Opinion
No. X04 CV-02-103527 S
June 3, 2005
MEMORANDUM OF DECISION RE MOTION TO STRIKE
Defendant's motion to strike count four of the second amended complaint asserts that the claim as set forth is legally insufficient because it fails to specifically allege facts demonstrating that the defendant has engaged in the conduct complained of in circumstances similar to the instant case as a general business practice. Defendant claims such specificity is required in order to support a claim for damages pursuant to CUTPA, the Connecticut Unfair Trade Practices Act, CGS § 42-110b et. seq, premised on violations of CUIPA, the Connecticut Unfair Insurance Practices Act, CGS § 38a-815 et. seq. For the reasons set forth in detail below, the court denies the motion to strike as the court concludes that the allegations are sufficient to support the claim of a prevalent or customary business practice as required by statute.
I FACTS ALLEGED
Plaintiff, Southridge Capital Management, LLC, hereafter Southridge, a financial advisory services company, alleges in its second amended complaint that the defendant, Twin City Fire Insurance Co., hereafter Twin City, issued it a professional and directors and officers liability policy. The complaint states that Twin City wrongfully denied coverage after Southridge provided notice of four separate lawsuits filed against it and Twin City refused to provide a defense to such suits. In these underlying cases, certain of plaintiff's clients claim that the plaintiff manipulated the stock prices of their companies to which entities related to the plaintiff had provided financing. This was done by means of "short selling" certain stocks in order for the plaintiff to procure favorable prices for the purchase of additional shares of stock from these companies. All four suits arise out of two incidents of claimed wrongdoing by Southridge. The present complaint alleges that the defendant Twin City failed to respond promptly in writing to plaintiff's claim notices concerning the four underlying lawsuits, that it denied coverage for spurious reasons, and later provided different and new reasons for the denial of coverage.
Nanopierce Technologies v. Southridge Capital Mgmt., LLC, Internet Law v. Southridge Capital Mgmt., LLC; Brewer v. Southridge Capital Mgmt, LLC; Hoagland v. Southridge Capital Mgmt., LLC.
These facts implicate General Statutes § 38a-816(6), which defines unfair and deceptive acts in relevant part, as follows: ". . . (b) failing to acknowledge and act with reasonable promptness upon communications with respect to claims arising under insurance policies . . . (d) refusing to pay claims without conducting a reasonable investigation based upon all available information . . . (f) not attempting in good faith to effectuate prompt fair and equitable settlements of claims in which liability has become reasonably clear . . ."
The relevant count of the second amended complaint, the fourth count, incorporates the specific factual allegations reviewed above and states that by such conduct, Twin City violated CUIPA. The count states that the "defendant has delayed coverage decisions, wrongfully refused to provide coverage and manufactured improper and erroneous reasons for denying coverage to insureds in Connecticut and across the country with such frequency as to indicate a general business practice." The complaint alleges that such violations of CUIPA are violations of CUTPA and are wrongful, willful, and wanton and offend public policy. Multiple acts of insurer misconduct are alleged and a number of cases in Connecticut and other jurisdictions are listed in support of plaintiff's claim that the defendant's conduct is part of a general business practice.
Paragraph 28 of count four of the amended complaint. Paragraph 27 asserts that the defendant was prohibited from engaging in any unfair insurance practice under CUIPA.
Paragraphs 29 and 30 of the amended complaint.
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).
Such favorable construction does not extend, however, to legal opinions or conclusions stated in the complaint, but only to factual allegations and the facts "necessarily implied and fairly provable under the allegations." Forbes v. Ballaro, 31 Conn.App. 235, 239, 624 A.2d 389 (1993). Conclusory statements or statements of legal effect not supported by allegations of fact will not enable a complaint to withstand a motion to strike. Mingachos v. CBS, Inc., 196 Conn. 91, 108, 491 A.2d 368 (1985); Fortini v. New England Log Homes, Inc., 4 Conn.App. 132, 134-35, 492 A.2d 545 cert. dismissed, 197 Conn. 801 (1985).
B. CUTPA/CUIPA Violations
On a motion to strike the court carefully scrutinizes the factual allegations and the facts "necessarily implied and fairly provable under the allegations." Forbes v. Ballaro, 31 Conn.App. 235, 239, 624 A.2d 389 (1993). "[In a CUTPA or CUIPA claim,] the insurer's liability is ordinarily based on its conduct in settling or failing to settle the insured's claim and on its claims settlement policies in general. The factual inquiry focuses, not on the nature of the loss and the terms of the insurance contract, but on the conduct of the insurer." (Internal quotation marks omitted.) Heyman Associates No. 1 v. Insurance Co. of Pennsylvania, 231 Conn. 756, 790, 653 A.2d 122 (1995).
Our well-established law holds 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 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), 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. As to what constitutes a general business practice, the Lees court at page 849 noted: "[i]n 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." The court observed in a footnote that: "[t]he term `general business practice is not defined in the statute, so [courts] may look to the common understanding of the words as expressed in a dictionary . . . `General' is defined as `prevalent, usual [or] widespread' . . . and `practice' means `[p]erformance or application habitually engaged in . . . [or] repeated or customary action.'" Lees v. Middlesex Ins. Co., supra, 229 Conn. 849 n. 8. Nonetheless, there is no appellate court guidance as to what specific facts and circumstances are sufficient to support such a cause of action.
Southridge asserts that Twin City's wrongful denial of coverage and its manufacturing of improper and erroneous reasons for denying coverage demonstrate a general business practice, relying on five cases in the states of Delaware, Ohio, Texas and Massachusetts. Additionally, the plaintiff lists ten other Connecticut superior court cases in which claims of breach of contract or bad faith conduct or unfair trade practices have been alleged against the defendant or its affiliated insurers. The defendant claims that the plaintiff has simply printed up a "laundry list" of cases from the computer, without alleging specific facts in the present case which are similar to the cases identified by the plaintiff in count four as supportive of its claim that the defendant's alleged improper conduct is indicative of a general business practice. This court does not agree.
The plaintiff alleges, in paragraph 28 of the fourth count, that "[u]pon information and belief, the Defendant has delayed coverage decisions, wrongfully refused to provide coverage and manufactured improper and erroneous reasons for denying coverage to insureds in Connecticut and across the country with such frequency as to indicate a general business practice." Paragraph 28 continues as follows: "For example, within the last four years alone, Twin City Fire Insurance Company has improperly delayed coverage decisions and/or wrongfully denied coverage to insureds in at least the states of Delaware, Ohio, Texas and Massachusetts. See e.g. [plaintiff lists five cases]." (Emphasis added.) Paragraph 28 continues with allegations that several lawsuits in Connecticut have been filed against the defendant and its affiliated insurers claiming breach of contracts of insurance, bad faith conduct and unfair trade practices and lists ten superior court cases in support of this statement.
The defendant next claims the allegations in the fourth count are legally insufficient to state a CUTPA claim based on CUIPA violations because the specific facts of this case are not compared with the specific facts in the listed cases to demonstrate that there are similar circumstances to indicate a general business practice. The defendant cites the cases of Mead v. Burns, supra, Lees v. Middlesex Ins. Co., supra, and SMS Textile Mills v. Brown, Jacobson, Tillinghast, Lahan King, P.C., 32 Conn.App. 786, 631 A.2d 340 (1993), cert denied, 228 Conn. 903, 634 A.2d 296 (1993), in support of its claim that plaintiff must plead with particularity and prove that the insurer engaged in specific acts or practices with such frequency as to indicate a general business practice. The defendant also cites the following Connecticut superior court decisions for the proposition that the other policyholders' claims referenced by the plaintiff must be factually similar to the plaintiff's claim to survive a motion to strike. Travelers Property Casualty Ins. Co., Inc. v. Standard Fire Ins. Co., Superior Court, judicial district of Hartford/New Britain at Hartford, Docket No. CV-98-0580328S (September 8, 2000, Fineberg, J.); Nuzzo v. Nationwide Mutual Ins. Co., Superior Court, judicial district of New Haven at New Haven, Docket No. CV-96-0394015S (July 1, 1998, Silbert, J.); Ferriolo v. Nationwide Ins. Co., Superior Court, judicial district of New Haven at New Haven, Docket No. CV-97-0403433S (March 11, 1998, Hartmere, J.). Defendant argues that these cases require comparing the details of the alleged improper conduct in this case with the details of the conduct involved in the cases listed in the fourth count to test the claim of a general business practice. The specificity defendant claims is required includes the type of insurance policy issued and the detailing of specific factual similarities in the insurers' conduct. Defendant basically argues that the factual situations must be virtually identical in order to state a legally sufficient claim for a CUTPA claim premised on CUIPA violations.
Again, the court cannot agree with defendant's interpretation. The cases simply do not require that such a stringent test be met. Moreover, the fact that some of the complaints in the superior court decisions cited by the defendant included more detail than necessary about the challenged conduct does not mean that that level of detail is required to state a legally sufficient CUTPA claim. No such language is found in these cases; defendant's statement of the holdings is an extension of the courts' conclusions beyond what the cases themselves state.
The frequently cited cases of Mead and Lees simply require that claims of unfair settlement practices under CUIPA require a showing of more than a single act of insurer misconduct, that there must be evidence of misconduct by the insurer in the processing of other policyholders' claims in order to rise to the level of a general business practice. While common sense would dictate that the alleged insurer misconduct must be similar to the extent that it indicates a practice of misfeasance in the handling of insurance claims, there is no requirement in statutory or case law that the alleged specific misconduct be the same in each case. The plaintiff has alleged that the defendant delayed coverage decisions, wrongfully refused to provide coverage and manufactured improper and erroneous reasons for denying coverage to insureds in its case and in the other cases listed in its complaint. Such allegations are sufficiently specific to state a cause of action under CUTPA. Although the defendant may strongly disagree with these allegations, the fact remains that they have been pleaded in the fourth count and the court must take the facts to be those alleged in the complaint and construe the complaint in the manner most favorable to sustaining its legal sufficiency. Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).
As an additional ground for its claim that the plaintiff's CUTPA/CUIPA claim is legally insufficient, the defendant claims that none of the cases listed in the fourth count support such a claim because none of them "involve the facts, circumstances, policy or basis for coverage denial involved in the instant case." Defendant's Memorandum in Support of Motion to Strike, Page 8. The defendant would have this court review each of the fifteen cases to determine whether they are factually similar to the present case. The court declines to do so for two reasons.
First, as previously noted, the plaintiff's second amended complaint clearly indicates that the list of cases in Paragraph 28 of the fourth count is not meant to be exhaustive. The cases are stated to be examples of the instances in which the defendant wrongfully delayed and/or denied coverage to insureds. Discovery is not complete, and the plaintiff believes it may find other cases to support its claim of wrongful settlement practices indicative of a general business practice. Thus, even if defendant is correct that the fifteen cases are not sufficiently similar to support plaintiff's CUTPA/CUIPA claim, the claim still survives because the second amended complaint alleges that "upon information and belief" the defendant's alleged wrongful conduct has occurred in Connecticut and other jurisdictions with such frequency as to indicate a general business practice.
Second, the court cannot properly consider facts outside the complaint to make its determination as to whether or not the fourth count should be stricken from the complaint. "A motion to strike requires no factual findings by the trial court . . . [The court] take[s] the facts to be those alleged in the complaint." Fort Trumbull Conservancy, LLC, supra, 498. A "speaking motion to strike," i.e., one which imparts facts outside of the pleadings, will not be granted by the court. Liljedahl Bros., Inc. v. Grigsby, 215 Conn. 345, 348, 576 A.2d 149 (1990); Doe v. Marselle, 38 Conn.App. 360, 364, 660 A.2d 871 (1995).
The defendant argues that the court must consider the cases cited by the plaintiff because they were specifically incorporated in the complaint. It cites no cases in support of this position, other than the general case law which holds that any attachments or exhibits attached to the plaintiff's complaint are deemed part of the complaint and may be considered by a court when deciding a motion to strike. See, e.g., Redmond v. Matthies, 149 Conn. 423, 425-26, 180 A.2d 639 (1962); A.C. Nielsen Co. v. Wang Laboratories, Inc., Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV-94-0312400S (February 6, 1995, Maiocco, J.). The plaintiff did not attach copies of the referenced cases to its complaint. Simply referencing the cases is insufficient to compel this court to review and analyze each case to determine if the factual situations are similar to the present case. Complaints routinely reference written agreements or other documentation in support of allegations but do not attach the referenced material as exhibits. If not attached, they simply are not part of the complaint and may not be considered for purposes of a motion to strike. For example, in R.I. Pools, Inc. v. Lillien, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV-04-4000871 (February 8, 2005, Wilson, J.), the plaintiff's complaint referenced a written agreement in a breach of contract claim but did not attach the subject agreement as an exhibit. The defendant moved to strike the claim, asserting the agreement was invalid and unenforceable, and attached a copy of the agreement to his motion. The court concluded that the defendant's introduction of the contract made the defendant's motion to strike a "speaking motion to strike" and denied the motion. "The defendant is essentially trying to accomplish, through a motion to strike, what is more appropriately accomplished by way of a motion for summary judgment."
Moreover, the defendant is not limited to the reported decisions and it may delve deeper into the circumstances of those cited cases if it chooses to do so.
III CONCLUSION CT Page 9982
The court concludes that the plaintiff has pleaded its CUTPA/CUIPA claim with sufficient particularity to indicate prevalent or widespread practices constituting a general business practice as required by CGS § 38a-816(6). Further, the court concludes that the defendant's motion to strike is a "speaking motion to strike." Accordingly, the court denies the defendant's motion to strike the fourth count of the plaintiff's second amended complaint.
BY THE COURT
BARBARA M. QUINN, Judge