Opinion
No. CV06 500 34 63S
October 17, 2006
MEMORANDUM OF DECISION
Before the court is the defendant's motion to strike count four of the plaintiff's complaint on the ground that the count fails to allege sufficient facts necessary to prove the existence of a general business practice under the Connecticut Unfair Insurance Practices Act as required to maintain a private cause of action under the Connecticut Unfair Trade Practices Act.
On April 24, 2006, the plaintiff, Starview Ventures Ltd., LLC (Starview), filed an eleven-count complaint against the defendants, Acadia (Acadia), Lloyd's of London, Joseph Krar and Associates, Incorporated, D.N.M. Autocare, LLC, Matthew Humphrey, Dwight Fowlin and Geoffrey Lyn. This action arises out of conduct allegedly occurring following the fire to a building owned by the plaintiff, which was located at 30 Orange Avenue in New Haven, Connecticut.
Counts one and two allege a breach of contract, count three, a breach of the implied covenant of good faith and fair dealing and count four, a violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statues § 42-110b et seq., each against Acadia, the insurer of the building owned by the plaintiff. Specifically, in paragraph thirteen of count four, the plaintiff alleges that "[t]he refusal by the defendant to pay the full amount of the loss, including the loss of rents, its failure to promptly respond to the plaintiff's claims, its failure to attempt to engage in a prompt, fair and equitable settlement of the plaintiff's claims, and its action in compelling the plaintiff to institute litigation to recover amounts due under the insurance policy, constitute a violation of General Statutes §§ 38a-815 and 38a-816, in that it evidences a general business practice on the part of the defendant . . ." These alleged incidents of insurer misconduct emanate from the alleged failure of Acadia to pay fully the plaintiff under a single commercial property insurance policy.
Counts five and six allege negligence and a violation of CUTPA, respectively, on the part of Lloyd's, the insurer of D.N.M. Count seven alleges negligence against Joseph Krar and Associates, Inc. Count eight alleges a breach of contract against Humphrey, Fowlin, and Lyn, the owners and operators of D.N.M., and counts nine, ten, and eleven allege negligence, conversion, and misappropriation of funds against D.N.M., Humphrey, Fowlin and Lyn, respectively.
On May 11, 2006, Acadia filed a motion to strike count four of the complaint on the grounds that: (1) where the plaintiff alleges "misconduct . . . related to an insurance carrier [it] may not bring a cause under CUTPA that does not violate . . . the [Connecticut Unfair Insurance Practices Act (CUIPA), General Statutes § 38a-815 et seq."]; (2) "no private right of action exists independently under CUIPA"; and (3) "the plaintiff has failed to sufficiently allege a CUIPA claim." The defendant has submitted a memorandum of law in support of its motion. On June 15, 2006, the plaintiff filed a memorandum in opposition.
"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). "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.) Rizzuto v. Davidson Ladders, Inc., 280 Conn. 225, 229 (2006). "The role of the trial court 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 Assurance Co., 242 Conn. 375, 378, 698 A.2d 859 (1997). "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, 693 A.2d 293 (1997). "[I]f facts provable in the complaint would support a cause of action, the motion to strike must be denied." (Internal quotation marks omitted.) Rizzuto v. Davidson Ladders, Inc., supra, 280 Conn. 229.
Recognition of a Private Right of Action under CUIPA
In support of its motion to strike count four, the defendant argues that the plaintiff fails to state a cause of action under CUIPA, contending that a private cause of action does not exist under the statute. The defendant relies on a majority of superior court cases that have declined to recognize the existence of a private cause of action under CUIPA. The plaintiff argues that this court should follow the minority position espoused by those superior court cases that have recognized a private cause of action under CUIPA.
Neither the Connecticut Supreme Court nor the Appellate Court has yet to rule on whether CUIPA permits a private right of action. As noted above, there is a split of authority in the Superior Court regarding whether a private right of action exists, with the majority of courts concluding that CUIPA does not authorize a private right of action. Green v. Government Employees Ins. Co., Superior Court, judicial district of New Haven at Meriden, Docket No. CV 04 0287116 (February 24, 2005, Wiese, J.). In light of this court's decision in Allessa v. Allstate Ins. Co., Superior Court, judicial district of Ansonia/Milford, Docket No. CV 95 050550 (November 7, 1995, Skolnick, J.), the court will follow the majority in declining to recognize a private right of action under CUIPA.
Sufficiency of allegations necessary to support a CUTPA claim
In further support of its motion, the defendant argues that the plaintiff fails to properly plead a CUTPA claim. Relying on Mead v. Burns, 199 Conn. 651, 509 A.2d 11 (1986), the defendant contends that a CUTPA claim cannot be based upon the occurrence of unfair claim settlement practices relating to a single insurance claim. The plaintiff counters that Mead is distinguishable in that it merely "sets forth the necessary facts in order to prove that a claim qualifies as a general business practice . . ." and that it has adequately alleged unfair claims settlement practices evidencing a "general business practice."
In Mead v. Burns, supra, 199 Conn. 663, the Connecticut Supreme Court expressly recognized "the existence of a private cause of action under CUTPA to enforce alleged CUIPA violations." "[A] CUTPA claim based on the public policy embodied in CUIPA must be consistent with the regulatory principles established therein . . . [T]he definition of unacceptable insurer conduct in [§ 38a-816(6)] reflects the legislative determination that isolated instances of unfair insurance settlement practices are not so violative of the public policy of this state as to warrant statutory intervention." (Internal quotation marks omitted.) Lees v. Middlesex Ins. Co., 229 Conn. 842, 850-51, 643 A.2d 1282 (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." Id., 849, quoting Mead v. Burns, supra, 666.
For a plaintiff to maintain a cause of action under CUTPA against an insurance carrier based upon alleged unfair claim settlement practices, in accordance with CUIPA, the plaintiff must plead facts indicating that such practices were committed "with such frequency as to indicate a general business practice." See Lees v. Middlesex Ins. Co., supra, 229 Conn. 850. The defendant points out to the court that the plaintiff has not alleged conduct amounting to a general business practice in its handling of insurance claims and further contends that a CUTPA claim arising out of an insurer's alleged unfair claim settlement practices as proscribed by § 38a-816(6) of CUIPA cannot be based upon the occurrence of unfair claim settlement practices relating to a single insurance claim. The plaintiff counters that given CUIPA's remedial nature, its allegation of a general business practice is sufficient to withstand a motion to strike. Although the plaintiff concedes that it would have to introduce evidence supporting the existence of a general business practice at trial, the plaintiff argues that in light of the remedial nature of CUIPA, an allegation of a general business practice is sufficient to withstand a motion to strike.
"[A] CUTPA claim based on an alleged unfair claim settlement practice . . . require[s] proof, as under CUIPA, that the unfair settlement practice had been committed or performed by the defendant with such frequency as to indicate a general business practice." (Internal quotation marks omitted.) Lees v. Middlesex Ins. Co., supra, 229 Conn. 850. "The term `general business practice' is not defined in the statute, so we may look to the common understanding of the words as expressed in a dictionary . . . `General' is defined as prevalent, usual [or] widespread . . . and `practice' means [p]erformance or application habitually engaged in . . . [or] repeated or customary action." (Citations omitted; internal quotation marks omitted.) Id., 849 n. 8. Although there is no appellate authority on this specific issue, a majority of superior courts have determined that allegations of unfair claims settlement practices in the handling of different components of the same claim are insufficient to demonstrate a general business practice in violation of CUIPA or CUTPA. See, e.g., Fetzer v. Safeco Ins. Co., Superior Court, judicial district of Litchfield, Docket No. CV 04 0092567 (August 9, 2006, Pickard, J.), citing Quimby v. Kimberly Clark Corp., 28 Conn.App. 660, 671-72, 613 A.2d 838 (1992).
For a CUTPA/CUIPA claim to survive a motion to strike, however, the majority of superior court decisions have construed "[t]he frequently cited cases of Mead and Lees . . . [to] require that claims of unfair settlement practices under CUIPA [to] require a showing of more than a single act of insurer misconduct . . . [and] that there must be evidence of misconduct by the insurer in the processing of other policyholders' claims in order to rise to the level of a general business practice." Southridge Capital Management, LLC v. Twin City Fire Ins. Co., Superior Court, complex litigation docket at Middletown, Docket No. X04 CV 02 103527 (June 3, 2005, Quinn, J.) ( 39 Conn. L. Rptr. 634); see also Dekutowski-Cook v. Pavalock, Superior Court, Judicial District of New Britain, Docket No. CV 05 4005970 (January 9, 2006, Shaban, J.) ( 40 Conn. L. Rptr. 584); Green v. Government Employees Ins. Co., supra, Superior Court, Docket No. CV 04 0287116. Further, support for this proposition can be gleaned from Mead v. Burns, supra, 199 Conn. 666, in which the Supreme Court indicated that "it would be more anomalous to permit a CUTPA claim to override a CUIPA regulatory pattern than to require a private litigant, using modern discovery techniques or enlisting others in a class action to comply with the statutory requirements of § 38-61." (Emphasis added.)
In Southridge, the court held that the plaintiff's complaint, which expressly referenced fifteen cases in the states of Connecticut, Delaware, Ohio, Texas, and Massachusetts, adequately alleged a "general business practice" in violation of CUIPA with sufficient particularity. Southridge Capital Management, LLC v. Twin City Fire Ins. Co., supra, Superior Court, Docket No. X04 CV 02 103527; see also Herbert v. Assurance Co. of America, Superior Court, judicial district of Ansonia-Milford, Docket No. CV 04 0084733 (February 9, 2005, Stevens, J.) ( 38 Conn. L. Rptr. 670) (holding that complaint's specific reference to five other instances of unfair claim settlement practices sufficiently alleged that the defendant had a "general business practice" of handling insurance claims in a manner that violated CUIPA).
A minority of courts have determined that allegations of a general business practice in a complaint, which are unaccompanied by allegations of specific instances of unfair settlement practices, are sufficient to withstand a motion to strike. See, e.g., Nation v. Allstate Ins. Co., Superior Court, judicial district of Litchfield, Docket No. CV 04 0093456 (September 7, 2005, Trombley, J.) ( 39 Conn. L. Rptr. 886); Bates v. Utica Mutual Ins. Co., Superior Court, judicial district of Litchfield, Docket No. CV 02 0088925 (May 29, 2003, Pickard, J.). This minority has reasoned that "[g]iven the remedial nature of CUIPA and given that it is to be liberally construed to give effect to the legislature's intent," allegations of a general business practice unsupported by specific instances of insurer misconduct are sufficient to withstand a motion to strike. See Nation v. Allstate Ins. Co., supra, Superior Court, Docket No. CV 04 0093456. The court believes, however, that the minority's approach contravenes Mead v. Burns, supra, 199 Conn. 666, in that an allegation of a general business practice, without supporting instances of insurer misconduct involving unfair claim settlement practices concerning other claimants or other transactionally unrelated claims, would effectively permit a litigant to "override . . . [the] CUIPA regulatory pattern . . ."
In the present case, the plaintiff's fourth count does not allege that Acadia has treated other claimants unfairly in a manner that constitutes a general business practice. Even construing that count of the complaint in a light most favorable to the nonmoving party, the plaintiff's allegations merely establish multiple acts of misconduct relating to a single insurance transaction. Notwithstanding the plaintiff's references to its numerous "claims," the complaint indicates that the plaintiff had one commercial property insurance policy with the defendant. All of the plaintiff's "claims" pertain to the April 13, 2004, fire to the plaintiff's property. Thus, in accordance with the majority of superior courts, the court finds that the plaintiff has failed to plead sufficient facts setting forth the existence of an "unfair settlement practice [that] had been committed or performed by the defendant with such frequency as to indicate a general business practice." (Internal quotation marks omitted.) Lees v. Middlesex Ins. Co., supra, 229 Conn. 850.
Construing the complaint in the manner most favorable to sustaining its legal sufficiency, the allegations therein are insufficient to survive a motion to strike. Therefore, the defendant's motion to strike count four of the plaintiff's complaint is granted.