2010 Ct. Sup. 13997
No. FST CV 09 5012672 SConnecticut Superior Court Judicial District of Stamford-Norwalk at Stamford
July 7, 2010
MEMORANDUM OF DECISION RE MOTION TO STRIKE (106.00)
TAGGART D. ADAMS, SUPERIOR COURT JUDGE.
FACTS
On August 11, 2009, the plaintiff, Seven Oaks Partners, LP, commenced this action by service of process against the defendant, Vigilant Insurance Company. In its complaint, the plaintiff alleges the following facts. On September 24, 2004, the defendant issued a homeowners insurance policy to Cynthia Licata to cover residential property located at 23 Meeting House Road in Greenwich. This insurance policy was in effect from September 25, 2004 to September 25, 2005, and Licata paid all of the required insurance premiums. The plaintiff was named as an additional insured on the policy because it was a mortgagee on a $2.5 million mortgage for the subject premises. On December 23, 2004, pipes burst and froze at Licata’s residence. Licata notified the defendant of the loss in a timely manner as required by the policy. Furthermore, Licata provided the defendant with all the information needed to process the claim, including, but not limited to, correspondence, sworn statements, as well as submitting to an examination under oath. Licata also filed a written claim with the defendant. Despite all of these efforts on the part of Licata, the defendant has failed to pay any money on the claim to the named insureds.
The plaintiff further alleges that the mortgage on Licata’s property is currently in default. Consequently, Sovereign Bank, which is the predecessor in right to the plaintiff, commenced foreclosure proceedings. In the foreclosure case filed against Licata, the court entered judgment in favor of Seven Oaks Partners, LP, which is the plaintiff in the present case. While the defendant has acknowledged the claim of the plaintiff on the subject insurance policy, it previously stated that it would not pay the claim because of the impending foreclosure action. Although the foreclosure judgment had been stayed by the filing of an appeal to the Appellate Court, this appeal has now been dismissed, and the plaintiff contends there is no legal impediment to the defendant paying the plaintiff’s claim under the insurance policy. Consequently, the CT Page 13998 plaintiff alleges that the defendant’s failure to adjust the claim in a prompt manner constitutes a breach of the insurance policy between the parties. Specifically, the plaintiff alleges that the defendant’s “failure to adjust the claim in good faith and in accordance with the contract was to intentionally and dishonestly avoid payment of the claim” and that the defendant’s actions were “purposeful and intentional.” Accordingly, in count one, the plaintiff states a claim for breach of the covenant of good faith and fair dealing.
In count two, the plaintiff alleges that the defendant violated the Connecticut Unfair Insurance Practices Act, General Statutes § 38a-815 et seq. (CUIPA), in that the defendant: (1) misrepresented the facts or policy provisions by failing to adjust the claim since 2004; (2) failed to acknowledge and act with reasonable promptness to the plaintiff’s communications regarding the claim; (3) failed to adopt and implement reasonable standards for the prompt investigation of the claim and (4) failed to affirm or deny coverage within a reasonable time. According to the complaint, these actions on the part of the defendant are “a general business practice, which is designed to avoid the timely payment of claims to its insured . . . Upon information and belief, [the defendant] has engaged in multiple instances of the type of misconduct against its insureds that the Plaintiff herein has suffered.” As a result of these violations of CUIPA, the plaintiff also alleges that the defendant has violated the Connecticut Unfair Trade Practices Act, General Statutes § 42-110(a) et seq. (CUTPA). Specifically, the plaintiff alleges that it had a consumer relationship with the defendant, that the defendant’s actions were “immoral, unethical, oppressive or unscrupulous” and that the plaintiff has suffered economic loss resulting from the defendant’s unfair and deceptive acts.[1]
On March 5, 2010, the defendant filed a motion to strike both counts of the plaintiff’s complaint and corresponding prayers for relief, as well as a memorandum of law in support of its motion. The plaintiff filed a memorandum of law in opposition on April 9, 2010, and the defendant filed a reply memorandum on April 28, 2010. The court heard this matter at short calendar on May 17, 2010.
DISCUSSION
“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.)Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498 (2003). In a motion to strike, “the moving party admits all facts well pleaded.” RK Constructors, Inc. v. Fusco Corp., 231 Conn. 381, 383 n. 2 (1994). CT Page 13999 Therefore, “[i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied.” (Internal quotation marks omitted.) Batte-Homgren v. Commissioner of Public Health, 281 Conn. 277, 294 (2007). Nevertheless, “[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, supra, 262 Conn. 498. When deciding a motion to strike, the court must “construe the complaint in the manner most favorable to sustaining its legal sufficiency.” (Internal quotation marks omitted.) Sullivan v. Lake Compounce Theme Park, Inc., 277 Conn. 113, 117
(2006).
I BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING
The defendant first moves to strike count one, breach of the covenant of good faith and fair dealing, on the ground that the plaintiff fails to allege any facts that could establish that the defendant acted with a dishonest purpose or sinister motive. In its memorandum of law, the defendant argues that the plaintiff’s complaint does not set forth any specific factual allegations demonstrating that the defendant acted in bad faith. The defendant contends that the plaintiff merely alleges a legal conclusion that the defendant acted in bad faith, and that such allegations are insufficient to survive a motion to strike. In response, the plaintiff argues that the defendant’s actions “taken together or individually, unquestionably suggest bad faith.” The plaintiff contends that because it alleges that the defendant did not act in accordance with the terms of its insurance contract, that the plaintiff alleges sufficient facts to maintain a cause of action for breach of the covenant of good faith and fair dealing.
“[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.” (Internal quotation marks omitted.) Renaissance Management Co., Inc. v. Connecticut CT Page 14000 Housing Finance Authority, 281 Conn. 227, 240, (2007). “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 maybe overt or may consist of inaction, and it may include evasion of the spirit of the bargain.” (Internal quotation marks omitted.) Keller v. Beckenstein, 117 Conn.App. 550, 563-64, cert. denied, 294 Conn. (2009). “Absent allegations and evidence of a dishonest purpose or sinister motive, a claim for breach of the implied covenant of good faith and fair dealing is legally insufficient.” Alexandru v. Strong, 81 Conn.App. 68, 81, cert. denied, 268 Conn. 906 (2004).
“[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 . . . The second line of cases generally holds parties to a less stringent standard requiring that a plaintiff need only allege sufficient facts or allegations from which a reasonable inference of sinister motive can be made . . . Even where courts have used an inference analysis, however, they have looked to allegations that the conduct at issue was engaged in purposefully.” (Citations omitted; internal quotation marks omitted.)Shiff v. Van Wyk, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. 08 5008214 (July 9, 2009, Pavia, J.). When previously examining whether a plaintiff had sufficiently alleged a cause of action for breach of the covenant of good faith and fair dealing, this court stated that “[t]he failure to make insurance payments, by itself, does not establish a claim of lack of good faith.” New England Fertility Institute v. CNA Commercial Ins. Co., Superior Court, complex litigation docket at Stamford-Norwalk at Stamford, Docket No. X08 CV 00 0181244 (June 10, 2003, Adams, J.).
In the present case, the plaintiff alleges that Licata provided the defendant “with all of the required information to process the claim, including but not limited to extensive correspondence and sworn statements.” The plaintiff also alleges that Licata submitted to an examination under oath as provided by the insurance contract. Furthermore, the plaintiff alleges that the defendant’s stated reason for not paying the claim was the underlying foreclosure action, even though the subject contract did not state that a foreclosure action would cause CT Page 14001 a delay in payment. At the end of count one, the plaintiff provides the following allegations: “[t]he purpose of the Defendant Vigilant’s failure to adjust the claim in good faith and accordance with the contract was to intentionally and dishonestly avoid payment of the claim . . . The Defendant’s purposeful and intentional refusal to adjust the claim in a timely manner is a breach of the implied covenant of good faith and fair dealing.” The plaintiff contends that such statements amount to legal conclusions, and, therefore, they are insufficient to withstand a motion to strike. If construed in a manner most favorable to the pleader, the court finds that the plaintiff has alleged that: (1) the defendant was provided with sufficient information to resolve the claim; (2) the defendant’s stated reason for non-payment on the claim was in violation of the insurance contract between the parties and that (3) the defendant purposefully and intentionally engaged in dishonest efforts to avoid settling the claim. Although the plaintiff’s factual allegations regarding the defendant’s intent are somewhat bare, the plaintiff does provide sufficient facts that could support its contention that the defendant acted in bad faith. As the plaintiff alleges that the purpose of the defendant’s actions was to intentionally and dishonestly avoid paying the claim, the plaintiff alleges more than a mere failure to make insurance payments. Therefore, the court denies the motion to strike count one.
II CUIPA/CUTPA
Next, the defendant moves to strike count two, CUIPA/CUTPA, on the ground that the plaintiff fails to allege sufficient facts that could establish a general business practice as required by General Statutes §38a-816(6). In its memorandum of law, the defendant argues that according to the majority of Superior Court cases, a plaintiff must allege specific instances of multiple unfair settlement practices in order to survive a motion to strike. As the plaintiff only alleges the conclusory statements that the defendant’s conduct amounted to a general business practice and that the defendant “engaged in multiple instances of the type of misconduct against its insureds that the Plaintiff herein has suffered,” the defendant contends that count two is legally insufficient.
The plaintiff responds by arguing that count two is legally sufficient because it alleges conduct that is immoral, unethical, oppressive and/or unscrupulous and caused substantial injury to a consumer. For this reason, the plaintiff contends that it alleges facts that satisfy the cigarette rule for stating a cause of action under CUTPA. Furthermore, the plaintiff cites to case law where multiple Superior Court judges have CT Page 14002 recognized a private cause of action under CUIPA. In its reply memorandum, the defendant argues that the plaintiff’s opposition to the motion to strike fails to address the precise argument raised by the defendant. Accordingly, the defendant again points out that the plaintiff fails to allege any specific facts indicating that the defendant engaged in a general pattern of business misconduct.
To date, Connecticut’s appellate courts have yet to decide affirmatively whether there is a private right of action under CUIPA. Although there is a split in authority in the Superior Court regarding this issue, this court has repeatedly determined that CUIPA affords no right to a private cause of action. Union Street Furniture and Carpet, Inc. v. Peerless Indemnity Ins. Co., Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 085008699 (February 16, 2010, Adams, J.); Finocchio v. Atlantic Mutual Ins. Co., Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 09 5009607 (April 22, 2009, Adams, J.) (47 Conn. L. Rptr. 624); New England Fertility Institute v. CNA Commercial Ins. Co., supra, Superior Court, Docket No. X08 CV 00 0181244. The court adheres to its position that the plaintiff cannot state a private cause of action under CUIPA.
In contrast to bringing a stand-alone CUIPA claim, our Supreme Court has recognized that a plaintiff can state a cause of action under CUTPA[2] for alleged violations of CUIPA. Mead v. Burns, 199 Conn. 651, 663, (1986). “[A] CUTPA claim based on an alleged unfair claim settlement practice prohibited by § 38a-816(6) 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 Ins. Co., 229 Conn. 842, 850, (1994). Alleging “improper 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’ as required by § 38a-816(6).” Id., 849.
As previously noted by this court, “there is currently a split of authority in the Superior Court as to the degree of factual detail required when alleging an insurer’s unfair claim settlement practices with respect to other insureds . . . For instance, in [Colonial Restaurant Supply, LLC v. Travelers Indemnity Co. of America, Superior Court, judicial district of New Haven, Docket No. CV 07 5009224 (June 12, 2007, Skolnick, J.T.R.)], the court found the following allegation sufficient: `[t]he defendant’s conduct . . . rises to the level of a general business practice in that, other insureds have made claims that the defendant has engaged in similar conduct in the handling of its insurance claims and/or the defendant has been previously found to have CT Page 14003 violated-statutes prohibiting unfair and deceptive trade practices, for its failure to pay the full extent of an insured’s loss pursuant to a commercial business insurance policy . . . `
“In contrast, in Asmus Electric, Inc. v. G.M.K. Contractors, Inc., Superior Court, judicial district of New Haven, Docket No. CV 04 0489527 (February 25, 2005, Lopez, J.), the court found that the plaintiff’s allegation that the defendant `has engaged in similar conduct with other persons and entities with such frequency as to indicate a general business practice . . .’ was legally insufficient . . . Similarly, in Currie v. Aetna Casualty Surety Co., Superior Court, judicial district of Hartford, Docket No. CV 96 0558900 (August 12, 1999, Mulchay, J.), the court granted a defendants’ motion to strike the following allegation: `[the defendants] have continued to commit the acts referred to above as to the plaintiff’s . . . and as to other insureds and policy holders of the defendants or the defendants’ holding companies, affiliates, or subsidiaries with such frequency as to constitute a general business practice in violation of Conn. Gen. Stat. § 38a-816(6) . . .’ The Asmus
and Currie decisions are indicative of a general trend among Superior Court judges to grant a motion to strike a CUTPA claim when the `plaintiff has inserted the magic words of other acts of insurance misconduct by the defendant, although not stat[ed] the factual basis for that claim . . . [O]n a motion to strike, legal conclusions are not admitted . . . and the bald statement that the defendant has, as a matter of business policy, failed to settle workers’ compensation claims of other persons is a legal conclusion, particularly since the other claimants are not identified.’ (Citation omitted.) Ciarleglio v. Fireman’s Fund Ins. Co., Superior Court, judicial district of Fairfield, Docket No. CV 90 0276028 (December 16, 1993, Fuller, J.) [10 Conn. L. Rptr. 579, 580].” (Citations omitted; internal quotation marks omitted.) Finocchio v. Atlantic Mutual Ins. Co., supra, 47 Conn. L. Rptr. 625-26.
In the present case, all of the malfeasances allegedly committed by the defendant are unfair claim settlement practices as prohibited by §38a-816(6).[3] Although most of the plaintiff’s specific factual allegations involve the settlement of the claim that is at issue in this matter, at the end of count two, the plaintiff does allege that “the action of the Defendant Vigilant is a general business practice, which is designed to avoid the timely payment of claims to its insured . . . Upon information and belief, the Defendant Vigilant has engaged in multiple instances of the type of misconduct against its insureds that the Plaintiff herein has suffered.” With its blanket contention that the actions of the defendant constitute a general business practice, the plaintiff merely alleges a legal conclusion, which is insufficient to CT Page 14004 withstand a motion to strike. The issue then becomes whether the plaintiff’s allegation that the defendant “has engaged in multiple instances of the type of misconduct against its insureds” is enough to allege a general business practice.
In Finocchio v. Atlantic Mutual Ins. Co., supra, 47 Conn. L. Rptr. 624, this court determined that the following allegation was insufficient: “[the defendant] has and in the past engaged, and continues to engage in unfair and deceptive acts and/or practices in the business of insurance . . .” Id., 626. Similarly, in Union Street Furniture and Carpet, Inc. v. Peerless Indemnity Ins. Co., supra, Superior Court, Docket No. CV 08 5008699, this court held that the plaintiff failed to allege a general business practice when the complaint stated that “[u]pon information and belief, it is standard policy of the [d]efendant . . . to deny these type[s] of claims and/or claim . . .” Id. Although the plaintiff in the present case does allege that the defendant has engaged in “multiple instances” of this type of conduct against its insureds, there are no explicit factual references to unfair settlement practices in other claims. As all of the specific factual allegations in count two involve only the settlement negotiations between the plaintiff and the defendant, and the plaintiff fails specifically to reference other claims where the defendant has committed malfeasance the plaintiff does not allege a general business practice and fails to state a claim under CUTPA for alleged violations of CUIPA.
The plaintiff also argues that count two alleges sufficient facts to maintain a claim for CUTPA under the cigarette rule.[4] “It is well settled that in determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the [F]ederal [T]rade [C]ommission for determining when a practice is unfair: (1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers, [competitors or other business persons] . . . All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three.” (Internal quotation marks omitted.) Naples v. Keystone Building Development Corp., 295 Conn. 214, 227-28, 990 A.2d 326 (2010). Under certain circumstances, “the same facts that establish a breach of contract claim may be sufficient to establish a CUTPA violation . . .” Lester v. Resort Camplands International, Inc., 27 Conn.App. 59, 71, 605 A.2d 550 (1992). Nevertheless, the majority CT Page 14005 rule among Superior Court judges is that “[a] simple breach of contract, even if intentional, does not amount to a violation of the Act; a [claimant] must show substantial aggravating circumstances attending the breach to recover under [CUTPA].” (Internal quotation marks omitted.)Belveron Partners Fund I, LP v. Augustus Manor Associates Limited Partnership, Superior Court, complex litigation docket at Hartford, Docket No. X04 CV 09 5032917 (March 31, 2010, Shaprio, J.). In fact, this court has previously determined that a simple breach of contract without any aggravating factors or egregious conduct does not amount to a CUTPA violation. Abatron, Inc. v. Reed Elsevier, Inc., Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 02 0191987 (January 24, 2003, Adams, J.) (stating that “almost if not all Superior Court decisions and one decision of the United States Court of Appeals for the Second Circuit, applying Connecticut law, have held that a simple breach of contract does not amount to a violation of CUTPA”).
Although the plaintiff in the present case does not explicitly allege a cause of action for breach of contract, [5] the crux of the plaintiff’s CUIPA/CUTPA claim in count two is the defendant’s alleged failure to settle a claim based on an insurance contract between the parties. Even if construed in a manner most favorable to the pleader, the most that count two alleges is that the defendant purposefully, intentionally and dishonestly sought to avoid payment of the plaintiff’s claim. At most, these allegations could demonstrate an intentional breach of contract on the part of the defendant. Absent allegations of additional aggravating factors or egregious conduct, these allegations are insufficient to state a claim for CUTPA under the cigarette rule, and the court grants the defendant’s motion to strike count two.
Having determined that count two is legally insufficient, the court also strikes the plaintiff’s third and fourth prayers for relief, which request statutory punitive damages and counsel fees pursuant to General Statutes § 42-110g(a) and (d). “Practice Book . . . § 10-39, allows for a claim for relief to be stricken only if the relief sought could not be legally awarded.” Pamela B. v. Ment, 244 Conn. 296, 325, 709 A.2d (1998). As these prayers for relief request statutory remedies for violations of CUTPA, and the court has ruled that the plaintiff’s CUTPA claim should be stricken, the plaintiff is legally barred from obtaining punitive damages and attorneys fees pursuant to CUTPA.
CONCLUSION
For all of the reasons stated above, the court denies the defendant’s motion to strike count one, but grants the defendant’s motion to strike count two and the third and fourth prayers for relief. CT Page 14006
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