Opinion
No. CV 04-0833347
February 9, 2005
MEMORANDUM OF DECISION ON MOTION TO STRIKE
On July 26, 2004, the plaintiff, Advanced Financial Services, Inc., filed this four-count revised complaint against the defendant, Savers Property Casualty Insurance Company, the insurer for Associated Appraisal Services against whom the plaintiffs had obtained a judgment based on damages incurred by the plaintiff as a result of certain misconduct by the insureds in providing real estate services. Due to the defendant's failure to pay the claim, the plaintiff, as subrogee now brings this claim against the defendant pursuant to Connecticut General Statutes § 38a-321.
On August 10, 2004, defendant moved to strike counts one, three and four of plaintiff's revised complaint dated July 23, 2004.
In count one, the plaintiff alleges breach of implied contractual duty of good faith and fair dealing. Count two alleges negligence. In count three, the plaintiff alleges insurance bad faith. In count four, the plaintiffs allege that the defendants committed unfair and deceptive acts under CUTPA by way of CUIPA, and seeks punitive damages.
I.
"An action for breach of the covenant of good faith and fair dealing requires proof of three essential elements, which the plaintiff must duly plead: first, that the plaintiff and the defendant were parties to a contract under which the plaintiff reasonably expected to receive certain benefits; second, that the defendant engaged in conduct that injured the plaintiff's right to receive some or all of those benefits; and third, that when committing the acts by which it injured the plaintiff's right to receive benefits it reasonably expected to receive under the contract, the defendant was acting in bad faith." Share America, Inc. v. Ernst Young, Superior Court, judicial district of Waterbury at Waterbury, Docket No. X01-CV-98-0144211 (July 2, 1999) (Sheldon, J.).
Bad faith in general implies both actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights or duties, but by some interested or sinister motive. Bad faith means more than mere negligence; it involves a dishonest purpose. Habetz v. Condon, 224 Conn. 231, 237, 618 A.2d 501 (1992).
It appears that the plaintiff has pleaded sufficient facts to support a claim for breach of the covenant of good faith and fair dealing.
Plaintiff has established that it and defendant were parties to a contract under which the plaintiff reasonably expected to receive certain benefits by alleging that it was owed a judgment by the insureds which was supposed to be paid by the defendant. The plaintiff established further privity between itself and the defendant under the subrogation rights conferred upon the plaintiff by Conn. Gen. Stat. § 38a-321.
Further, plaintiff has alleged that the defendant engaged in conduct which injured the plaintiff's right to receive certain benefits, and by alleging that the defendant instigated an unnecessary appeal, refused to make payment on the judgment according to the terms of the policy, and intentionally incurred litigation costs to reduce the amount of the insurance coverage.
Finally, the plaintiff has sufficiently alleged that the defendant was acting in bad faith by alleging that in addition to the above-stated claims, that the defendant refused to engage in private mediation, despite consenting to such at a pretrial hearing, and also recounting repeated instances of the defendant's failure to make an effort to settle the claim. These allegations charge defendant with actions not prompted by an "honest mistake." Share America, Inc. v. Ernst Young, supra, Superior Court CV X01-CV-98-0144211. The alleged facts, taken together, taken in the most favorable light to the plaintiff, sufficiently support a claim for breach of implied contract of fair dealing.
II.
Count three alleges that defendant acted in bad faith when it failed to settle the claim within available policy limits, even after plaintiffs had suffered a judgment in excess of the policy limits, and plaintiff seeks punitive damages.
An insurer who acts unreasonably and in bad faith by withholding insurance benefits may be liable in tort. If the insured claims punitive damages, the tortuous conduct must be alleged in terms of wanton and malicious injury, evil motive and violence and outrageous conduct. L.F. Pace Sons, Inc. v. Travelers Indemnity Co., 9 Conn.App. 30, 48, 514 A.2d 766 (1986) citing Restatement 4 Torts § 908. Allegations that do not reach to this level of extreme conduct are still viable to obtain compensatory damages and will survive a motion to strike as long as the complaint alleges more than the fact that the defendant failed to pay the claim. See Burnside v. Nationwide Mutual Ins. Co., Superior Court, judicial district of Fairfield at Bridgeport, docket no. 343068 (September 18, 1997, Melville, J.).
Here, the plaintiff has failed to plead facts sufficient to support a claim for insurance bad faith seeking punitive damages because the plaintiff has not alleged conduct by defendant in terms of wanton and malicious injury, evil motive, violence or outrageous conduct.
III.
In order to allege and prove a violation of the Connecticut Unfair Trade Practices Act (CUTPA) in the context of an insurance claim, the plaintiff must allege and prove the allegations necessary to satisfy a violation of the Connecticut Unfair Insurance Practices Act (CUIPA). Lees v. Middlesex Insurance Company, 229 Conn. 842, 643 A.2d 1282 (1994). "CUIPA provides that "[n]o person shall engage . . . in any trade practice which is defined in section 38a-816 as . . . an unfair method of competition or an unfair or deceptive act or practice in the business of insurance . . ." [C]onduct . . . constitutes unfair and deceptive acts and practices if it is `[c]ommitt[ed] or perform[ed] with such frequency as to indicate a general business practice . . .' Id. Under § 38a-816(6), a plaintiff "must allege and prove facts sufficient to show that the insurer was `[c]ommitting or performing [certain specified acts] with such frequency as to indicate a general business practice . . .' General Statutes § 38a-816(6)." Heyman Associates No. 1 v. Insurance Co. of Pennsylvania, 231 Conn. 756, 796, 653 A.2d 122 (1995).
Although the term "general business practice" is not defined in CUIPA, our Supreme Court has expressly held that an insurer's "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 § 38a-816(6)." Lees v. Middlesex Ins. Co., 229 Conn. 842, 849, 643 A.2d 1282 (1994). In Lees, the court rejected the plaintiff's contention that "proof of an insurer's commission of two or more unfair claim settlement practices in relation to only one insurance claim is sufficient to satisfy the `general business practice' requirement of § 38a-816(6)." Id., 848. Because such allegations cannot support a cause of action under CUIPA, they are also not sufficient to support a cause of action under CUTPA. Id., 850-51." D'Amico v. Great American Ins. Co., Superior Court, judicial district of New Haven at Meriden, Docket No. CV99-0267542 (May 19, 2000) (Robinson, J.).
Moreover, this court has previously associated itself with the majority of Superior Court decisions which severely limit private causes of action under CUIPA. Argueta v. Nationwide Ins. Co., judicial district of Hartford, No. CV 02-0820009 (Feb. 20, 2004, Wagner, J.), and cases cited.
Defendant's motion to strike counts three and four and the corresponding prayers for relief are granted. Motion to strike count one is denied.
BY THE COURT
WAGNER, JTR