2009 Ct. Sup. 12059
No. X 09 CV 08 5023757Connecticut Superior Court Judicial District of Hartford, Complex Litigation Docket at Hartford.
July 15, 2009
MEMORANDUM OF DECISION ON MOTION TO STRIKE
JOSEPH M. SHORTALL, J., Judge Trial Referee.
On November 15, 2006, when fire damaged the business premises of the plaintiff, Active Ventilation Products, Inc. (Active Ventilation), the property was insured by the defendant, Property Casualty Insurance Co. of Hartford (the Hartford) Active Ventilation hired contractors to clean up and to salvage equipment and material and submitted to the Hartford a timely claim for losses due to the fire. Subsequent claims were submitted for thefts of equipment, materials and product discovered in the course of cleanup and salvage operations. Although timely proofs of loss have been submitted to the Hartford, not only have the claims not been paid, but the Hartford has not yet taken a position as to their validity.
These facts, taken as true for the purpose of this motion, have given rise to a three-count complaint, alleging breach of contract (count one), violation of the Connecticut Unfair Trade Practices Act (CUTPA) (count two) and violation of CUTPA through the Connecticut Unfair Insurance Practices Act (CUIPA) (count three). The Hartford has moved to strike counts two and three.
I
Well-known canons govern the court’s treatment of a motion to strike. 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 . . . Thus, if facts provable in the complaint would support a cause of action, the motion to strike must be denied . . . Moreover, . . . what is necessarily implied [in an allegation] need not be expressly alleged . . . It is fundamental that in determining the sufficiency of CT Page 12060 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. (Citations omitted; internal quotation marks omitted.)
Violano v. Fernandez, 280 Conn. 310, 317-18 (2006).
Moreover, the court must apply settled law regarding the interpretation of pleadings:
The modern trend, which is followed in Connecticut, is to construe pleadings broadly and realistically, rather than narrowly and technically . . . Although essential allegations may not be supplied by conjecture or remote implication . . . the complaint must be read in its entirety in such a way as to give effect to the pleading with reference to the general theory upon which it proceeded, and do substantial justice between the parties . . . As long as the pleadings provide sufficient notice of the facts claimed and the issues to be tried and do not surprise or prejudice the opposing party, we will not conclude that the complaint is insufficient to allow recovery. (Internal citations and quotations omitted.)
Emerick v. Kuhn, 52 Conn.App. 724, 738-39 (1999).
II
The second count of the complaint attempts to state a CUTPA violation by the Hartford without alleging a violation of CUIPA, indeed, without even mentioning CUIPA. It has been clear since Mead v. Burns, 199 Conn. 651, 663-66 (1986), that an insurer like the Hartford can only violate CUTPA if it violates CUIPA, i.e. that an insurer is not liable for an unfair trade practice that is not also an unfair insurance practice, as those practices are defined in CUIPA. See Conn. General Statutes § 38a-816. The rationale for this melding of the two acts is that “a CUTPA claim based on the public policy embodied in CUIPA must be consistent with the regulatory principles established therein . . .” Lees v. Middlesex Ins. Co., 229 Conn. 842, 850 (1994).
Count two’s failure to ground its alleged CUTPA violation in CUIPA is CT Page 12061 fatal, and the court, based on the Mead and Lees decisions, granted the motion to strike count two at the conclusion of oral argument on June 23, 2009.
III
Count three alleges two violations of CUTPA “through CUIPA:” first, a violation of § 38a-816(1), in the making of certain representations to Active Ventilation “in the process of selling said insurance policy to [Active Ventilation];” Complaint, ¶ 16;[1] and, second, a violation of § 38a-816(6), “in delaying the processing of [Active Ventilation’s] claims . . . without either paying or denying such claims within a reasonable time . . .” Id., ¶ 23.[2]
A
Section 38a-816(1) prohibits “misrepresentations . . . of insurance policies,” more specifically, inter alia, misrepresentations of “the benefits, advantages, conditions or terms of any insurance policy.” The Supreme Court held in Nazami v. Patrons Mut. Ins. Co., 280 Conn. 619, 625-26 (2006), that for a cause of action under this section of CUIPA to succeed the plaintiff must allege and prove the four established elements of a negligent misrepresentation claim: (1) the defendant made a misrepresentation of fact; (2) which the defendant knew or should have known was untrue; (3) the plaintiff reasonably relied on the misrepresentation; and (4) the plaintiff suffered pecuniary harm as a result of the misrepresentation. Active Ventilation runs afoul of the first requirement.
The alleged representations made by the Hartford were that:
“A. Its policies provided fair and reasonable
provisions for proving the losses presented as claims.
B. It had a history of paying claims promptly and fairly.
C. The coverages provided in this type of insurance policy had been proven by the experiences of others to be appropriate, proper and complete coverage of the types of losses incurred by businesses such as engaged in by the Plaintiff.
D. Its claim procedures had evolved and had been CT Page 12062 proven prompt, fair and reasonable by its many years of providing coverages throughout the business community.”
(Emphasis added.) Complaint, ¶ 16.
Qualitative statements like these are simply not representations of fact: they recite the Hartford’s opinions of the terms of its policies and its claims handling processes.[3] As such, they are not actionable misrepresentations. Cf. Crowther v. Guidone, 183 Conn. 467, 468 (1981).
Moreover, the only allegations of falsity and reliance are found in an affidavit of Active Ventilation’s president, which is attached to the complaint “and made a part hereof.” Complaint, ¶ 16. Whether Practice Book § 10-29, permitting a plaintiff to make a “document” part of the complaint by referring to it as Exhibit A, B or C without reciting it in the complaint, also allows a plaintiff to supply essential allegations of his cause of action by attaching an affidavit is a question the court has never entertained before. In view of the court’s finding that the complaint fails to allege misrepresentations of fact, however, it need not do so here.
B
Section 38a-816(6) prohibits “unfair claim settlement practices,” i.e., “committing or performing with such frequency as to indicate a general business practice” fifteen enumerated acts and practices, including, inter alia, “(e) failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed.”[4]
“[A] CUTPA claim based on an alleged unfair claim settlement practice . . . require[s] proof, as under CUIPA, that the unfair settlement practice had been committed or performed by the defendant with such frequency as to indicate a general business practice.” Lees v. Middlesex Inc. Co., supra, 229 Conn. 850. “[T]he legislature has manifested a clear intent to exempt from coverage under CUIPA isolated instances of insurer misconduct.” Id., 849. “The term `general business practice’ is not defined in the statute, so we 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.” (Citations and internal quotation marks omitted.) Id., n. 8.
Active Ventilation has alleged in its complaint that the acts or CT Page 12063 omissions of the Hartford in dealing with its claims, “to [its] knowledge and belief,” are the Hartford’s “general business practices;” Complaint, ¶ 21; more particularly, the Hartford’s delay in processing Active Ventilation’s claims, “[t]o the knowledge and belief of . . . Active Ventilation, . . . occur[s] with such frequency as to constitute a general business practice of the . . . Hartford . . .” Id., ¶ 23.
The issue raised by the Hartford in moving to strike this portion of count three is whether a bare allegation that a complained-of practice constitutes its “general business practice,” without specific examples of other instances in which it has allegedly engaged in the same practice, is sufficient to state a cause of action for violating § 38a-816(6), especially when that allegation is based upon the “knowledge and belief” of Active Ventilation.
The fact that there is a split among Superior Courts on this issue is not surprising:[5] it is a thorny one. On the one hand, there is the burden upon the plaintiff’s lawyer, without access to the insurance company’s records, to discover somehow the existence of other instances of the same conduct in sufficient quantity to represent the company’s “general business practice.” On the other hand, the company asks whether a plaintiff should be able to invoke the panoply of pretrial discovery techniques to rummage around in the company’s books and records simply by alleging that he has “knowledge and belief” that it has engaged in the same allegedly unlawful acts with others as it has with the plaintiff, without at least alleging that he has personal knowledge of other cases in which this conduct has occurred.
This court believes that those decisions have the better of the argument which hold that an allegation of a general business practice, unsupported by specific instances of insurer misconduct, is sufficient to withstand a motion to strike.[6]
Both CUTPA and CUIPA are remedial statutes, to be liberally construed to give effect to the legislature’s intent to penalize unfair insurance practices; placing on the plaintiff a heavy burden of pleading specific instances of other insurer misconduct before he can even begin an action seeking redress under those statutes does not further that end. In addition, the Mead and Lees cases speak of what a plaintiff must prove in order to prevail in a case alleging unfair settlement practices, not what he must plead. Nor is pleading the existence of a “general business practice” tantamount to pleading a legal conclusion rather than a fact. After all, at the trial of such a case, whether the plaintiff has met its burden of proving this allegation would be for the fact finder to decide. Finally, the established rules for judging the adequacy of a CT Page 12064 complaint; viz., that it be “construe[d] . . . in the manner most favorable to sustaining its legal sufficiency;” Violano v. Fernandez supra. 289 Conn. 317; and that it “provide sufficient notice of the facts claimed and the issues to be tried and . . . not surprise or prejudice the opposing party;” Emerick v. Kuhn, supra, 52 Conn.App. 739; suggests this more liberal approach to judging the sufficiency of a CUTPA/CUIPA complaint. “The defendant has been given sufficient notice of the plaintiff’s intent to prove at trial what it has presently alleged in the complaint, specifically, that the defendant has engaged in similar conduct with other claimants. Were the plaintiff to prove its allegations of the defendant’s conduct toward other claimants, such proof would support its CUTPA-CUIPA claim.” Colonial Restaurant Supply, LLC v. Travelers Indemnity Co. of America, Superior Court, judicial district of New Haven at New Haven, Docket No. CV 07 5009224, 2007 Ct.Super. 10263, 10269-70 (June 12, 2007).
Several of the cases relied upon by the Hartford are ones in which the plaintiff alleged that the insurer’s unfair practices in settling th plaintiff’s own claim established its “general business practice,” a claim explicitly rejected by the Supreme Court. “[T]he Supreme Court has determined that multiple acts of unfairness in dealing with the same claim do not establish a general business practice.” Dekutkowski-Cook v. Pavalock, Superior Court, judicial district of New Britain at New Britain, Docket No. CV 05 4005970 (Jan. 9, 2006) [40 Conn. L. Rptr. 584], citing Lees v. Middlesex Inc. Co., supra, 229 Conn. 849. Accord: Quimby v. Kimberly Clark Corp., 28 Conn.App. 660, 672 (1992). See also Starview Ventures, LLC v. Acadia Insurance, Superior Court, judicial district of New Haven at New Haven, Docket No. CV 06 5003463 (Oct. 17, 2006); Sullivan v. Allstate Ins. Co., Superior Court, judicial district of Hartford at Hartford, Docket No. CV 05 4008548 (Mar. 28, 2006). That is not the claim made by Active Ventilation.
Furthermore, in two of the Hartford’s cases, although the trial courts held that specific allegations regarding several cases other than the plaintiff’s, in which the insurer was alleged to have committed unfair settlement practices, were sufficient to state a claim under CUIPA, neither held that such allegations were required. See Southridge Capital Mgt., LLC v. Twin City Fire Ins. Co., Superior Court, judicial district of Middlesex, Complex Litigation Docket No. X 04 CV 02 103527 (June 3, 2005) [39 Conn. L. Rptr. 635]; Hebert v. Assurance Co. of America, Superior Court, judicial district of Ansonia-Milford at Milford, Docket No. CV 04 0084733 (Feb. 9, 2005) [38 Conn. L. Rptr. 670].
The court finds in none of these cases persuasive reasons for striking Active Ventilation’s unfair settlement practices claim. CT Page 12065
The Hartford’s final objection to the complaint is that Active Ventilation pleads its “general business practice” allegations upon “knowledge and belief.”[7] This court recognizes that the court i Tomonko v. Progressive Northern Ins. Co., Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 04 4001543 (July 7, 2006) held that allegations “on information and belief” are not allegations of fact, as required by Practice Book § 10-1. But, in two other decisions addressing the sufficiency of “general business practice” allegations, that language was accepted. Southridge Capital Mgt., LLC v. Twin City Fire Ins. Co., supra; O’Leary Ltd. Partnership v. Travelers Property Casualty Co., supra. This court sees no inconsistency in alleging facts which a party knows only “upon information and belief,” especially where, as here, it is unlikely that plaintiff’s counsel could have personal knowledge of an insurer’s “general business practices” before conducting discovery. Cf. ABB Automation, Inc. v. Zaharna, 77 Conn.App. 260 (2003).
In sum, the court concludes that Active Ventilation has adequately pled its CUTPA claim based on the Hartford’s alleged violation of § 38a-816(6). It agrees with the court in O’Leary that “the plaintiff is entitled to the opportunity to gather information supporting its claims that the defendant’s alleged wrongful conduct has been committed with such frequency as to indicate a general business practice.” O’Leary v. Travelers Property Casualty Co., supra, 2001 Ct.Super. 4903.[8]
Count two commingles two theories of how CUTPA and CUIPA were violated. The court has concluded that the claim of a violation of 38a-816(1) is defective for its failure to allege that the Hartford made representations of fact, as opposed to opinion. Since the motion to strike is directed at the entire count, however, it must fail if either of Active Ventilation’s claims is legally sufficient to state a CUTPA/CUIPA cause of action. Wachtel v. Rosol, 159 Conn. 496, 499 (1970) [3 Conn. L. Rptr. 135]; Whelan v. Whelan, 41 Conn.Sup. 519, 520
(1991); Turner v. Allstate Ins. Co., Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 00 0177471 (Dec. 8, 2000) [28 Conn. L. Rptr. 485]; State v. Liberty Mutual Holding Co., Inc., Superior Court, judicial district of Hartford at Hartford, Complex Litigation Docket No. X 09 CV 06 4023087 (Mar. 20, 2009). Because the claim of unfair settlement practices is viable, the count survives.
IV
For the reasons stated in this memorandum of decision, the motion to strike count three is DENIED. CT Page 12066
In addition, the stay of discovery which the court had previously imposed while this motion has been pending is VACATED.
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