain a private right of action for unfair insurance practices." (Internal quotation marks omitted.) Carter v. Cambridge Mutual Fire Ins. Co., Superior Court, judicial district of Hartford, Docket No. CV 03 0824460 (September 9, 2004, Shapiro, J.).
In addition, Asmus has not alleged sufficient facts in count eight that Nautilus has engaged in unfair settlement practices in violation of CUIPA. In paragraphs thirty-nine and forty of this count, Asmus alleges: "Nautilus has engaged in similar conduct with other persons and entities with such frequency as to indicate a general business practice . . . As a result of the foregoing, the Defendant, Nautilus, has engaged in unfair or deceptive acts and practices, as proscribed by . . . § 38[a]-816(6)."
As our Supreme Court has stated, "of the sixteen categories of unfair insurance practices proscribed by General Statutes 38a-816, only subsection (6) expressly requires proof that the unfair claim settlement practices enumerated therein were committed or performed `with such frequency as to indicate a general business practice.'" Lees v. Middlesex Ins. Co., 229 Conn. 842, 848 n. 5, 643 A.2d 1282 (1994), citing Mead v. Burns, supra, 199 Conn. 651. Asmus has not alleged facts constituting improper conduct in the handling of any other insurance claims and without evidence of such misconduct by Nautilus, the allegations do not rise to the level of a "general business practice" as required by § 38a-816(6). Lees v. Middlesex Ins. Co., supra 849.
Asmus does allege that Nautilus's conduct indicated a "general business practice" and it "has engaged in unfair or deceptive acts and practices," but these allegations are merely legal conclusions; see In re Michael D., supra, 58 Conn.App. 122; that do not state a cause of action upon which relief may be granted, and, therefore, do not withstand a motion to strike. Accordingly, the motion to strike count eight is granted.
III
As to count nine, Nautilus argues that (1) as a stranger to the insurance agreement between GMK and Nautilus, Asmus has no standing to pursue a CUTPA action; (2) an insurance practice does not give rise to a cause of action under CUTPA unless the practice also violates CUIPA; and (3) the facts pleaded are not sufficient to support a CUTPA claim. In this revised ninth count of the complaint, Asmus, in essence asserts a "CUIPA via CUTPA" claim against Nautilus.
Asmus entitled count nine as a CUTPA claim but bases its allegations on the CUIPA claim set forth in count eight of the complaint. Therein, Asmus advances that the actions and conduct of Nautilus constitute unfair settlement practices that violate CUIPA and that CUTPA provides for a private right of action for alleged CUIPA violations when asserted together with a CUIPA claim.
At the outset, the court notes that, in count nine paragraph thirty-eight of the revised complaint, Asmus has alleged that Nautilus provided it "with insurance coverage," and, thus, "was under a duty implied by law to act fairly and in good faith with regard to handling the Claim made pursuant to the Policy" and has "engaged in unfair or deceptive practices as proscribed by . . . [CUIPA] § 38a-816(6)." Since Asmus is not a party to the contract of insurance between Nautilus and GMK, but merely a third-party, its third-party status triggers the threshold question of whether a third-party claimant may assert a CUIPA and CUTPA cause of action against the insurer of another.
General Statutes § 38a-816 provides: "The following are defined as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance . . . (6) Unfair claim settlement practices. Committing or performing with such frequency as to indicate a general business practice . . ."
While it is true that CUTPA authorizes private causes of action to enforce a claim derived from CUIPA, our appellate courts have not addressed whether CUTPA remedies based on CUIPA violations may be sought by injured third parties who are not the insured. Nevertheless, a majority of Superior Court decisions hold that a CUTPA claim for unfair claims settlement practices by an insurance company may not be brought by a third-party. DeVillegas v. Quality Roofing, Inc., Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 92 294190 (December 1, 1993, Freedman, J.) ( 10 Conn. L. Rptr. 487); see also Chapell v. LaRosa, Superior Court, judicial district of New London, Docket No. CV 98 552801 (January 5, 2001, Corradino, J.) ( 28 Conn. L. Rptr. 683); Calnan v. Allstate Indemnity Co., Superior Court, judicial district of New Haven at Meriden, Docket No. CV 98 264160 (December 3, 1998, Dorsey, J.T.R.) ( 23 Conn. L. Rptr. 476).
The rationale is that "the language of CUIPA . . . does not explicitly create a duty of an insurance company to a third-party claimant. CUIPA defines [u]nfair claim settlement practices in a way that refers to insureds, not third parties." (Internal quotation marks omitted.) D'Alessandro v. Clare, Superior Court, judicial district of Middlesex at Middletown, Docket No. CV 97 0084006 (April 1, 1999, Schuman, J.) ( 24 Conn. L. Rptr. 325, 326), aff'd, 74 Conn.App. 177, 812 A.2d 76 (2002).
There are cases, however, in which a court has, because of additional circumstances, permitted such a claim by a third-party. For example, in Rivera v. Pereira, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 01 0382813 (January 25, 2002, Sheedy J.) ( 31 Conn. L. Rptr. 406), the complaint alleged that the insurer carrier spoke to the plaintiff directly, even though they knew she was represented by counsel. Such direct and improper conduct could state a cause of action. Absent such allegations, a claim does not lie.
The same analysis applies to the case of Preston v. Chartkoff, Superior Court, judicial district of Ansonia-Milford at Milford, No. CV 00 0071112 (July 5, 2001, Nadeau, J.). In Preston, the complaint alleged contact between the agent and the third party, including promises of the issuance of a performance bond made directly by the agent to the third-party. All of these cases contain allegations of some direct contact by the defendant insurers or insurance agents with the plaintiffs. It is on the basis of such defendants' direct and offending conduct that courts in those cases permitted either standing or denied motions to strike. These cases, therefore, form the exception to the general rule that third parties, without more, cannot sue such insurers or agents directly. Estate of Ridgaway v. Cowles Connell, Superior Court, complex litigation docket at Middletown, Docket No. X04 CV03 0103516 (May 21, 2004, Quinn, J.).
The majority of superior courts, however, have held that "[u]nfair claims settlement practices have been held to be actionable for insureds only, not for third-party claimants." (Internal quotation marks omitted.) Izzo v. Kruk, Superior Court, judicial district of New Haven, Docket No. CV 02 0468089 (April 29, 2003, Gilardi, J.) ( 34 Conn. L. Rptr. 441); see also Cyr v. Popick, Superior Court, judicial district of New Britain, Docket No. CV 03 052166 (January 13, 2004, Murray, J.).
In Chapell v. Larosa, supra, 28 Conn. L. Rptr. 683, Judge Corradino sets forth a well reasoned decision regarding this dilemma. After first discussing the implications of Mead v. Burns in not deciding whether a private right of action lies under CUIPA, Judge Corradino addressed the issue of the scope of liability imposed by CUTPA on the insurance industry and whether a third-party claimant may sue under CUTPA. Id., 689. He looked at the "policy goals, purposes and guidelines behind CUPTA itself," and noted that the relationship between the claimant and the insurer is an adversary relationship and different from that of a fiduciary obligation found to exist between the insured and the tortfeasor. Id. Therefore, he reasoned that providing a private right of action for a third-party claimant against the insurer of another would not fall within the policy of CUTPA to protect the consumer. Id., 689-90.
"Although privity, in the traditional contractual sense of an exchange of consideration between parties may no longer be an essential for standing under CUTPA, a claimant under CUTPA must possess at least some type of consumer relationship with the party who allegedly caused harm to him or her. CUTPA was, after all, enacted by the legislature to put Connecticut in the forefront of state consumer protection . . ." Id. Judge Corradino concluded his analysis by positing a question as to the practical application of the guidelines established to determine if there has been a CUTPA violation. Id. "As a trial court, how do you determine whether these criteria have been met in the third-party's claim against the insurer when on the other side of the battle line the insurer argues that as to any particular allegation brought by the claimant against it, the insurer would have been compelled to violate its fiduciary obligation to its insured, the tortfeasor, if it had acted in any other way.
The first of the three criteria of the "cigarette rule" formulated in McLaughlin Ford, Inc. v. Ford Motor Co., 192 Conn. 558, 567, 473 A.2d 558 (1984), requires a determination as to whether the practice offends public policy as established by statute or the common law; the second criteria is whether the practice is among other things immoral, unethical or unscrupulous. Chapell v. LaRosa, supra, 28 Conn. L. Rptr.
"And what of the third criteria of the cigarette rule — does this practice cause substantial injury to consumers. In the context of third-party claimants, suits against the tortfeasor's insurer what consumers are we talking about? Is the class of consumers the general liability insurance buying public — prospective tortfeasors that is? If that is the class or one of the classes that would be affected by allowing this type of CUTPA claim, what about the concern . . . [regarding] a general increase in premiums if a CUIPA type action is allowed against the insurer. The same result would ensue if a CUTPA claim were to be permitted." Id.
Based on these reasons, the Chapell v. LaRosa court struck the CUTPA claim. This court agrees with the reasoning in Chapell and applies it to the present case. The CUTPA claim by the third-party claimant, Asmus, against the tortfeasor's insurer is stricken.
IV
For the above-stated reasons, the Court grants Nautilus's motion to strike counts eight and nine as well as the corresponding paragraphs in the prayer for relief of the revised complaint.
Lopez, J.