Opinion
No. X04-CV 03-0103516S
May 21, 2004
MEMORANDUM OF DECISION RE MOTION TO STRIKE
This is one of seven cases arising out of a fatal motor vehicle accident which occurred in the early morning hours of April 16, 2000. Anthony Sulls, allegedly intoxicated, was driving a motor vehicle in which William Ridgaway, Jr. and Frank Sestito, Jr. were passengers. The automobile veered off Route 12 in Ledyard, and collided with a pole and rock outcropping. Mr. Sulls and plaintiff's decedent died from their injuries. The seriously injured passenger, Frank Sestito, passed away several years later. The estate of William Ridgaway, Jr. commenced this action, together with the decedent's surviving parents, against certain insurance agents and brokers who purported to secure basic and excess liquor liability insurance for the establishment, Silk, LLC, where Mr. Sulls, it is alleged, was served and consumed excessive amounts of alcohol on the night of the accident.
Pending before the court is a twelve-count complaint, the gravamen of which is that the plaintiffs were third-party beneficiaries to the undertakings by the brokers and agents to secure the same liquor liability insurance for Silk, LLC that had existed for the previous establishment at that location. The complaint alleges that coverage confirmations for liability insurance including liquor liability were issued by the brokers and agents, financing secured and progress payments begun. Subsequently a binder was issued by the insurance company. Nonetheless, when notice of the accident was provided, liquor liability coverage in excess of $100,000 was declined.
The first four counts of the complaint assert claims by the estate. Count one alleges a breach of contract and the duties of good faith and fair dealing. Count two alleges common-law bad faith and breach of the duties of good faith and fair dealing. Count three claims CUTPA violations arising from unfair settlement and unfair trade practices. Count four claims damages for civil conspiracy. Each of the counts contains the allegation that the plaintiff estate is a third-party beneficiary of the insurance contracts and the defendants are liable to it for all said losses. The next four counts allege the same causes of action by the decedent's surviving father and the last four by his surviving mother. All counts of the complaint contain assertions of third-party beneficiary status and claim that the agents' and brokers' failure to secure such coverage including umbrella coverage in the amount of six million dollars, denies the plaintiffs a fair and just recovery.
Connecticut Unfair Trade Practices Act, CGS § 42-110b et seq.
The defendants Cowles Connell, and separately, the defendants Louis Levine Agency, Inc and Webster Insurance, Inc., move to strike the entire complaint, alleging that the plaintiff's decedent and his surviving parents are not third-party beneficiaries to the undertaking to procure the insurance coverage asserted. In addition, they argue that his surviving parents, because they do not have the right of direct action against Silk, LLC, have no right of action against the insurance brokers and agents. Plaintiffs deny these arguments and counter that the allegations for the underlying causes of action are sufficient.
Because the plaintiffs' entitlement to advance their various causes of action depends upon their alleged status as third-party beneficiaries, the court will first examine those claims before turning to the other concerns raised in these motions. For the reasons set forth in detail below, the court concludes that the Estate of William Ridgaway, Jr. and his surviving parents are not intended beneficiaries to the defendants' undertakings to procure liability insurance. All of the causes of action asserted in the complaint are predicated upon third-party beneficiary status. Because any alleged responsibilities of the defendants cannot extend to those who were neither parties to contracts with them nor third-party beneficiaries to those contracts, the motions to strike all counts are granted.
II DISCUSSION A. Legal Standard
"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.) Peter-Michael, Inc. v. Sea Shell Associates, 244 Conn. 269, 270, 709 A.2d 558 (1998). In ruling on a motion to strike, the trial court examines the complaint construed in favor of the plaintiffs, 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, 698 A.2d 859 (1997). When deciding the motion, "The court is limited to the facts alleged in the complaint." (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 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 . . ." (Citation omitted; internal quotation marks omitted.) Lombard v. Edward J. Peters, Jr., P.C., 252 Conn. 623, 626, 749 A.2d 630 (2000).
B. Third-party Beneficiary Status
While it is correct to state, as plaintiffs do, that "[a] third-party beneficiary may enforce a contractual obligation without being in privity with the actual parties to the contract . . . Therefore, a third-party beneficiary who is not a named obligee in a given contract may sue the obligor for breach." Gateway Co. v. DiNoia, 232 Conn. 223, 230-31 (1995), such a statement does not adequately describe the particular concerns in this and other third-party beneficiary cases. For the issue is, when third-party beneficiary status is challenged, whether a claimed beneficiary is the intended beneficiary of any contract. And in that analysis, our Supreme Court has stated that:
[T]he ultimate test to be applied [in determining whether a person has a right of action as a third-party beneficiary] is whether the [mutual] intent of the parties to the contract was that the promissor should assume a direct obligation to the third party [beneficiary] and that intent is to be determined from the terms of the contract read in the light of the circumstances attending its making . . . (Emphasis added.) Pelletier v. Sordoni/Skanska Construction Co., 264 Conn. 509, 531, 825 A.2d 72 (2003).
In Pelletier, an employee of a subcontractor sued the general contractor under negligence and contract. The subcontractor's employee claimed he was a third-party beneficiary to the construction contract between the owner and the general contractor concerning safety inspections. The court upheld summary judgment, concluding that the employee was not an intended beneficiary of this contract, even though such an employee was a foreseeable beneficiary of any safety measures. The court stated "foreseeablity alone is insufficient to create third-party beneficiary rights." Id., at page 532. The court's holding and earlier cases require that the two contracting parties intend to undertake a direct obligation to the third party before third-party beneficiary status can be achieved. See Gazo v. City of Stamford, 255 Conn. 245, 765 A.2d 505 (2001).
While there is no appellate guidance on third-party beneficiary status as it impacts insurance contracts and the claims of injured parties, there are unreported Superior Court cases which carefully analyze these issues. They conclude that an injured party is not, without more, a third-party beneficiary of the insurance contract between the tortfeasor and the insurance company. In Chapell v. LaRosa, 2001 CT. Sup. 370, 28 Conn. L. Rptr. 683, Superior Court, judicial district of New London at New London, Docket No. CV99-0552801 (Jan. 5, 2001, Corradino, J.), the court concluded that any injured party, while a foreseeable beneficiary to the applicable liability insurance policy between an insurance company and the insured party, does not become an intended beneficiary until such time as the claims asserted are adjudicated in the injured party's favor and the insured party's indemnification right under the insurance contract is determined. This court concurs with the policy analysis set forth by the court in Chapell concerning why such a conclusion is required by the law, as otherwise a conflict would exist between the insurer's duties to its insured and its potential liability to an injured party.
See for example, Weinberg v. Isom, 1995 Ct. Sup. 14421, judicial district of Stamford/Norwalk at Stamford, No. CV 0140152 (December 26, 1995, Lewis, J.); Webster v. USFG, 1995 Ct. Sup. 2600, judicial district of Tolland at Rockville, No. CV 92 51784 S (March 21, 1995, Rittenband, J.); Povroznik v. Rivercliff Fuel, Inc., 2001 Ct. Sup. 14751, 30 Conn. L. Rptr. 661, judicial district of Ansonia/Milford at Milford, No. CV 01073764 (October 22, 2001, Moran, J.).
The court's exhaustive analysis and review of the case law in Connecticut and other state courts around the country on this subject is instructive and helpful.
In the case before the court, the facts asserted relate to the failure of the brokers and agents to secure certain coverage. There is no claim directed against the insurance companies issuing the policies. Thus, this case presents facts already several steps further removed from the contract of insurance between the company and the insured party than the cases above cited. Undertakings to procure insurance are even more tangential to the rights of parties who might seek future benefits from these contracts of insurance than claims directly against an insurance company. The court appreciates that the purpose of such insurance is to protect the owners and operators of establishments serving liquor to the public from claims by injured parties and that injured parties, such as William Ridgaway, Jr., are foreseeable beneficiaries of such policies. Nonetheless, without more than what is alleged in the complaint, the plaintiffs cannot be intended third-party beneficiaries of the brokers' and agents' efforts to procure such insurance when they would not have been third-party beneficiaries to the contract of insurance itself. The court concludes that the Estate of William Ridgaway, Jr. and his surviving parents are not intended third-party beneficiaries of the undertakings of the defendants to procure liquor insurance for Silk, LLC.
While the plaintiffs in their brief cite many cases in support of their claim of third-party beneficiary status, they rely in particular on a certain unreported case which, upon review, the court concludes is inapposite. In Cirrito v. Crawford, 2002 Ct. Sup. 16445, judicial district of New Haven at New Haven, No. CV01 0456052S (December 23, 2002, Zoarski, J.T.R.), for example, the issue concerned workers' compensation claims and an injured worker's suit about the improper handling of his claims. The worker also alleged that he was an intended third-party beneficiary to the insurance contract. And in contradistinction to the case before the court, the Cirrito plaintiff alleged that the insurer had accepted the claim and agreed to provide benefits. Under the Cirrito circumstances, the insurer would have an obligation to indemnify the employer and pay the claim. In addition, workers' compensation is a creature of statute, which provides a legislatively imposed framework for the payment of injuries occurring in the workplace. It is in derogation of the common law and removes from the worker any independent right to establish his claim. Such statutory rights do therefore, of necessity, result in creating a different status for the injured party and his relationship to the insurer than would those of parties dealing with private insurance, not to mention those tasked with the obligation of procuring such insurance. No facts have been alleged in the present complaint, which would make the reasoning of Cirrito applicable.
C. Claims of Breach of Duty of Good Faith and Fair Dealing
While there is not yet any appellate guidance on whether or not a third party may allege breach of an implied covenant of good faith and fair dealing against another's insurer, other superior courts have held that third parties are not permitted to bring such a cause of action. See for example Weinberg v. Isom, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. 140152 (December 26, 1995, Lewis, J.). In order to allege such a claim, our courts have held that:
the implied duty of good faith and fair dealing is a covenant implied into a contract or a contractual relationship . . . 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.
(Citations omitted; internal quotation marks omitted.) Hoskins v. Titan Value Equities Group, Inc., 252 Conn. 789, 793, 749 A.2d 1144 (2000).
Because the claims asserted in counts one, five, and nine respectively, do not rest on a direct contract relationship and because the court concludes a third-party beneficiary relationship has not been alleged, these counts do not state claims upon which relief may be granted. They are hereby stricken.
D. Common-law Bad Faith and Breach of Duties of Good Faith and Fair Dealing
In Counts two, six and ten, plaintiffs allege that the actions of brokers and agents constitute common-law bad faith. As noted by plaintiffs, "bad faith implies . . . fraud or a design to mislead or deceive another . . . or a refusal to fulfill some duty," citing Picerno v. Alexis, 1998 Ct. Sup. 1991, judicial district of Hartford at New Britain, No. CV 94-0535383 (February 17, 1998, Wagner, J.). Bad faith involves some dishonest purpose. Habetz v. Condon, 224 Conn. 231, 237, 618 A.2d 501 (1992). These counts assert that the defendants acted in bad faith with negligence and disregard for the interests of its insureds and the plaintiffs, thereby denying the plaintiffs as third-party beneficiaries and assignees of the policies a fair and just recovery.
While a duty may run under the common-law tort of bad faith to the insureds, it cannot run to those who cannot bring themselves within the rubric of claiming third-party beneficiary status, pursuant to these allegations. The cases cited at length by plaintiffs are inapposite and do not assist them in demonstrating that their allegations show third-party beneficiary status or that bad faith, in the absence of direct contract between the injured party and the insurance carrier, can be pled under these facts. Carpentino v. Transport Ins. Co, 609 F. Sup. 556 (D.Conn. 1985), for example, concerned itself with a claim of bad faith termination of worker's compensation benefits. In Grand Sheet Metal Products Co. v. Protection Mutual Insurance Co., 34 Conn. Sup. 46, 51, 375 A.2d 428 (1977), the plaintiff brought a bad faith action against its own insurance agent and the insurance company. There was no third-party claim under consideration. The court found that:
Where an insurer fails to deal fairly and in good faith with its insured by refusing without proper cause to compensate its insured for a loss covered by the policy such conduct may give rise to a cause of action in tort for breach of an implied covenant of good faith and fair dealing. The duty violated arises not from the terms of the insurance contract but is a duty imposed by law, the violation of which is a tort.
In Picerno v. Alexis, 1998 Ct. Sup. 1991, judicial district of Hartford at New Britain, No. CV 94-0535383 (February 17, 1998, Wagner, J.), the court was concerned with delays in promised workers' compensation disability payments. For these cases to be of assistance to the plaintiffs, the allegations of the complaint should contain some statement of a direct relationship or direct contact between the defendant insurance agents and brokers and the plaintiffs. But no such allegations have been set forth. In fact, plaintiffs' claim for damages of each bad faith count is premised on the assertion that "the plaintiff is a third-party beneficiary of the aforesaid liability insurance contracts and as a result (emphasis added) the defendants are liable to it/him/her for all said losses." Since the facts alleged do not support the causes of action, the court strikes these counts.
The other cases cited by plaintiffs exhibit the same logical infirmities when compared to the allegations in this case. In Rivera v. Pereira, 2002 Ct. Sup. 1297, 31 Conn. L. Rptr. 406, judicial district of Fairfield at Fairfield, No. CV 01 0382813S (Jan. 25, 2002, Sheedy, J.), for example, the plaintiff was injured in a motor vehicle accident and had direct phone contact with the defendant's insurance carrier whom she informed that she had legal representation.
B. CUTPA/CUIPA Violations
The allegations in counts three, seven and eleven concern unfair insurance settlement practices under CUIPA, the Connecticut Unfair Insurance Practices Act, CGS § 38a-815 et seq., as supporting a claim under CUTPA, Connecticut Unfair Trade Practices Act CGS § 42-110b et seq. The basic factual allegations are incorporated into these counts, which then allege that such conduct is a violation of CUIPA. A conclusory paragraph is added that these actions were general business practices of the defendants and were unfair trade practices.
It is well established that isolated instances of insurer misconduct are exempt from coverage under CUIPA. In Mead v. Burns, 199 Conn. 651, 663, 509 A.2d 11 (1986), the court noted, without so holding, that a violation of CUIPA may be actionable as an unfair trade practice under the Connecticut Unfair Trade Practices Act (CUTPA). See also Lees v. Middlesex Ins. Co., 229 Conn. 842, 850-51, 643 A.2d 1282 (1994) (holding that a plaintiff may bring a private cause of action under CUTPA for a violation of CUIPA). Proof is required that the insurer has engaged in unfair claim settlement practices with such frequency as to indicate a general business practice. Mead v. Burns, supra, 199 Conn. 672. It bears repeating that the plaintiff must allege facts and not legal conclusions tending to show that the insurer engaged in a pattern of misconduct in order to qualify for coverage under CUIPA, not the case in the allegations under consideration by the court.
Our appellate courts have not addressed whether CUTPA remedies based on CUIPA violations may be sought by injured third parties who are not the insured. And the majority of superior court decisions hold that a CUTPA claim for unfair claims settlement practices by an insurance company may not be brought by a third party. Nonetheless, in support of their argument, plaintiffs advance this claim and rely on cases, which the court concludes are inapposite. In Rivera v. Pereira, 2002 Ct. Sup. 1297, 31 Conn. L. Rptr. 406, judicial district of Fairfield at Fairfield, No. CV 01 0382813S (Jan. 25, 2002, Sheedy, J.), the complaint alleged that the insurer carrier spoke to the plaintiff directly, even though they knew she was represented by counsel. Such direct and improper conduct could state a cause of action. Absent such allegations, a claim does not lie. The same analysis applies to the case of Preston v. Chartkoff, 2001 Ct. Sup. 8895, judicial district of Ansonia/Milford at Milford, No. CV 00 0071112 S (Jul. 5, 2001, Nadeau, J.). In Preston, the complaint alleged contact between the agent and the third party, including promises of the issuance of a performance bond made directly by the agent to the third party. All the cases on which the plaintiffs rely contain allegations of some direct contact by the defendant insurers or insurance agents with the plaintiffs. It is on the basis of such defendants' direct and offending conduct that courts in those cases permitted either standing, see Waldo v. Attfield, 1997 Ct. Sup. 7684, judicial district of Hartford, No. CV 97-0567813 (July 14, 1997, Sullivan, J.), or denied motions to strike. These cases, therefore, form the exception to the general rule that third parties, without more, cannot sue such insurers or agents directly.
DeVillegas v. Quality Roofing, Inc., Superior Court, judicial district of Fairfield at Bridgeport, Docket No. 294190 (December 1, 1993, Freedman, J.) ( 10 Conn. L. Rptr. 487); see also Chapell v. LaRosa, Superior Court, judicial district of New London at New London, Docket No. 552801 (January 5, 2001, Corradino, J.) ( 28 Conn. L. Rptr. 683); Calnan v. Allstate Indemnity Co., Superior Court, judicial district of New Haven at Meriden, Docket No. 264160 (December 3, 1998, Dorsey, J.T.R.) ( 23 Conn. L. Rptr. 476); Lyman v. Liberty Mutual Insurance, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. 344481 (December 8, 1997, Ford, J.).
Turning to the counts under consideration, the court concludes there are no allegations contained in them that bring the plaintiffs within any of the exceptions discussed above. For the foregoing reasons, the motions to strike counts three, seven and eleven are granted.
F. Civil Conspiracy
In counts four, eight and twelve, plaintiffs allege a civil conspiracy. Four elements must be alleged in order to survive a motion to strike a civil conspiracy count: "(1) a combination between two or more persons. (2) to do a criminal or an unlawful act or a lawful act by criminal or unlawful means, (3) an act done by one or more of the conspirators pursuant to the scheme and in furtherance of the object, (4) which act results in damage to the plaintiff. (Internal quotation marks omitted.)" Macomber v. Travelers Property Casualty Corp., 261 Conn. 620, 647, 804 A.2d 180 (2002); see also Marshak v. Marshak, 226 Conn. 652, 665, 628 A.2d 964 (1993), overruled on other grounds, State v. Vakilzaden, 251 Conn. 656, 666, 742 A.2d 767 (1999). The allegations of the complaint are that Mount Vernon Fire Insurance and First Specialty Insurance Corporation conspired with the defendants to deny that six million dollars of insurance coverage was in place. It alleges specific acts done in furtherance of the conspiracy and alleges damages to the plaintiffs.
Taking the allegations of the complaint to be true for purposes of this examination, to deny the existence of insurance coverage if it existed would be a legal wrong. The problem comes with the 4th element, that the plaintiffs have sustained damages from such conduct. This presupposes that the plaintiffs have established their claims against the alleged tortfeasor, Silk, LLC, and are entitled to damages; i.e. they are intended beneficiaries of the contracts to procure insurance. The court has already concluded that the complaint does not support plaintiffs as third-party beneficiaries, under the allegations pleaded. While they remain potential claimants, until such time as their rights to recovery have been established, they cannot legally be said to have been damaged by the alleged unlawful conduct.
As was noted in Litchfield Asset Management Corp. v. Howell, 70 Conn. App. 133, 140, 799 A.2d 298 (2002):
Under Connecticut law, technically speaking, there is no such thing as a civil action for conspiracy. The action is for damages caused by acts committed pursuant to a formed conspiracy rather than by the conspiracy itself . . . A claim of civil conspiracy, therefore, is insufficient unless based on some underlying cause of action . . . Consequently, for a plaintiff to recover on a conspiracy claim, the court must find the facts necessary to satisfy the elements of an independent underlying cause of action. More specifically, where the plaintiff is unable to establish the underlying cause of action for fraud, the cause of action for conspiracy to defraud must also fail. (Internal quotation marks and citations omitted).
The court concludes that the plaintiffs' allegations do not adequately set forth any of the underlying causes of action and therefore cannot state a cause of action of civil conspiracy. Counts four, eight and twelve are also dismissed.
G. Additional Issues
During oral argument, the defendants Levine Insurance and Webster Insurance, Inc. questioned the court's subject matter jurisdiction, citing as support for their claim the unreported case of Tri-State Contracting, LLC v. Ferguson McGuire, Inc., 2003 Ct. Sup. 10660, 35 Conn. L. Rptr. 453, judicial district of Tolland, No. X0 7CV03 0080812S (Sept. 10, 2003, Sferrazza, J.). Subsequently, all defendants filed motions to dismiss on the grounds of ripeness. Those motions and their claims are addressed separately.
See the decision on the motions to dismiss, dated May 21, 2004.
Where plaintiffs do not allege facts which support third-party beneficiary status, such a failure could conceptually be viewed from a jurisdictional standpoint and, as noted in Waldo v. Attfield, be viewed as a matter of standing. In Board of Pardons v. Freedom of Information Commission, 210 Conn. 646, 649 (1989), the court held that standing ". . . is a practical concept designed to ensure that courts and parties are not vexed by suits brought to vindicate nonjusticiable interests and that judicial decisions which may affect the rights of others are forged in hot controversy, with each view fairly and vigorously represented." Nonetheless, the jurisdictional infirmities in the present case do not become apparent until the plaintiffs' third-party beneficiary claims fail after analysis. The jurisdictional argument, therefore, is circular and logically infirm. It must fail since the cornerstone finding that the plaintiffs are not third-party beneficiaries must initially be made before the jurisdictional infirmities come into focus.
The final claim is that the surviving parents of William F. Ridgaway, Jr. do not have standing. As the court has dismissed the entire complaint, including those setting forth the claims of these plaintiffs, the court will not address this issue further.
II CONCLUSION
For all of the reasons set forth in detail above, the court strikes all counts of the plaintiffs' complaint.
BY THE COURT
BARBARA M. QUINN, Judge