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interpreting the Acordia phrase “some other statute regulating a specific type of insurance related conduct” as providing the basis for a CUTPA claim only “when the legislature explicitly provides that the statute's violation constitutes an unfair or deceptive insurance practice”
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AANCV156018031S
08-23-2016
Chicago Title Insurance Company v. Elizabeth LaPuma et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION ON PLAINTIFF'S MOTION TO STRIKE
Barry K. Stevens, J.
STATEMENT OF THE CASE
This action was instituted by the plaintiff, Chicago Title Insurance Company, against the defendants Elizabeth LaPuma and O Taconic, LLC, concerning two title insurance policies issued by the plaintiff to the defendants for properties owned by the defendants in Greenwich, Connecticut. The complaint alleges that LaPuma purchased property identified as 546 North Street, Greenwich, Connecticut. When the property was purchased, LaPuma obtained a title insurance policy from the plaintiff containing an endorsement insuring that this property had access to a public highway known as Taconic Road. A determination was ultimately made that the property did not have access to Taconic Road. As a result, LaPuma presented a claim to the plaintiff under the provisions of the title insurance policy.
According to the complaint, the policy endorsement providing access to Taconic Road was the result of a mutual mistake because when the policy was issued, the parties knew that LaPuma's deed did not convey this right of access. The first count of the complaint seeks reformation of the policy to delete this endorsement. The second count seeks a declaratory judgment that the plaintiff has no obligation either to provide coverage for this access or to indemnify the defendant LaPuma for her claim of loss. The plaintiff contends that it does not have this obligation either because of a mutual mistake or because LaPuma lacked an " insurable interest" in this right of access. The third count seeks a declaratory judgment on whether LaPuma has suffered a covered loss under the title insurance policy, and if so, the amount of this loss.
The fourth count of the complaint is against the defendant O Taconic, LLC (Taconic). Taconic is a limited liability company and LaPuma is its sole member. The fourth count alleges that Taconic purchased property identified as O Taconic Road. When the property was purchased, Taconic also obtained a title insurance policy containing an endorsement insuring that O Taconic Road had access to the highway, Taconic Road. Again, a determination was made that the O Taconic Road property had no such access, and as a result, Taconic presented a claim of loss to the plaintiff. In the fourth count, the plaintiff seeks a declaratory judgment on whether Taconic has suffered a covered loss, and if so, the amount of this loss.
On November 20, 2015, the defendants amended their answer, special defenses and counterclaim that had been filed in response to the complaint. The counterclaim contains seven counts. The motion before the court concerns the third count of the counterclaim. In this count, LaPuma alleges that the plaintiff violated the Connecticut Unfair Insurance Practices Act (CUIPA) and the Connecticut Unfair Trade Practices Act (CUTPA). The plaintiff moves to strike paragraphs 13 through 18 of this third count. As explained further below, the plaintiff contends that these particular paragraphs assert a distinct or separate CUTPA claim that fails as a matter of law.
In the answer, the defendants, among other things, deny that they knew that their deeds did not convey the access to Taconic Road as insured under the title insurance policies, deny that there was any mutual mistake, and deny that they lacked an insurable interest in the access way. In their special defenses, the defendants claim that all the counts of the complaint fail to state legally cognizable claims. As to the second count seeking declaratory relief, defendant LaPuma asserts the defenses of waiver and estoppel.
In the counterclaim, the defendants assert claims based on breach of contract (count one), contractual indemnity (count two), negligent misrepresentation (counts four and six), and fraudulent misrepresentation (counts five and seven). In count three, LaPuma asserts claims based on alleged violations of the Connecticut Unfair Insurance Practices Act and the Connecticut Unfair Trade Practices Act.
General Statutes § 38a-815 provides in relevant part: " No person shall engage in this state in any trade practice which is defined in section 38a-816 as, or determined pursuant to sections 38a-817 and 38a-818 to be, an unfair method of competition or an unfair or deceptive act or practice in the business of insurance, nor shall any domestic insurance company engage outside of this state in any act or practice defined in subsections (1) to (12), inclusive, of section 38a-816."
General Statutes § 42-110b(a) states the following: " No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce."
The plaintiff filed its motion to strike and supporting memorandum of law on March 23, 2016. The defendants filed their objection and memorandum of law on April 11, 2016, and the plaintiff filed a reply on April 28, 2016. The court heard oral argument on May 16, 2016. For the following reasons, the plaintiff's motion to strike is granted and the defendants' objection is overruled .
DISCUSSION
I
" A motion to strike attacks the legal sufficiency of the allegations in a pleading . . . In reviewing the sufficiency of the allegations in a complaint, courts are to assume the truth of the facts pleaded therein and to determine whether those facts establish a valid cause of action." (Internal quotation marks omitted.) Kortner v. Martise, 312 Conn. 1, 48-49, 91 A.3d 412 (2014). " The role of the trial court in ruling on a motion to strike is to examine the [complaint], construed in favor of the [plaintiff], to determine whether the [plaintiff has] stated a legally sufficient cause of action." (Internal quotation marks omitted.) Coe v. Board of Education, 301 Conn. 112, 117, 19 A.3d 640 (2011). " [W]hether the plaintiff alleged the facts required . . . must be determined with due regard to the principle that the facts necessarily implied by the allegations in a complaint are sufficiently pleaded, and hence need not expressly be alleged." Bouchard v. People's Bank, 219 Conn. 465, 471, 594 A.2d 1 (1991). " In ruling on a motion to strike, the court is limited to the facts alleged in the complaint." (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997). Similarly, " the trial court is limited to considering the grounds specified in the motion." Meredith v. Police Commission, 182 Conn. 138, 140, 438 A.2d 27 (1980).
II
In count three of her counterclaim, LaPuma bases her CUTPA claim on two grounds. She first alleges that in issuing the title insurance policy on the North Street property, the plaintiff made a misrepresentation that " was an unfair and deceptive act or practice in the business of insurance" in violation of CUIPA and CUTPA. The motion to strike is not directed to this claim.
Specifically, LaPuma alleges that the plaintiff " misrepresented the benefits, advantages, and terms" of the policy on the North Street property by making the following statement: " The [plaintiff] insures against loss or damage sustained by the insured if, at Date of Policy: (I) the Land does not have both actual vehicular and pedestrian access to and from North Street and Taconic Road." Countercl., Count Three, P5.
The plaintiff's motion to strike is directed to the second claim asserted in paragraphs 13 through 18 of the third count. In this claim, LaPuma alleges that under General Statutes § 38a-407, the plaintiff had a duty " before issuing the [title insurance policy], to conduct a reasonable search and examination of the title and cause to be made a determination of insurability of title in accordance with sound underwriting practices." Countercl., Count Three, P13, According to LaPuma, the plaintiff breached this duty to conduct a reasonable search and investigation and this " failure to investigate offends public policy as it has been established by [§ 38a-407]--a statute that regulates insurance related conduct--and was an unfair or deceptive act or practice in violation of [CUTPA]." Countercl., Count Three, P18.
General Statutes § 38a-407 provides in relevant part: " No title insurance policy may be written unless and until the title insurer or its title agent has caused to be conducted a reasonable search and examination of the title and has caused to be made a determination of insurability of title in accordance with sound underwriting practices."
LaPuma first asserts a procedural objection to the plaintiff's motion to strike arguing that the motion improperly seeks to strike a portion of count three. As a general rule, a motion to strike may not be used to strike paragraphs of a count or to strike only a part rather than an entirety of a count. In response, the plaintiff explains that the court sustained LaPuma's objection to the plaintiff's request for her to revise count three requesting for her to plead her CUTPA claims in separate counts. As a result, the plaintiff contends that " this is one of those rare circumstances" where a motion to strike is warranted because of the manner in which the CUTPA claim has been pleaded, or alternatively, because trial courts have deviated from the general rule proscribing use of a motion to strike a portion of a count when the disputed section asserts an insular or independent cause of action.
See MacLean v. Perry, Superior Court, judicial district of New London, Docket No. CV-11-6009597-S (February 16, 2012, Martin, J.) (53 Conn.L.Rptr. 497, 498, ) (" [A]lthough there is a split of authority, most trial courts follow the rule that a single paragraph of a pleading is subject to a motion to strike only when it attempts to set forth all of the essential allegations of a cause of action or defense . . . Arguably under the present rules, a motion to strike may properly lie with respect to an individual paragraph in a count . . . However, the weight of authority in the Superior Court is that the motion does not lie, except possibly where the subject paragraph attempts to state a cause of action . . . [O]nly an entire count . . . can be subject to a motion to strike, unless the individual paragraph embodies an entire cause of action or defense" [internal quotation marks omitted]).
The court agrees with the plaintiff that the rules of practice should not be utilized by the defendants or construed by the court to insulate the defendant's CUTPA claim from being tested for its legal sufficiency prior to trial. The interests of justice simply do not support the defendants' argument to the contrary. See Practice Book § 1-8 (the rules of practice are to be liberally interpreted to avoid injustice). The disposition of this issue may affect the scope of discovery, the admissibility of evidence at trial and the parameters of any possible settlement. Moreover, the substantive merits of the dispute have been fully briefed by the parties and are ready for disposition. The laudable goals in efficient and effective adjudication of this action do not support delaying a consideration of the issues raised in the motion until the trial proceedings. In an analogous situation, the court allowed parties to file motions in limine on issues not amenable to disposition through motions for summary judgment. Bridgeport Harbor Place I, LLC v. Ganim, Superior Court, judicial district of Waterbury, Complex Litigation Docket, Docket No. X06-CV-04-0184523-S, (Jan. 25, 2008, Stevens, J.), aff'd, 131 Conn.App. 99, 30 A.3d 703, cert. granted, 303 Conn. 904, 31 A.3d 1179 (2011) (parties subsequently withdrew appeals on January 26 and 27, 2012) (where the court considered defendants' motions in limine after denying their motions for summary judgment when the defendants sought judgment on only one aspect of the plaintiff's claim for damages.) In this particular case, the court concludes that the defendants' claim based on § 38a-407 is sufficiently insular, specific and independent that its legal sufficiency may be tested through a motion to strike.
III
As previously explained, LaPuma's CUTPA claim is premised on the plaintiff's alleged violation of General Statutes § 38a-407. LaPuma contends that under § 38a-407, the plaintiff was required to conduct a reasonable investigation of the title of the North Street property before issuing the title insurance policy for the property. The counterclaim alleges that if the North Street property does not have access to Taconic Road as purportedly insured under this policy, then this deficiency was caused by the plaintiff's failure to conduct the investigation as required by § 38a-407. According to LaPuma, this failure to comply with § 38a-407 constitutes an unfair and deceptive insurance practice on which a CUTPA claim may be based.
Under Connecticut law, unfair insurance practices are exclusively defined by CUIPA. State v. Acordia, Inc., 310 Conn. 1, 73 A.3d 711 (2013). Although CUIPA does not provide for a private right of action, our Supreme Court in Mead v. Burns, 199 Conn. 651, 509 A.2d 11 (1986), held that a CUTPA claim may be premised on a violation of CUIPA.
In addressing the motion to strike, both parties rely on the Supreme Court's decision in State v. Acordia, Inc., supra, 310 Conn. 1. The question in Acordia was whether an insurer's breach of common-law fiduciary duties can form the basis of a CUIPA violation and support a CUTPA claim. In answering this question negatively, the court found that the extensiveness of the statutory provisions and the legislative history of CUIPA demonstrated that " the legislature intended to occupy the field of defining unfair insurance practices, thereby precluding courts from incorporating common-law principles as a basis for finding an unfair insurance practice." State v. Acordia, Inc., supra, 310 Conn. 26. The Supreme Court explained its holding in Acordia as follows. " Because CUIPA provides the exclusive and comprehensive source of public policy with respect to general insurance practices, we conclude that, unless an insurance related practice violates CUIPA or, arguably, some other statute regulating a specific type of insurance related conduct, it cannot be found to violate any public policy and, therefore, it cannot be found to violate CUTPA, . . . Accordingly, we conclude that a common-law breach of fiduciary duty arising in the insurance context that does not violate CUIPA or some other statute regulating the insurance industry cannot provide the basis for a valid CUTPA claim." Id., 37-38.
There is no dispute that CUIPA does not define a violation of § 38a-407 as an unfair insurance practice. Therefore, the plaintiff insists that the defendants' CUTPA claim must fail. The plaintiff reasons that under Acordia, a CUTPA claim must be based on a CUIPA violation, and because CUIPA does not define a violation of § 38a-407 as an unfair insurance practice, the defendants' CUTPA claim based on § 38a-407 should be stricken.
In response, LaPuma argues that the plaintiff's reading of Acordia is narrow and incomplete. The defendants point to the language of Acordia indicating that a CUTPA claim may be based on either a violation of CUIPA or some other statute regulating insurance. The defendants reason that because § 38a-407 is a statute regulating title insurance and implicating public policy concerns, its violation supports a CUTPA claim. According to the defendants, " the holding of Acordia makes clear that even where insurance related conduct does not violate CUIPA, it may violate CUTPA if it violates 'some other statute regulating the insurance industry.'" Obj. to Mot. to Strike, p. 6.
The facts of Acordia did not involve a CUTPA claim based on some statute other than CUIPA, and therefore, the language from Acordia on which the defendant relies is obiter dicta . See State v. Iverson, 48 Conn.App. 168, 174, 708 A.2d 615 (" obiter dicta is not binding precedent"), cert. denied, 244 Conn. 930, 711 A.2d 728 (1998). Indeed, this dicta suggesting that a CUTPA claim for unfair insurance practices may be based on " some other statute regulating the insurance industry" is very unclear and somewhat curious considering the court's extensive discussion about the exclusiveness of CUIPA in defining unfair and deceptive insurance practices. In any event, it is evident that the defendant's view of this language is incorrect. More specifically, the court must reject the defendant's contention that a CUTPA claim may be premised on the mere violation of any statute governing insurance practices that is enacted for a public purpose. Such a contention cannot be squared with the explicit holding of Acordia regarding CUIPA, or the established law regarding the scope of CUTPA.
In its interpretation of CUIPA, the Supreme Court in Acordia found the following conclusion so important that it was stated twice in the opinion:
[T]he legislature intended to set out specifically the types of actions that constitute unfair insurance practices in a highly detailed manner . . . [and] viewed accomplishing that task as essential to the underlying purpose of CUIPA: enabling the commissioner to better protect consumers. The many subsequent amendments incorporating additional practices as violative of CUIPA demonstrate an ongoing legislative effort to keep the list of prohibited practices as current as possible and provide further evidence of the legislature's intent to provide in CUIPA a comprehensive list of unfair insurance practices . . . The legislative history of CUIPA, therefore, demonstrates that the legislature intended to occupy the field of defining unfair insurance practices, thereby precluding courts from incorporating common-law principles as a basis for finding an unfair insurance practice.(Emphasis in original; internal quotation marks omitted.) State v. Acordia, Inc., supra, 310 Conn. 36.
According to Acordia, therefore, the legislature's intent was for CUIPA to provide the " exclusive and comprehensive source of public policy with respect to general insurance practices" in a manner designed to " occupy the field of defining unfair insurance practices." Id., 35, 37. This legislative intent to exclusively occupy the field in defining unfair insurance practices through CUIPA would obviously be undermined if a violation of any insurance related statute not so defined could be an unfair insurance practice sufficient to support a CUTPA claim. The defendants' argument to the contrary would not just involve an interpretation of CUIPA, but would involve a wholesale rewriting of the statute. To explain further, in the very extensive list provided in CUIPA, the legislature could have defined an unfair insurance practice as a violation any other statute regulating insurance conduct, but did not. More specifically, the legislature could have provided under CUIPA that a violation of § 38a-407 constitutes an unfair insurance practice, but it did not. An interpretation of CUIPA in a manner consistent with the defendants' argument would require the court to say that the statute provides what it does not say. In short, the defendants' contention that a CUTPA claim may be based on a statutory violation that CUIPA does not define as an unfair insurance practice cannot be squared with the holding of Acordia that CUIPA provides the exclusive source of public policy definitions of unfair insurance practices on which a CUTPA claim may be based.
In fact, the General Assembly in CUIPA expressly identifies the statutes whose violations constitute " unfair methods of competition and unfair and deceptive acts or practices in the business of insurance." General Statutes § § 38a-816(9), (17), (20), (21), (22).
Based on the above discussion, the Supreme Court's dicta in Acordia suggesting that a CUTPA claim may be based on either CUIPA or " some other statute regulating the insurance industry" must be construed in a manner consistent with Acordia's holding that the legislature intended CUIPA to provide the exclusive and comprehensive list of unfair insurance practices on which a CUTPA claim may be based. Consequently, the most rational view of the court's dicta may be that a CUTPA claim involving an unfair insurance practice may be premised on a statute other than CUIPA when the legislature explicitly provides that that statute's violation constitutes an unfair or deceptive insurance practice, thereby preserving the legislative design that the General Assembly's statutory enactments occupy the field of defining unfair insurance practices.
The defendants' reliance on Artie's Auto Body, Inc. v. Hartford Fire Ins. Co., 317 Conn. 602, 119 A.3d 1139 (2015), is misplaced. In Artie's, the plaintiffs, three auto body repair shops and an association of auto body repair shops, sued the defendant insurance company, the Hartford Fire Insurance Company, contending that the insurance company used its appraisers to negotiate artificially low hourly rates with the repair shops making automobile repairs for customers whose vehicles were insured by the defendant. The plaintiffs claimed that the defendant's conduct violated a regulation (§ 38a-790-8) promulgated by the state Insurance Department requiring appraisers to address the appraisal process without prejudice or favoritism. The jury found that the manner in which the defendant used its appraisers to negotiate the labor rates did not violate CUIPA, but did violate CUTPA on the ground that the defendant's conduct offended the public policy embodied in the regulation.
Hartford Fire Insurance Company appealed the jury's verdict arguing two points. The defendant first argued that the jury's verdict based on CUTPA was improper because under State v. Acordia, Inc., supra, 310 Conn. 1, there could be no CUTPA violation for insurance related conduct in the absence of a CUIPA violation. Alternatively, the defendant argued that its conduct did not violate the regulation. In response, the plaintiffs insisted that the defendant's conduct violated the regulation. The plaintiffs further argued that although the conduct did not violate CUIPA, " Acordia held out the possibility that insurance related conduct that does not violate CUIPA may still violate CUTPA if it offends some other law regulating the insurance industry, " and the regulation, § 38a-790-8, was such a law. Artie's Auto Body, Inc. v. Hartford Fire Ins. Co., supra, 317 Conn, 622-23. In reversing the verdict, the Supreme Court agreed with the defendant that its conduct did not violate the regulation or any other public policy of this state.
Contrary to LaPuma's position, the precise holding in Artie's does not support her position because in Artie's, the Supreme Court did not hold that the CUTPA claim could be based on the regulation at issue in that case in the absence of a CUIPA violation. The court simply did not address this possible ground for reversing the verdict. The court merely held that the regulation was not violated. This court rejects the defendants' invitation to infer that the Supreme Court in Artie's made a holding on an issue that it in fact did not reach.
The defendant also relies on cases such as Brico v. Travelers Casualty & Surety Co. of America, Superior Court, judicial district of Fairfield, Docket No. CV-09-5023993-S, (Dec. 29, 2010, Dooley, J.) (51 Conn.L.Rptr. 161), holding that a CUTPA claim may be based on General Statutes § 49-42 (governing the enforcement of municipal construction bonds) in the absence of a CUIPA violation. The court respectfully declines to follow the reasoning of these cases. The cases relied on by the defendant were decided before the Supreme Court's decision in State v. Acordia, Inc., supra, 310 Conn. 1, and the court in Acordia explicitly considered and rejected the holdings of cases such as Brico stating that a CUTPA claim based on insurance related conduct can be asserted independent of a CUIPA claim. See State v. Acordia, supra, 310 Conn, 31-36.
Furthermore, as pled, the defendant's claim based on § 38a-407 fails to state a cognizable cause of action under CUTPA. The test for determining whether a particular act violates CUTPA under the " cigarette rule" is well established and will not be reiterated here. See Jacobs v. Healey Ford-Subaru, Inc., 231 Conn. 707, 725-26, 652 A.2d 496 (1995). Certainly, under the " cigarette rule, " a CUTPA claim may be based on conduct that violates established public policy and a statute may provide a source for such public policies. See, e.g., Conaway v. Prestia, 191 Conn. 484, 464 A.2d 847 (1983) (finding a CUTPA violation based on the public policy embodied in the Landlord and Tenant Act regarding the health and safety of tenants). There are also situations where the legislature has explicitly defined certain conduct as being an unfair or deceptive business practice (as it did in CUIPA), and where the legislature has explicitly provided a remedy under CUTPA for a statute's violation. See, e.g., General Statutes § 42-115u(b) (authorizing a CUTPA action for violation of the Unfair Sales Practices Act).
" It is well settled that in determining whether an act or practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the federal trade commission for determining when an act or practice is unfair: (1) whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise--whether, in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers, competitors or other businessmen." (Citation omitted; quotation marks omitted.) Jacobs v. Healey Ford-Subaru, Inc., supra, 231 Conn. 725-26.
The defendants' argument, however, is broader than these concepts. The defendants contend that a CUTPA claim may be premised on an isolated, inadvertent violation of a statute, such as § 38a-407, simply because the statute advances or protects a public interest. Few statutes are enacted without a legislative intent to promote a public purpose, and the defendants' contention that a CUTPA claim may be based on a mistaken violation of such a statute is equivalent to establishing a per se violation of CUTPA based on a statutory violation. The identification of statutes whose violations constitute per se violations of CUTPA is within the sole domain of the legislature. Jacobs v. Healey Ford-Subaru, Inc., supra, 231 Conn. 727 (" When the legislature has intended to make the violation of a consumer statute an automatic violation of CUTPA, it has done so expressly"). " The Connecticut General Assembly has enacted 60 separate statutes which expressly provide that a violation of such legislation is a violation of CUTPA." R. Langer, J. Morgan, & D. Belt, 12 Connecticut Practice Series: Unfair Trade Practices, Business Torts and Antitrust, § 2.8, p. 48. The legislature has made no such provision regarding a violation of § 38a-407, and there is no authority supporting the proposition that a CUTPA claim may be based on § 38a-407 solely because this statute implicates a " public policy" and " regulates insurance related conduct" as alleged in the counterclaim and as argued by the defendants in opposition to the motion to strike. Indeed, what the Supreme Court stated in Mead and emphasized in Acordia regarding isolated instances of unfair insurance settlement practices is fully applicable here regarding the defendants' claim based on an inadvertent violation of an insurance related statute: " [t]he definition of unacceptable insurer conduct in [CUIPA] reflects the legislative determination that isolated instances of unfair insurance settlement practices are not so violative of public policy of this state as to warrant statutory intervention. Under CUTPA, as under CUIPA, a litigant is bound by this legislative determination." (Footnote omitted.) Mead v. Burns, supra, 199 Conn. 666; accord State v. Acordia, Inc., supra, 310 Conn. 35.
CONCLUSION
Therefore, for these reasons, the plaintiff's motion to strike LaPuma's CUTPA claim asserted in the third count of the counterclaim and based on a violation of General Statutes § 38a-407 is granted and the defendants' objection to the motion is overruled . The defendants have leave to plead over within fifteen days and the plaintiff shall plead further to the defendant's special defenses and counterclaims within thirty days thereafter. See Practice Book § § 10-8, 10-44.
So ordered.