Opinion
No. NNH CV11 6017083 S
October 21, 2011
MEMORANDUM OF DECISION
On January 11, 2011, the plaintiff, Sherif Afifi, filed a four-count complaint, alleging breach of contract, bad faith, negligence and violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes 42-110a et seq., respectively, against the defendant, Standard Fire Insurance Company. The plaintiff alleges the following facts in his complaint: the plaintiff owned a house at 59 Ledgewood Drive, North Branford ("North Branford property"), which was insured by the defendant. The plaintiff also owned a property located in Wilmette, Illinois. On or about December 24, 2009, the plaintiff's North Branford property "suffered a loss by way of water." Prior to that date, the plaintiff informed the defendant that the North Branford property would be rented by tenants. The plaintiff was told that the only change in the policy "might be a change in the insurance premium." The defendant continued to accept premium payments from the plaintiff after notification that the North Branford property would be rented. Despite demand, the defendant has not paid the plaintiff for the loss.
On March 3, 2011, the defendant filed a motion to strike counts two, three and four of the plaintiff's complaint and a memorandum of law in support of the motion. The defendant asserts in its motion that count two of the complaint fails to allege conduct that was undertaken with the mindset required for a bad faith claim, count three impermissibly converts "contract liability into tort liability" by "invoking negligence language" and count four does not adequately allege facts showing a general business practice. On April 13, 2011, the plaintiff filed an objection to the motion to strike and a memorandum of law in support of the objection.
"[A] party may challenge the legal sufficiency of an adverse party's claim by filing a motion to strike." Vertex, Inc. v. Waterbury, 278 Conn. 557, 564, 898 A.2d 178 (2006). "[G]rounds other than those specified should not be considered by the trial court in passing upon a motion to strike . . ." (Internal quotation marks omitted.) Gazo v. Stamford, 255 Conn. 245, 259, 765 A.2d 505 (2001). This court takes "the facts to be those alleged in the complaint . . . and . . . construe[s] the complaint in the manner most favorable to sustaining its legal sufficiency . . . Thus, [i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied . . . Moreover [the court notes] that [w]hat is necessarily implied [in an allegation] need not be expressly alleged . . . It is fundamental that in determining the sufficiency of 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 . . . Indeed, pleadings must be construed broadly and realistically, rather than narrowly and technically." (Internal quotation marks omitted.) Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 252-53, 990 A.2d 206 (2010). "A motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).
In its memorandum of law in support of the motion to strike, the defendant argues that count two of the complaint is legally insufficient because the plaintiff has not alleged the mental state required for pleading bad faith. Specifically, the defendant contends that the plaintiff must allege a sinister or evil motive. The defendant argues that paragraphs 7(a) and (b) lack any allegations that the conduct was done with a sinister or evil motive and paragraphs 7(c) and (d) are conclusory. The plaintiff counters that there is a split of authority regarding the requirements for alleging bad faith; some courts follow the strict pleading standard referred to by the defendant, while other courts adhere to a less stringent alternative. The plaintiff argues count two is sufficient under both standards as paragraph seven alleges a dishonest purpose and the count as a whole amounts to more than a mere denial of the claim.
"[T]he implied covenant of good faith and fair dealing has been applied . . . in a variety of contractual relationships, including . . . insurance contracts . . . The concept of good faith and fair dealing is [e]ssentially . . . a rule of construction designed to fulfill the reasonable expectations of the contracting parties as they presumably intended." (Citations omitted; internal quotation marks omitted.) Verrastro v. Middlesex Ins. Co., 207 Conn. 179, 190, 540 A.2d 693 (1988). "[B]ad faith is defined as the opposite of good faith, generally implying a design to mislead or to 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 . . ." (Internal quotation marks omitted.) Buckman v. People Express, Inc., 205 Conn. 166, 171, 530 A.2d 596 (1987). Nevertheless, "[n]eglect or refusal to fulfill a contractual obligation can be bad faith only if prompted by an interested or sinister motive." Feinberg v. Berglewicz, 32 Conn.App. 857, 862, 632 A.2d 709 (1993).
"[T]here is a split of authority among Superior Courts as to what factual allegations are sufficient to constitute the element of bad faith . . . The first line of cases requires specific allegations establishing a dishonest purpose or malice . . . In alleging a breach of the covenant of good faith and fair dealing, courts have stressed that such a claim must be alleged in terms of wanton and malicious injury [and] evil motive." (Citations omitted; internal quotation marks omitted.) Chapman v. Georgine Realty, Superior Court, judicial district of New Haven, Docket No. CV 05 5001346 (August 29, 2008, Bellis, J.). "The second line of cases holds the plaintiff to a less stringent standard . . . [T]he [plaintiff] need only allege sufficient facts or allegations from which it may reasonably be inferred that the defendant breached the implied covenant of good faith and fair dealing." (Internal quotation marks omitted.) Algiere v. Utica National Ins. Co., Superior Court, judicial district of New London, Docket No. CV 04 0569670 (February 7, 2005, Jones, J.).
In Quality Restoration Roofing, Inc. v. United States Liability Ins. Group, Superior Court, complex litigation docket at Waterbury, Docket No. CV 02 0175383 (June 15, 2004, Sheedy, J.), the court applied the heightened standard, noting that "[m]ere conclusory allegations as to the legal status of the insurer's acts, without specific allegation of conduct which demonstrates a dishonest purpose, malice or bad faith do not state a claim for bad faith." After reviewing the allegations, the court denied the motion to strike the bad faith claim, finding "there is a specific allegation as indicia of malice or dishonest purpose. [The] [p]laintiff has alleged . . . that [the defendant] did not promptly adjust, investigate, indemnify, negotiate or settle claims for the sole reason of avoiding payment of a claim that defendant knew it had an obligation to pay." Id.
Count two alleges in paragraphs 7(a) through (e) that the defendant investigated the plaintiff's loss "in an effort to support delay and denial," failed to interview witnesses and collect documentation, misled the plaintiff into believing his claim was being paid, intentionally failed to disclose material information, and ignored the plaintiff with the intention of prejudicing the present action. These allegations, when read together, broadly, realistically and in favor of the plaintiff, are sufficient to state a cause of action for bad faith. The plaintiff has alleged that the defendant ignored facts showing no legitimate basis for denial, failed to interview witnesses and failed to disclose information to the plaintiff after repeated requests. In addition, the plaintiff has alleged that the defendant did so intentionally and for the purpose of prejudicing the defendant as well as delaying and denying the claim. These allegations are similar to those made in Quality Restoration Roofing, Inc., which were found sufficient under the heightened pleading standard. Therefore the motion to strike count two is denied.
Next, the defendant argues that count three of the complaint is legally insufficient because it attempts to convert contract liability into tort liability. The plaintiff asserts there is no law preventing a breach of contract from becoming a negligence claim when the party acted negligently. In addition, the plaintiff argues he is allowed to plead in the alternative pursuant to Practice Book § 10-25. In response, the defendant, in its reply, argues that the plaintiff has failed to allege that the defendant owed a duty of care to the plaintiff and has failed to specify any damages resulting from the alleged negligent activity separate from the damages available for breach of contract.
"Unless a particular conflict between the rules of contract and tort requires otherwise, a plaintiff may choose to proceed in contract, tort, or both." Stowe v. Smith, 184 Conn. 194, 199, 441 A.2d 81 (1981). "[N]egligence may be the outgrowth of precedent contractual relationship . . . Where there is a precedent relationship, all that is necessary to furnish a basis for an action of negligence is that there be present the elements necessary to establish such a cause of action, and if that is so, that that relationship is one of contract is no sound reason why the action should not lie." Dean v. Hershowitz, 119 Conn. 398, 408, 177 A 262 (1935). However, "a mere breach of the contract [does] not afford a basis for a recovery in tort [unless] the necessary elements to establish negligence [have been] shown . . ." Dean v. Hershowitz, supra, 409. "The essential elements of a cause of action in negligence are well established: duty; breach of that duty; causation; and actual injury." (Internal quotation marks omitted.) Considine v. Waterbury, 279 Conn. 830, 858, 905 A.2d 70 (2006).
"A duty to use care may arise from a contract, from a statute, or from circumstances under which a reasonable person, knowing what he knew or should have known, would anticipate that harm of the general nature of that suffered was likely to result from his act or failure to act." (Internal quotation marks omitted.) Sturm v. Harb Development, LLC, 298 Conn. 124, 139-40, 2 A.3d 859 (2010). "There is no question that a duty of care may arise out of a contract . . ." (Internal quotation marks omitted.) Id., 140. However, "[a]n action in contract is for the breach of a duty arising out of a contract; an action in tort is for a breach of duty imposed by law." (Citation omitted; internal quotation marks omitted.) Gazo v. Stamford, supra, 255 Conn. 262. "[A] contract may create a state of things which furnishes the occasion of a tort so that negligent performance of a contract may give rise to an action in tort, if the duty exists independently of the performance of the contract. The contract then creates the relation out of which rose the duty to use care and the performance of a responsibility prescribed by the contract." (Internal quotation marks omitted.) Marx v. McLaughlin, Superior Court, judicial district of New London, Docket No. CV 00 0556383 (July 3, 2001, Corradino, J.).
In Gonzalez v. Allstate Ins. Co., Superior Court, judicial district of Fairfield, Docket No. CV 06 5004078 (February 1, 2007, Radcliffe, J.), the plaintiff alleged that the defendant was negligent in handling its claim and in hiring incompetent agents. The court noted that "the relationship between an insured and the insurance carrier is contractual in nature . . ." The court then struck the negligence counts, finding that "in the absence of a duty of care owed to its insured, independent of its duties and obligations under the contract of insurance, the plaintiff cannot prevail on these counts." Id. However, in Baroni v. Western Reserve Life Assurance Co., Superior Court, judicial district of Middlesex, Docket No. CV 99 0087965 (September 29, 1999, Gordon, J.), the plaintiff alleged that the defendant, an "offeror" of insurance, was negligent in the handling of the insurance policy. The court denied the motion to strike, noting that "once there exists an express or implied contract that contract may give rise to a duty to handle the policy with reasonable care." Id.
In the present case, the plaintiff may plead both negligence and breach of contract, even though both claims arise out of the same facts, so long as the elements of each claim are sufficiently alleged. Read in favor of the plaintiff, the complaint alleges that the defendant negligently handled the insurance policy by negligently reviewing the policy, misinforming the plaintiff as to his coverage, and continuing to take payments after being notified of the plaintiff's change in residency. The plaintiff further asserts that, as a result of the defendant's negligent review of his policy, the plaintiff has been harmed. As a duty to use care may arise out of a contract, the allegations in count three are sufficient to allege that the defendant had a duty to handle the policy with reasonable care and its negligent review of the policy has caused the plaintiff harm. These allegations are therefore sufficient to withstand a motion to strike.
As to count four of the complaint, the defendant argues that the allegations are legally insufficient because the plaintiff has failed to allege facts to show a general business practice of insurance misconduct. The defendant further argues that the cases cited to by the plaintiff in his complaint as examples of other instances of misconduct are insufficient because only one of the listed lawsuits was filed against the defendant and the listed cases are not based upon similar factual circumstances. The plaintiff counters that as long as the plaintiff alleges that the misconduct involved other insureds, he is not required to include additional information in the complaint. The plaintiff further argues that, even under the heightened standard, which requires specific instances be pleaded, the list of cases in the complaint, wherein insureds have allegedly been the subject of unfair insurance practices committed by the defendant, is sufficient for the purpose of satisfying the pleading requirements of CUTPA.
"[A] CUTPA claim based on an alleged unfair claim settlement practice . . . require[s] proof, as under CUIPA, that the unfair settlement practice ha[s] 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., 229 Conn. 842, 850, 643 A.2d 1282 (1994). "[C]laims of unfair settlement practices under CUIPA require a showing of more than a single act of insurance misconduct." Mead v. Burns, 199 Conn. 651, 659, 509 A.2d 11 (1986). "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 . . . [I]mproper 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." (Citation omitted; internal quotation marks omitted.) Lees v. Middlesex Ins. Co., supra, 229 Conn. 849.
In Mead, the plaintiff, in his amended complaint, "alleged that the defendant insurer had . . . refused to pay his claim against the insured but he did not allege that the insurer's conduct constituted a general practice of refusal." (Emphasis in original.) Mead v. Burns, supra, 199 Conn. 655. Similarly, in Lees, the plaintiff alleged more than one instance of unfair claim settlement practices relating to the handling of her complaint but "the plaintiff [did] not [allege] unfair settlement practices by the defendant in its handling of other insurance claim or claims . . ." Lees v. Middlesex Ins. Co., supra, 229 Conn. 848. In both cases, the allegations were found insufficient to allege a general business practice. There is no appellate authority, however, as to what is required for an allegation to sufficiently allege a general business practice, the number of instances of insurance misconduct which must be alleged and how specific those allegations must be. "A split of authority exists regarding the degree of specificity required when pleading a general business practice under CUIPA to survive a motion to strike. One line of cases . . . requires that the plaintiff plead specific facts to demonstrate acts of insurer misconduct that go beyond the plaintiff's immediate claim." Dadura v. NGM Ins. Co., Superior Court, judicial district of New Britain, Docket No. CV 10 6004690 (April 15, 2011, Swienton, J.). The other line of cases "ha[s] held, essentially, that as long as the plaintiff alleges that the insurer misconduct involves other insureds, pleading specific instances of such misconduct is not required." Id.
This court has previously denied motions to strike where the complaint alleges that conduct has occurred in the handling of other claims without reference to those specific instances. In Seeds v. AIG Life Ins. Co., Superior Court, judicial district of New Haven, Docket No. 375958 (December 6, 1996, Zoarski, J.) allegations that the defendant "violated CUIPA by `(c) not attempting in good faith to effectuate prompt, fair and equitable settlements of claims; (e) failing to act or acknowledge with reasonable promptness communications from insureds regarding the claim or claims; and (f) forcing claimants to bring suit in order to effectuate a fair settlement of their claims'" were enough to show a general business practice of insurance misconduct. In addition, in Cirrito v. Crawford Co., Superior Court, judicial district of New Haven, Docket No. CV 01 0456052 (December 23, 2002, Zoarski, J.) allegations that defendant "`has made it its general business practice to neglect, fail and/or refuse to pay for covered losses . . . under workers' compensation insurance policies thereby forcing said beneficiaries . . . to litigate'" were also sufficient to withstand a motion to strike.
Count four of the complaint incorporates the previous counts and further alleges the defendant engaged in unfair and deceptive acts and practices by "narrowly and improperly interpreting the provisions of its insurance policy," conducting biased investigations, ignoring evidence helpful to insureds, misapplying the law and misinterpreting policy provisions to the detriment of the insured, with "such frequency as to constitute a general business practice." These allegations are sufficient to survive a motion to strike. In paragraph nineteen of count four the plaintiff alleges the defendant has "unduly, narrowly and improperly" interpreted its insurance policy, conducted a "biased, prejudicial and unfair investigation," and misinterpreted and applied the policy provisions. In addition, paragraphs nineteen and twenty allege these acts have occurred to the plaintiff as well as to other insureds and policy holders of the defendant with such frequency as to constitute a general business practice. These allegations indicate that the alleged conduct has not occurred solely against the plaintiff, as was the case in both Mead and Lees. Therefore, count four sufficiently pleads a general business practice under CUTPA and the motion to strike is denied.
The defendant's motion to strike as to counts two, three and four of the plaintiff's complaint is denied.