Opinion
No. 31 82 24
May 8, 1995
MEMORANDUM OF DECISION ON MOTION TO STRIKE NO. 105
On September 8, 1994, the Transamerica Insurance Company ("TIC") filed a complaint seeking payment from Nejame Sons, Inc. ("Nejame") of additional premiums of $50,247, plus interest. On January 24, 1995, the court (Riefberg, J.) granted the defendant's motion to implead John Hyatt Associates, Inc. ("Hyatt"), the alleged agent for both TIC and Nejame.
On February 1, 1995, Nejame filed a three count, third party complaint against Hyatt. The first two counts allege actions sounding in fraudulent misrepresentation and negligence, respectively. The third count incorporates factual allegations as set forth in the first count, and further alleges a violation of the Connecticut Unfair Insurance Practices Act ("CUIPA"), as codified in General Statutes, Sec. 38a-815 et seq., and a violation of the Connecticut Unfair Trade Practices Act ("CUTPA"), as codified in General Statutes, Sec. 42-110a et seq.
On January 23, 1995, Hyatt filed a motion to strike the third count of Nejame's third party complaint on the ground of legal insufficiency, in that Nejame has failed to allege the existence of a general business practice as required by CUIPA. Hyatt has filed a memorandum of law in support of its motion to strike. Nejame has filed a memorandum in opposition.
The purpose of the motion to strike is to challenge the legal sufficiency of the allegations of any complaint. Gordon v. Bridgeport Housing Authority, 208 Conn. 161, 170, 544 A.2d 1185 (1988). In judging the motion, it does not matter whether the party can prove the allegations at trial. Levine v. Bess and Paul Sigel Hebrew Academy of Greater Hartford, Inc., 39 Conn. Sup. 129, 132, 471 A.2d 679 (Super.Ct. 1983). The motion admits all facts well pleaded, but does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings. The sole inquiry is whether the plaintiff's allegations, if proved, state a cause of action. Mingachos v. CBS, Inc., 196 Conn. 91, 108, 491 A.2d 368 (1985).
A plaintiff may bring a private cause of action pursuant to CUTPA to recover for alleged CUIPA violations. Lees v. Middlesex Ins. Co., 219 Conn. 644, 654, 594 A.2d 952 (1991). If the alleged CUIPA violation is predicated upon an unfair claims settlement practice as defined by section 38a-816(6), a showing of a "general business practice," as opposed to a showing of a single act of insurance misconduct, is required. Mead v. Burns, 199 Conn. 651, 659, 509 A.2d 11 (1986). However, if the CUIPA violation is predicated upon misrepresentations and false advertising of insurance policies pursuant to section 38a-816(1)fn1, a plaintiff need not allege more than a single act. See Martin Sons, Inc. v. Covenant Ins. Co., 9 CSCR 595 (June 13, 1994, Hennessey, J.); Schott v. Great American Insurance Co., 8 CSCR 988 (September 1, 1993, Hendel, J.); King v. Ehorn, 8 CSCR 1299 (November 17, 1993, Rush, J.); Bronson Townsend Co. v. Cornaglia, 1 CSCR 814 (September 30, 1986, Reynolds, J.).
Connecticut Statutes, Sec. 38a-816 (Formerly Sec. 38-61)(1) and (6) provides: (1) Misrepresentations and false advertising of insurance policies. Making, issuing or circulating, or causing to be made, issued or circulated, any estimate, illustration, circular or statement, sales presentation, omission or comparison which: (a) Misrepresents the benefits, advantages, conditions or terms of any insurance policy; (b) misrepresents the dividends or share of the surplus to be received, on any insurance policy; (c) makes any false or misleading statements as to the dividends or share of surplus previously paid on any insurance policy; (d) is misleading or is a misrepresentation as to the financial condition of any person, or as to the legal reserve system upon which any life insurer operates; (e) uses any name or title of any insurance policy or class of insurance policies misrepresenting the true nature thereof; (f) is a misrepresentation for the purpose of inducing or tending to induce to the lapse, forfeiture, exchange, conversion or surrender of any insurance policy; (g) is a misrepresentation for the purpose of effecting a pledge or assignment of or effecting a loan against any insurance policy; or (h) misrepresents any insurance policy as being shares of stock. (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; (g) compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds; (h) attempting to settle a claim for less than the amount to which a reasonable man would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application; (i) attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of the insured; (j) making claims payments to insureds or beneficiaries not accompanied by statements setting forth the coverage under which the payments are being made; (k) making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration; (l) delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information; (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.
In its supporting memorandum, Hyatt concedes that a private cause of action exists under CUTPA for alleged violations of CUIPA. However, the thrust of Hyatt's argument is that Nejame has failed to allege an essential element of a CUIPA claim, i.e., a general business practice. Therefore, Hyatt postulates that since there is no alleged violation of CUIPA, there can similarly be no alleged violation of CUTPA.
Nejame counters in its opposition memorandum that the third count of its third party complaint alleges a CUIPA violation based upon section 38a-816(1), which does not require an allegation that the alleged unfair practices "be committed with such frequency as to indicate a general business practice." In the alternative, Nejame posits that even if it were required to allege a general business practice, paragraph ten as set forth in the third count of its third party complaint satisfies that standard.
The gist of the first count of Nejame's third party complaint is that if liability is imposed on it for additional premiums, that liability resulted from a series of alleged misrepresentations by Hyatt with regard to the policy's terms. The allegations of misrepresentation, which serve as the factual predicate for Nejame's CUTPA claim, are incorporated into the third count. The third count recites that Hyatt misrepresented the terms of the 1990/1991 insurance policy, in that:
Hyatt informed Nejame that an allocation between (Work Class) WC 5223 and WC 9014 would remain applicable to the 1990/1991 insurance policy;
Hyatt failed to timely inform Nejame that TIC would not allocate "pool wages" to the WC 9014 category in the 1990/1991 insurance policy;
Hyatt continued to misrepresent the terms of the policy despite its knowledge that the WC 9014 category had been deleted;
Hyatt engaged in unfair and deceptive insurance practices in violation of section 38a-815 et seq. by misrepresenting the terms of the 1990/1991 insurance policy;
Hyatt engaged in unfair and deceptive acts, omissions, and/or practices in the conduct of commerce in violation of section 42-110a et seq. by its aforesaid statements and actions.
(Third Party Complaint dated December 9, 1994, Third Count, pars. 11-13.)
Although the third count of Nejame's third party complaint alleges CUIPA violations on the part of Hyatt, that count fails to specify which sections allegedly were violated. A review of that count reveals that Nejame is not claiming misrepresentation with regard to any "claim settlement" as defined in section 38a-816(6), nor is any type of "settlement" alleged. However, the allegations set forth in the third count can be found to fall within the ambit of section 38a-816(1), which defines misrepresentations and false advertising of insurance policies. Therefore, since the CUIPA allegations are based upon alleged violations of section 38a-816(1), not 38a-816(6), Nejame need not allege more than a single act, and Hyatt's motion to strike the third count of the third party complaint is denied.
Stodolink, J.