Opinion
No. CV 10-6006711-S
October 28, 2010
MEMORANDUM OF DECISION ON DEFENDANT ONEBEACON MIDWEST INSURANCE COMPANY'S MOTION TO STRIKE #101
On December 31, 2009, the plaintiff, Pettibone Tavern, LLC, filed its seven-count complaint against the defendants, OneBeacon Midwest Insurance Company (OneBeacon) and R.C. Knox and Company, Inc. (R.C. Knox).
Counts one through four are directed at OneBeacon. In count one for breach of contract, the plaintiff alleges that OneBeacon issued it an insurance policy, in effect on January 3, 2008, that provided coverage for business personal property, business income loss, extended business income loss, extra expense, claims expense and sign coverage. On January 3, 2008, the plaintiff suffered extensive damage and loss as a result of a fire and subsequent flooding from the sprinkler system and burst pipes, for which the policy provides coverage. OneBeacon has refused to pay the loss and damage under the terms of the policy, which the plaintiff claims to be in excess of $750,000, even though the plaintiff has fulfilled all the terms, conditions and requirements of the policy on its part to be performed.
In count two, labeled "Good Faith and Fair Dealing," the plaintiff realleges the allegations in count one for breach of contract and further alleges that the plaintiff reasonably expected to receive the full benefits due and owing it under the terms of the policy, that it has repeatedly requested that OneBeacon honor its obligations under the policy and make payment in full to the plaintiff, and that it has repeatedly identified its claims, and the basis and amount of them. Furthermore, it has provided OneBeacon with all documents necessary for OneBeacon to make payment to the plaintiff. Despite the plaintiff's diligence, OneBeacon has engaged in a campaign to delay and deny coverage to the plaintiff despite its knowledge that no basis exists to do so under the policy. OneBeacon demonstrates it was acting in bad faith because it has failed to conduct a reasonable and timely investigation of the plaintiff's claims, has failed to pay benefits in a timely manner, has refused to engage in reasonable settlement negotiations to resolve the plaintiff's claims, has engaged in unfair insurance settlement practices, and has engaged in conduct that injured the plaintiff's right to receive some or all of the benefits guaranteed to the plaintiff.
In count three for unfair insurance practices, the plaintiff realleges the allegations contained in counts one and two, and further alleges that OneBeacon's acts were unfair and deceptive acts or practices in the business of insurance under General Statutes § 38a-816(6)(a), (b), (c), (d), (e), (f), (m) and (n), and OneBeacon has made it a business practice and pattern to act in this way. As a result, the plaintiff has suffered a monetary loss. OneBeacon's settlement practices are part of and/or constitute a general business practice, and it has engaged in unfair settlement practices in handling other claims.
In count four for unfair trade practices, the plaintiff realleges all the allegations contained in counts one, two and three, and further alleges that OneBeacon is engaged in the conduct of a trade or commerce as defined in General Statutes § 42-110a. The acts, omissions, and misrepresentations of OneBeacon were unfair or deceptive acts or practices in the conduct of a trade or commerce in violation of Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110b et seq., which violated the public interest, by which the plaintiff has suffered a monetary loss. The plaintiff further alleges that OneBeacon's conduct constitutes a deceptive act or practice in the conduct of the trade or commerce and within the meaning of General Statutes § 42-110b(a). Its conduct also constitutes an intentional and wanton violation of the plaintiff's rights or was done with a reckless indifference to those rights. The conduct is an immoral, unethical, oppressive, unfair, offensive to public policy, deceptive or unscrupulous trade practice in violation of CUTPA, and as a result, the plaintiff has suffered substantial injury and ascertainable loss of money or property.
R.C. Knox has filed a separate motion, not before this court, to strike counts six and seven of the plaintiff's complaint.
Counts five, six and seven are directed at R.C. Knox, for professional negligence, breach of contract, and breach of fiduciary duty, respectively.
In its prayer for relief, in addition to compensatory damages and costs, the plaintiff claims punitive damages, damages pursuant to General Statutes §§ 42-110b et seq. (CUTPA) and General Statutes §§ 38a-815 et seq. (CUIPA), pre-and post-judgment interest and attorneys fees.
On January 25, 2010, OneBeacon filed its motion to strike (#101) count two for failure to assert a proper bad faith claim; count three for failure to assert a proper claim under the CUIPA, count four for failure to assert a proper claim under CUTPA; and the prayer for relief for punitive damages, damages pursuant to CUIPA and CUTPA, interest and attorneys fees. On March 3, 2010, the plaintiff filed its objection to OneBeacon's motion to strike, also supported by a memorandum of law.
DISCUSSION
"(a) Whenever any party wishes to contest (1) the legal sufficiency of the allegations of any complaint, counterclaim or cross claim, or of any one or more counts thereof, to state a claim upon which relief can be granted, or (2) the legal sufficiency of any prayer for relief in any such complaint, counterclaim or cross complaint . . . that party may do so by filing a motion to strike the contested pleading or part thereof." Practice Book § 10-39.
"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 (2003). "A motion to strike challenges the legal sufficiency of a pleading, and, consequently, requires no factual findings by the trial court." (Internal quotation marks omitted.) Suffield Development Associates Ltd. Partnership v. National Loan Investors, L.P., 260 Conn. 766, 771 (2002). "A motion to strike admits all facts well pleaded; it does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings." (Emphasis in original; internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 588 (1997). 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 [pleading party has] stated a legally sufficient cause of action." (Internal quotation marks omitted.) Dodd v. Middlesex Mutual Assurance Co., 242 Conn. 375, 378 (1997). "Thus, [i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied . . . It is fundamental that in determining the sufficiency of a complaint [or a count in 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." Doe v. Board of Education, 76 Conn.App. 296, 299-300 (2003). "Practice Book . . . § 10-39, allows for a claim for relief to be stricken only if the relief sought could not be legally awarded." Pamela B. v. Ment, 244 Conn. 296, 325 (1998).
I
Count Two: Common-Law Bad Faith Claim
OneBeacon first moves to strike count two for failure to assert a proper common-law bad faith claim.
"[I]t is axiomatic that the . . . duty of good faith and fair dealing is a covenant implied into a contract or a contractual relationship . . . In other words, every contract carries an implied duty requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement . . . The covenant of good faith and fair dealing presupposes that the terms and purpose of the contract are agreed upon by the parties and that what is in dispute is a party's discretionary application or interpretation of a contract term . . . To constitute a breach of [the implied covenant of good faith and fair dealing], the acts by which a defendant allegedly impedes the plaintiff's right to receive benefits that he or she reasonably expected to receive under the contract must have been taken in bad faith." (Internal quotation marks omitted.) Renaissance Management Co., Inc. v. Connecticut Housing Finance Authority, 281 Conn. 227, 240 (2007).
"The appellate courts of this state have not addressed the . . . issue . . . [of] where an insurer denies or limits coverage under an insurance policy, what allegations are required to allege bad faith as opposed to breach of contract . . . [A] majority of trial courts have held [however] that plaintiffs must plead facts that go beyond a simple breach of contract claim and enter into a realm of tortious conduct which is motivated by a dishonest or sinister purpose." (Internal quotation marks omitted.) Lynch v. Covenant Ins. Co., Superior Court, judicial district of Hartford, Docket No. CV 09 5027821 (August 11, 2009, Aurigemma, J.). Allegations which give rise to an inference that the defendant has acted purposefully are sufficient. See Shiff v. Van Wyk, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 08 5008214 (July 6, 2009, Pavia, J.).
In the present case, the plaintiff alleges in count two for bad faith that "despite Pettibone Tavern's diligence, OneBeacon has engaged in a campaign to delay and deny coverage to Pettibone Tavern despite its knowledge that no basis exists to delay or deny coverage under the terms of the policy." The word "campaign" suggests a series of actions to bring about the delay and nonpayment. This allegation, on its own, falls short. However, the additional allegation that OneBeacon had knowledge that it had no basis for denying coverage, but denied the plaintiff nonetheless, gives rise to the inference that OneBeacon acted "willfully." These allegations are sufficient to survive a motion to strike the plaintiff's bad faith claim.
For the foregoing reasons, the court DENIES One Beacon's motion to strike count two of the plaintiff's complaint.
II
Count Three: CUIPA
OneBeacon next moves to strike count three for failure to assert a proper claim under CUIPA, General Statutes §§ 38a-816 et seq. In its memorandum of law, OneBeacon argues that CUIPA does not provide a private right of action. There is division in the Superior Court on this issue.
"The Superior Court decisions considering this question are split, with a majority of these decisions concluding that CUIPA alone does not provide for a private right of action." Austrian v. United Health Group, Inc., Superior Court, complex litigation docket at Waterbury, Docket No. X06 CV 05 4010357 (July 17, 2007, Stevens, J.) (Conn. L. Rptr. 852, 860). "The consensus of these courts may be summarized as follows: 1) there is no express authority under CUIPA for private causes of action; 2) CUIPA is not ambiguous; 3) the regulatory scheme under CUIPA contemplates investigation and enforcement actions to be taken by the insurance commissioner; and 4) consequently there is no private cause of action under CUIPA." (Internal quotation marks omitted.) Watton v. Geico Indemnity Co., Superior Court, judicial district of Hartford, Docket No. CV 08 5018837 (November 13, 2008, Aurigemma, J.).
This court follows the majority of Superior Courts that hold that CUIPA does not provide for a private right of action.
As such, the court GRANTS OneBeacon's motion to strike count three of the plaintiff's complaint.
III
Count Four: Violation of Connecticut Unfair Trade Practices Act
OneBeacon next moves to strike count four for failure to assert a proper claim under CUIPA, General Statutes §§ 38a-816 et seq. Here, the defendant argues that absent allegations sufficient to set forth a CUTPA violation, a CUIPA claim cannot survive. Again, a CUIPA claim requires proof that an unfair settlement practice had been committed with such frequency to indicate a general business practice, and the plaintiff has failed to plead any facts to show that the defendant engaged in misconduct in the handling of other policyholders' claims or that demonstrate a pattern of misconduct in violation of CUTPA. The better approach, it argues, is to require the plaintiff to do more than merely parrot the language contained within the CUIPA count and allege facts that demonstrate that the defendant engaged in a pattern of misconduct.
The plaintiff counters that the more persuasive line of cases does not require that it allege specific instances of insurer misconduct.
General Statutes § 38a-816 provides in relevant part: "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 any of the following: (a) Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue; (b) failing to acknowledge and act with reasonable promptness upon communications with respect to claims arising under insurance policies; (c) failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies; (d) refusing to pay claims without conducting a reasonable investigation based upon all available information; (e) failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed; (f) not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear . . . (m) failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage; (n) failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement; (o) using as a basis for cash settlement with a first party automobile insurance claimant an amount which is less than the amount which the insurer would pay if repairs were made unless such amount is agreed to by the insured or provided for by the insurance policy."
"Although the CUIPA violations alleged by the plaintiff cannot stand on their own, CUTPA authorizes private causes of action to enforce claims derived from CUIPA." Fedora v. Worcester Ins. Co., Superior Court, judicial district of New Haven, Docket No. CV 03 0285288 (September 28, 2004, Tanzer, J.). "A claim under CUIPA predicated upon alleged unfair claim settlement practices in violation of § 38a-816(6) requires proof that the unfair settlement practices were committed or performed with such frequency as to indicate a general business practice." (Internal quotation marks omitted.) Lees v. Middlesex Ins. Co., 229 Conn. 842, 847-48 (1994). "In requiring proof that the insurer has engaged in unfair claim settlement practices with such frequency as to indicate a general business practice, the legislature has manifested a clear intent to exempt from coverage under CUIPA isolated instances of insurer misconduct . . . [Therefore] alleged improper conduct in the handling of a single insurance claim, without any evidence of misconduct by the defendant in the processing of any other claim, does not rise to the level of a general business practice as required by [CUIPA]." (Citation omitted; internal quotation marks omitted.) Id., 849.
Superior Courts are divided on whether a plaintiff must plead with particularity that the insurer engaged in specific acts or practices with such frequency as to indicate a general business practice.
In Active Ventilation Products, Inc. v. Property Casualty Ins. Co. of Hartford, Superior Court, complex litigation docket at Hartford, Docket No. X09 CV 08 5023757 (July 15, 2009, Shortall, J.), the court held that "allegations of a general business practice, unsupported by specific instances of insurer misconduct, is sufficient to withstand a motion to strike [a CUTPA claim based on CUIPA]." The plaintiff in that case alleged more than one claim. Specifically, it "alleged in its complaint that the acts or omissions of the Hartford in dealing with its claims, `to [its] knowledge and belief,' are the Hartford's `general business practices;' . . . more particularly, the Hartford's delay in processing Active Ventilation's claims, `[t]o the knowledge and belief of . . . Active Ventilation, . . . occur[s] with such frequency as to constitute a general business practice of the . . . Hartford . . .'" (Emphasis added.) Id. The court agrees with Judge Shortall's conclusion.
In the present case, although the plaintiff's CUIPA claim cannot stand on its own, the plaintiff properly alleges a violation of CUTPA through CUIPA. The plaintiff here realleges the allegations of all previous counts. So in addition to alleging violations of CUIPA, it also alleges that the "acts, omissions, and representations of OneBeacon as set forth [in count three for CUIPA] were and are unfair or deceptive acts or practices in the conduct of a trade or commerce in violation of the Connecticut Unfair Trade Practices Act, General Statutes § 42-110b et seq. and said acts, omissions and misrepresentations violate the public interest." Furthermore, the plaintiff alleges that "Pettibone has suffered a loss of money as a result of OneBeacon's stated unfair and/or deceptive acts or practices . . . The conduct of OneBeacon constitutes a deceptive act or practice in the conduct of the trade or commerce and within the meaning of . . . General Statutes § 42-110b(a) . . . The conduct of OneBeacon constitutes an intentional and wanton violation of Pettibone Tavern's rights or was done with a reckless indifference to those rights . . . The conduct of OneBeacon is an immoral, unethical, oppressive, unfair, offensive to public policy, deceptive or unscrupulous trade practice in violation of CUTPA." In count three for CUIPA, the plaintiff alleges that "the acts of OneBeacon, as set forth above were and are unfair and deceptive acts or practices in the business of insurance under . . . General Statutes § 38a-816(6)(a), (b), (c), (d), (e), (f), (m) and (n) and OneBeacon has made it a business practice and pattern to act in said fashion."
Looking to the allegations in count two for bad faith, the plaintiff alleges only that OneBeacon failed to pay benefits to the plaintiff, refused to engage in reasonable settlement negotiations to resolve the plaintiff's claims, and engaged in conduct that injured the plaintiff's right to some or all of the benefits guaranteed to the plaintiff under the policy. In count three, however, the plaintiff further alleges that "OneBeacon has engaged in unfair settlement practices in handling other claims." (Emphasis added.) The plaintiff, therefore, has alleged that the actions of OneBeacon reach outside the handling of her single claim. Although the plaintiff does not specifically use the words "other insureds," the reader infers that the claims involve other insureds. The plaintiff has alleged enough to survive a motion to strike this count of its complaint.
For the foregoing reasons, the court DENIES OneBeacon's motion to strike count four of the plaintiff's complaint.
IV
Prayer for Relief for Punitive Damages, Damages Recoverable Under CUIPA, Damages.
Lastly, OneBeacon moves to strike the prayer for relief as to punitive damages, damages pursuant to CUIPA and CUTPA, interest and attorneys fees.
OneBeacon argues that because count two for bad faith should be stricken, no punitive damages can be awarded. Similarly, the claims under CUIPA and CUTPA are flawed, and, therefore, the plaintiff cannot recover under either statute. Furthermore, the plaintiff does not cite any authority that would entitle it to recover interest. As to attorneys fees, it argues, Connecticut follows the American Rule where the plaintiff bears the cost of litigation. The plaintiff does not address OneBeacon's arguments.
A
Punitive Damages
As to the award of punitive damages for a bad faith claim, "[s]tanding alone a finding of breach of the duty to act in good faith does not permit an award of attorneys fees or punitive damages. The duty which is breached is a contractual one. Barry v. Posi-Seal International, Inc., 40 Conn.App. 577, 587-88, cert. denied, 237 Conn. 917 (1996)." O'Brien v. Craumer, Superior Court, Judicial District of Tolland, Docket No. CV 06 4008739 (April 30, 2008, Tobin, J.)
"Punitive damages are not ordinarily recoverable for breach of contract . . . This is so because . . . punitive or exemplary damages are assessed by way of punishment, and the motivating basis does not usually arise as a result of the ordinary private contract relationship. The few classes of cases in which such damages have been allowed contain elements which bring them within the field of tort." (Citation omitted.) Triangle Sheet Metal Works, Inc. v. Silver, 154 Conn. 116, 127 (1966). "The flavor of the basic requirement to justify an award of punitive or exemplary damages has been repeatedly described in terms of wanton and malicious injury, evil motive and violence . . . The Restatement declares that punitive damages may be awarded only for `outrageous conduct, that is, for acts done with a bad motive or with a reckless indifference to the interests of others.' Restatement, 4 Torts § 908, comment (b)." Id., 128. See also L.F. Pace Sons, Inc. v. Travelers Indemnity Co., 9 Conn.App. 30, 47-48, cert. denied, 201 Conn. 811 (1986).
In the present case, to furnish a basis for recovery of punitive damages, "the pleadings must allege and the evidence must show wanton or wilful malicious misconduct . . ." Markey v. Santangelo, 195 Conn. 76, 77 (1985). The plaintiff here alleges in count two for bad faith that "[d]espite Pettibone Tavern's diligence, OneBeacon has engaged in a campaign to delay and deny coverage to Pettibone Tavern despite its knowledge that no basis exists to delay or deny coverage under the terms of the policy." It also alleges that "OneBeacon engaged in unfair insurance settlement practices." Other allegations simply point to OneBeacon's "reasonableness." Therefore, in connection with its claims for breach of contract and bad faith, the plaintiff has not alleged facts sufficient to show that the defendant engaged in conduct that was wanton, maliciously injurious, outrageous and done with evil motive and violence.
As to the award of punitive damages under a CUTPA claim, "[a]warding punitive damages and attorneys fees under CUTPA is discretionary . . . and the exercise of such discretion will not ordinarily be interfered with on appeal unless the abuse is manifest or injustice appears to have been done . . . In order to award punitive or exemplary damages, evidence must reveal a reckless indifference to the rights of others or an intentional and wanton violation of those rights . . . In fact, the flavor of the basic requirement to justify an award of punitive damages is described in terms of wanton and malicious injury, evil motive and violence." (Citation omitted; internal quotation marks omitted.) Gargano v. Heyman, 203 Conn. 616, 622 (1987).
In its count four CUTPA claim, the plaintiff alleges that "[t]he conduct of OneBeacon constitutes an intentional and wanton violation of Pettibone Tavern's rights or was done with a reckless indifference to those rights." (Emphasis added.) The plaintiff has, therefore, alleged enough by which to potentially collect punitive damages under CUTPA.
Therefore, the court GRANTS the defendant's motion to strike paragraph 2 of the plaintiff's prayer for relief except with respect to count four for CUTPA.
B
CUIPA and CUTPA Statutory Damages
As the court declines to strike count four for CUTPA, the court DENIES the defendant's motion to strike paragraph 3 of the plaintiff's prayer for relief for damages based on CUTPA.
As the court strikes count three for CUIPA, the court also GRANTS OneBeacon's motion to strike paragraph 4 of the plaintiff's prayer for relief for damages based on CUTPA.
C
Pre-and Post-judgment Interest
In its prayer for relief, the plaintiff claims pre-and post-judgment interest but fails to specifically cite authority for such interest. Therefore, the court declines to address it and, for this reason, GRANTS OneBeacon's motion to strike paragraph 5 of the plaintiff's prayer for relief for pre-and post-judgment interest.
D
Attorneys Fees
As to the plaintiff's prayer for attorneys fees, "Connecticut adheres to the American rule," pursuant to which, "[o]rdinarily, a successful litigant is not entitled to an award of attorneys fees." (Internal quotation marks omitted.) L R Realty v. Connecticut National Bank, 53 Conn.App. 524, 550-51, cert. denied, 250 Conn. 901 (1999). Nevertheless, "Connecticut [also] recognizes . . . the exceptions to this rule. A successful litigant is entitled to an award of attorneys fees . . . if they are provided by contract . . . or as an aspect of punitive damages." (Citations omitted.) Id., 551.
Because the count for breach of contract remains, it is possible that attorneys fees may be awarded if provided for contractually. In addition, because the plaintiff has alleged enough in its count four CUTPA claim to withstand the motion to strike punitive damages, attorneys fees could be awarded as an aspect of punitive damages.
For the foregoing reasons, the court GRANTS OneBeacon's motion to strike paragraph 7 of the plaintiff's prayer for relief for attorneys fees except with respect to count one for breach of contract and count four for CUTPA.
CONCLUSION
Count Two (Bad Faith) DENIED
Count Three (CUIPA) GRANTED
Count Four (CUTPA) DENIED
Prayer for Relief:
Par. 2. GRANTED except with respect to count four for CUTPA
Par. 3. DENIED
Par. 4. GRANTED
Par. 5. GRANTED
Par. 7. GRANTED except with respect to count one for breach of contract and count four for CUTPA.