Opinion
No. CV01 501 71 61S
February 9, 2010
MEMORANDUM OF DECISION
The defendant moves to strike the first, third and fourth counts, brought in breach of contract, violation of the Connecticut Unfair Trade Practices Act (CUTPA) and breach of the implied covenant of good faith and fair dealing, of the amended and revised complaint filed by the plaintiffs, Savoy Linen Services, Inc. and Vazzano Realty Company, Inc. The basis of the defendant's motion is its contention that the action is one for professional malpractice based on the failure of the defendant to render proper insurance services to the plaintiffs. The defendant claims that the breach of contract count is legally insufficient because there is no allegation that the defendant promised to the plaintiffs that it would secure a specific result in rendering their services. The defendant claims the CUTPA count fails for various reasons, including that professional negligence does not fall within the purview of the Act; and that the breach of the implied covenant of good faith and fair dealing fails because the plaintiffs have failed to allege that the defendants acted in bad faith. For the reasons hereinafter discussed, the defendant's motion to strike is granted on all three counts.
The genesis of this action is an alleged fire loss to property owned by the plaintiff, Vazzano Realty, and located at 895 Woodend Road, Stratford, Connecticut. The plaintiffs allege that they entered into a relationship with the defendant, the successor by merger to Webster Insurance, whereby the defendant was to obtain for the plaintiff insurance that would provide appropriate coverage to compensate the plaintiffs in the event of a loss. The plaintiffs claim that the insured property sustained a fire loss on July 24, 2007 for which the defendant failed to procure the appropriate insurance. More particularly, the plaintiffs assert that the defendant produced an insurance policy naming Savoy Linen as the sole insured for the equipment, building and real property (property) located at 895 Woodend Road, Stratford, Connecticut with the knowledge that Vazzano Realty, in fact, was the owner of the property.
In the first count of their complaint, the plaintiffs allege that they entered into an agreement with the defendant "whereby [the defendant] agreed to procure appropriate insurance" for the plaintiffs in consideration of the plaintiffs' premium payments. The plaintiffs assert that the defendant issued a policy that named Savoy Linen as the sole insured of the Stratford property despite knowing that Vazzano Realty was the true owner. The plaintiffs claim that although they performed under the agreement by paying the defendant for its services, the defendant breached the agreement because it failed to "procure an insurance policy for [the] plaintiffs . . . under which they would receive appropriate amounts to compensate them in the event of a fire loss." Specifically, the plaintiffs allege that the defendant breached the agreement in the following ways: (1) in that it failed to conduct an inspection of the property; (2) in that it failed to discuss with the plaintiffs the insurance that it was procuring for them; (3) it failed to give to the plaintiffs a copy of the policy; (4) in that it failed to provide sufficient coverage and limits of insurance such that the full loss to the plaintiffs less deductibles would be insured; and (5) it failed to act as a reasonable insurance agent would have acted under the circumstances prevailing. The plaintiff realleges in each of the remaining counts the material fact that the plaintiffs and the defendant entered into an agreement providing that the defendant would obtain a policy of insurance in exchange for premium payments by the plaintiffs. In the second count, brought in negligence, the plaintiffs additionally allege that the purported agreement gives rise to a duty of care owed by the defendant to the plaintiffs, which duty the plaintiffs assert the defendant breached in the exact same ways that it is alleged to have breached the agreement. The plaintiffs claim in the third count that the defendant violated CUTPA because it "misrepresented to the plaintiffs . . . that the insurance policy that [the defendant] placed for the plaintiffs . . . adequately protected the plaintiffs . . . to appropriately compensate it in the event of a fire loss so that [the defendant] could receive a fee from [the] plaintiffs . . . in violation of Connecticut General Statutes § 38a-816." In the fourth count, the plaintiffs essentially reallege this allegation by asserting that the defendant breached the implied covenant of good faith and fair dealing in that it "misrepresented" to the plaintiff that it procured adequate appropriate fire insurance coverage "so that [the defendant] could receive a fee from [the] plaintiff."
The defendant moves to strike the first, third and fourth counts claiming that they are legally insufficient for the reasons that (1) the plaintiffs failed to allege in the breach of contract count that the defendant promised a specific result, which is required where the plaintiffs' claim against the defendant is one for professional negligence in failing to secure appropriate insurance; (2) the CUTPA count is based on professional negligence by the defendant, and is not a claim concerning the commercial or entrepreneurial aspects of the business of insurance; (3) the plaintiffs have failed in the CUTPA count to allege with sufficient particularity "how or in what manner the actions of [the defendant] in this case rose to the level of corrupt, immoral or unscrupulous behavior;" (4) the plaintiffs have failed to plead in the CUTPA count that the practices of the defendant are unfair within the meaning of the "cigarette rule;" (5) the plaintiffs have failed to claim that the defendant's acts and omissions violate the Connecticut Unfair Insurance Practices Act (CUTPA), § 38a-815 et seq., which is necessary to state a legally sufficient CUTPA violation; and (6) the plaintiffs have failed to allege that the defendant acted in bad faith in breaching the covenant of good faith and fair dealing.
I
In the first count of their amended and revised complaint, the plaintiffs claim that the defendant breached its agreement to procure an appropriate insurance policy for the plaintiffs concerning the Stratford property. The defendant moves to strike that count contending that for a plaintiff to set forth a legally sufficient claim for breach of contract in the context of a professional negligence action the plaintiff must allege that the defendant promised a specific result. The defendant alleges that the plaintiffs fail to make such an allegation. The plaintiffs counter that they have alleged in the first count the elements necessary for a breach of contract claim. Also, the plaintiffs claim that the court should construe the first count as alleging that the plaintiffs "contracted with [the defendant] for specific purposes."
There are two Superior Court decisions that the court finds to be well-reasoned and persuasive on the legal sufficiency of the first count. Both cases involve claims against insurance entities alleging professional negligence in obtaining policies of insurance.
In Berlin Corp. v. Continental Casualty Co., Superior Court, judicial district of Hartford, Docket No. CV 06 4021653 (November 2, 2006, Wiese, J.) ( 42 Conn. L. Rptr. 358), the plaintiff brought a multi-count complaint against the named defendant, an insurance company, and the defendant, Smith Brothers Insurance, Inc., an insurance broker, alleging various omissions concerning the plaintiff's purchase of insurance. Id. The plaintiff, a seller of alcohol, specifically claimed that the defendants procured an insurance policy that failed to provide liquor liability coverage. Id.
The fifth count of the plaintiff's amended complaint alleged that the defendant broker agreed "that it had the ability to recommend the necessary and appropriate insurance coverage to the plaintiffs and that it breached this contract by failing to procure liquor liability insurance." Berlin Corp. v. Continental Casualty Co., supra, 42 Conn. L. Rptr. 360-61. The court granted the defendant broker's motion to strike the count, concluding that the allegations contained therein constituted a professional negligence claim and not an independent breach of contract claim. Id. The court stated as follows:
The plaintiff's complaint fails to set forth facts establishing a cause of action for breach of contract. A fair reading of the plaintiff's amended complaint reveals that the plaintiffs' cause of action hinges not on whether the defendant executed specifically agreed-upon tasks required of it pursuant to a contract, but whether the defendant exercised ordinary care in effectuating the plaintiff's purchase of insurance. The complaint states that the defendant contracted that it had the "ability to recommend the necessary and appropriate insurance coverage" not that it contractually guaranteed, as part of the basis of the bargain, to effectuate the purchase of a particular insurance product. The defendant's statement is merely a recitation that the defendant will exercise the skill and judgment common to practitioners of its trade. Absent a showing that the defendant specifically guaranteed a particular result and that such a result was not delivered, the plaintiffs cannot maintain an action for breach of contract.
CT Page 4788 Berlin Corp. v. Continental Casualty Co., supra, 42 Conn. L. Rptr. 361.
The case of DeCrescenzo v. CPM Ins. Services, Inc., Superior Court, judicial district of New Haven, Docket No. CV 07 5010892 (December 19, 2007, Cosgrove, J.) ( 44 Conn. L. Rptr. 679), involved similar facts and claims. The plaintiff was the owner of a restaurant. Id. The defendant, an insurance broker and agency, agreed to obtain for the plaintiff general liability and liquor liability insurance. Id. The defendant failed to obtain the liquor liability coverage and, as a result, the plaintiff brought an action for negligence, breach of contract and violation of CUTPA. Id.
The defendant moved to strike the breach of contract count because the plaintiff failed to allege that the defendant promised a specific result, "but rather alleges that [the insurer] agreed to assist the plaintiff in procuring business insurance." DeCrescenzo v. CPM Ins. Services, Inc., supra, 44 Conn. L. Rptr. 680. The court commented that "[t]he essence of the [breach of contract] count is really a negligence claim recast as a breach of contract claim." Id.
In striking the count, the court found the decision in Berlin Corp. to be "directly on point." DeCrescenzo v. CPM Ins. Services, Inc., supra, 44 Conn. L. Rptr. 680. Moreover, the alleged breaches of contract in the DeCrescenzo case are strikingly similar to those in the present matter. In construing the allegations for purposes of deciding the motion to strike, the court concluded that "[the] allegations reveal only that [the defendant] agreed to assist [the plaintiff] with the insurance application process; there is no allegation that [the defendant] guaranteed the provision of insurance or any other specific result." Id., 681.
In this action, the gravamen of the plaintiffs' first count is their allegation that the defendant failed to procure an insurance policy naming the proper insured, and having sufficient coverage and limits. Similar to the allegations in Berlin Corp. and DeCrescenzo, the allegations are couched in terms of the defendant having committed professional negligence in the procuring of the insurance policy issued to the plaintiffs. The allegations neither expressly allege, nor can they be reasonably construed as alleging, that the defendant promised the plaintiff a specific result in obtaining the insurance. Therefore, the defendant's motion to strike the second count is granted.
II
The defendant moves to strike the third count of the plaintiffs' amended and revised complaint, alleging a CUTPA violation, General Statutes § 42-110b et seq. The defendant claims that the count is based on professional negligence by the defendant, and is not a claim concerning the commercial or entrepreneurial aspects of the business of insurance. The defendant contends that a CUTPA cause of action applies only to those aspects of the profession. Additionally, the defendant moves to strike the count for the reason that the plaintiffs have failed to allege with sufficient particularity "how or in what manner the actions of [the defendant] in this case rose to the level of corrupt, immoral or unscrupulous behavior." Further, the plaintiffs have failed to plead allegations that the practices of the defendant are unfair within the meaning of the "cigarette rule." Finally, the defendant asserts that the plaintiff must claim that the defendant's acts and omissions violate the Connecticut Unfair Insurance Practices Act (CUIPA), § 38a-815 et seq., in order to claim a CUTPA violation.
The plaintiffs oppose the motion asserting that they have alleged in the third count that the defendant made intentional misrepresentations to the plaintiffs in order to receive fees from them. The plaintiffs claim that such allegations are sufficient to sustain a CUTPA claim.
The court agrees with the defendant's contention that the third count is legally insufficient because it alleges professional negligence, and not the commercial or entrepreneurial aspects of the business of insurance. Because the striking of this count is dispositive of it, the court need not consider the defendant's other claims.
In Haynes v. Yale-New Haven Hospital, 243 Conn. 17, 34, 699 A.2d 964 (1997), our Supreme Court "conclude[d] that professional negligence — that is, malpractice — does not fall under CUTPA." The Court held that although physicians and other health care providers fall within the ambit of CUTPA, only the commercial or entrepreneurial aspects of the profession are covered. Id. In so holding, the Court noted that CUTPA similarly covers only the commercial and entrepreneurial aspects of the legal profession. Id., 34-35. See Beverly Hills Concepts, Inc. v. Schatz Schatz, Ribicoff Kotkin, 247 Conn. 48, 79, 717 A.2d 724 (1998) ("We have stated, instead, that, only the entrepreneurial aspects of the practice of law are covered by CUTPA . . . Accordingly, as in the health care context, we conclude that professional negligence — that is, malpractice — does not fall under CUTPA.").
There is no appellate authority directly holding that in the insurance context, professional negligence claims do not fall under CUTPA. Nonetheless, some superior courts have concluded that, similar to the medical legal professions, only the commercial or entrepreneurial aspects of the insurance profession are covered by CUTPA. See, e.g. DeCrescenzo v. CPM Ins. Services, Inc., supra, 44 Conn. L. Rptr. 682 ("Because the CUTPA count is essentially a recast negligence claim, rather than a claim based on entrepreneurial aspects of [the defendant insurance broker's] business, the CUTPA claim is legally insufficient"); N L Trucking, LLC v. M.H. Chodos Ins. Agency, Superior Court, judicial district of New Haven, Docket No. CV 05 4011430 (September 23, 2005, Thompson, J.) ( 40 Conn. L. Rptr. 33, 34) (finding that "[t]here is no reason why the reasoning in Haynes and Beverly Hills Concepts should not be extended to insurance agents," and granting a motion to strike a CUTPA claim based on allegations of professional negligence); Krassner v. CPM Ins. Services, Inc., Superior Court, judicial district of New Haven, Docket No. CV 01 0456362 (August 9, 2002, Booth, J.) ( 32 Conn. L. Rptr. 701, 702) (holding "that the CUTPA claim . . . is essentially a professional malpractice claim against an independent insurance agent," and granting the agent's motion to strike).
This court agrees with the logic and reasoning of those decisions. As discussed in part I of this decision, the plaintiffs' claim is that the defendant committed professional negligence in procuring insurance for the plaintiffs. As such, it is a malpractice claim. The allegations do not implicate the commercial or entrepreneurial aspects of the defendant's profession. In view of the foregoing, the defendant's motion to strike the third count is granted.
III
The defendant moves to strike the fourth count of the plaintiffs' amended and revised complaint, brought in breach of the covenant of good faith and fair dealing, claiming that the plaintiffs have failed to allege bad faith. The plaintiffs contend that they have alleged bad faith in that the defendant "misrepresented" that the insurance policy would provide adequate coverage for a fire loss to the property; and that the defendant "agreed" to obtain a policy insuring Vazzano Realty for such a fire loss, but failed to do so. The plaintiff appears to argue in opposition to the motion that the defendant's failure to obtain a policy covering Vazzano Realty was also the product of a misrepresentation, although that is not expressly alleged in the complaint. The plaintiffs claim that the defendant made the representations "to receive fees from [them], and thus, were intentional," and therefore, the motion should be denied on this count. The court disagrees with the assertions made by the plaintiffs concerning the legal viability of the fourth count.
"The relevant legal principles are well established. [I]t is axiomatic that the . . . duty of good faith and fair dealing is a covenant implied into a contract or a contractual relationship . . . In other words, every contract carries an implied duty requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement . . . 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 . . . To constitute a breach of [the implied covenant of good faith and fair dealing], the acts by which a defendant allegedly impedes the plaintiff's right to receive benefits that he or she reasonably expected to receive under the contract must have been taken in bad faith . . .
"Bad faith has been defined in our jurisprudence in various ways. 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 . . . [B]ad faith may be overt or may consist of inaction, and it may include evasion of the spirit of the bargain . . ." (Citations omitted; internal quotation marks omitted.) Keller v. Beckenstein, 117 Conn.App. 550, 563-64, 979 A.2d 1055, cert. denied, 294 Conn. 913 (2009).
The allegations in the fourth count fail to sufficiently allege the elements necessary for a claim of breach of the covenant of good faith and fair dealing. Although the plaintiffs allege that the defendant made certain misrepresentations of facts to receive a fee, they fail to allege the nature and extent of the misrepresentations. Specifically, the plaintiffs fail to allege whether the misrepresentations were intentional or negligent, and facts showing that the defendant acted with a "dishonest purpose" in procuring the insurance policy for them. The plaintiffs have made only conclusory allegations of misrepresentation. See 1049 Asylum Ltd. Partnership v. Kinney Pike Ins., Inc., Superior Court, judicial district of Hartford at Hartford, Docket No. CV 02 0816344 (May 30, 2003) ( 34 Conn. L. Rptr. 723, 726) (The court granted the defendant's motion to strike count for breach of the implied covenant of good faith and fair dealing where the plaintiff failed "to allege sufficient facts to show that [the defendant's] conduct was motivated by a dishonest purpose. Simply alleging that a misrepresentation occurred does not amount to conscious deception by [the defendant] to mislead [the plaintiff]."); see also Ashforth Properties Construction, Inc. v. Bank of Scotland, Superior Court, complex litigation docket at Waterbury, Docket No. X10 UWY CV 08 5010671 (November 2, 2009, Scholl, J.) (motion to strike granted where allegations of complaint were insufficient to establish bad faith because the plaintiff failed to allege facts beyond an alleged misrepresentation and the allegations of the complaint were conclusory.). Therefore, the motion to strike the fourth count is granted.
IV
The defendant's motion to strike (113.00) the first, third and fourth counts of the plaintiffs' amended and revised complaint is granted.