STATE of Connecticut v. ACORDIA, INC.
The plaintiff, the state of Connecticut, brought this action against the defendant, Acordia, Inc., pursuant to General Statutes § 42–110m, alleging that the defendant's failure to disclose to its clients certain contingent commission agreements that it had entered into with insurance companies violated the Connecticut Unfair Trade Practices Act (CUTPA); General Statutes § 42–110a et seq.; and the Connecticut Unfair Insurance Practices Act (CUIPA). General Statutes § 38a–815 et seq. Following a court trial, the court rendered judgment in favor of the plaintiff, concluding that the defendant's actions violated both CUTPA and CUIPA. The defendant appeals1 from the judgment of the trial court, claiming that the court improperly relied on its conclusion that the defendant had breached a fiduciary duty owed to its clients to determine that the defendant violated CUIPA. General Statutes § 38a–816 (1) and (2).2 The defendant further contends that if this court concludes that the trial court improperly concluded that the defendant violated CUIPA, the CUTPA violation cannot stand. We agree with the defendant that the trial court improperly concluded that the defendant violated CUIPA. We further conclude that, in the absence of a CUIPA violation, the CUTPA claim must fail in the context of the present case. Accordingly, we reverse the judgment of the trial court.3
The trial court found the following pertinent facts. During the relevant time period between 1999 and 2002, the defendant, an independent insurance broker headquartered in Chicago, Illinois, offered its clients insurance products from multiple insurance companies. The defendant operated a decentralized organization with 75 to 100 local offices throughout the United States. The local offices, each of which was a separate corporate entity, employed approximately 1000 producers. Producers are the individuals in the industry who have direct contact with clients, cultivate personal relationships with them and assist them in selecting insurance policies that best meet the clients' needs. The defendant sold insurance only through these local offices and producers. Although the defendant did not maintain a local office in Connecticut, it solicited customers in Connecticut and sold and serviced insurance products to Connecticut consumers through its offices in New Jersey, New York and Massachusetts, among other states.
Insurance companies sell their products in one of two ways, either directly or through an agent or broker. Brokers may be either “captive” or “independent.” A captive broker offers products only from a particular insurance company. By contrast, an independent broker, such as the defendant, offers its clients a choice of policies from multiple insurance companies. Independent brokers are compensated for their services either by a fee charged directly to the consumer or by a commission, the cost of which is included in the premium.
In 1999, the defendant proposed a three year program to the twenty insurance companies with which it placed the most business; the program was called the “millennium partnership program” (program). Insurers who chose to participate in the program (participating insurers) agreed to pay on a quarterly basis 1 percent of the total value of the premiums that the defendant placed with that company, in addition to any commission already paid to the defendant. In exchange for this payment, Charles Ruoff, the defendant's chief marketing officer, represented to prospective participants that participating insurers would be given “priority status” and would “have the opportunity under the [program] to quote more business through [the defendant] to [the defendant's] clients and sell more insurance.” Ruoff also told prospective participants that producers at the local offices would be informed of their priority status. Five insurers agreed to participate in the program: The Travelers Indemnity Company, The Hartford Fire Insurance Company, Chubb Group of Insurance Companies, Atlantic Mutual Insurance Company and Royal & Sun Alliance Insurance Company. Subsequently, Kevin Con-boy, the defendant's east regional director, instructed executive management that the participating insurers “should be given preferential consideration on new and renewal placements.”
The defendant's clients were never informed of the existence of the program. Four Connecticut consumers who were clients of the defendant testified at trial that they had never heard of the program. They also testified that they relied on their broker—in each instance a producer employed by one of the defendant's subsidiaries—to provide them with independent and unbiased advice regarding the purchase of insurance coverage.
Despite Ruoff's assurances to the participating insurers, the plaintiff failed to prove at trial that producers in fact had been informed of the program. Of the four producers who testified at trial, three had never heard of the program or of the contingent commissions, and the fourth testified only that he “may have heard about it.” Additionally, the plaintiff failed to prove that any of the producers steered their clients toward participating insurers or did anything other than act in the clients' best interests in assisting them to obtain insurance. Moreover, the court found that the plaintiff failed to prove that any clients suffered any individual monetary harm from the failure to disclose the program, and, instead found that clients paid the same insurance premiums that they would have paid if the program had not existed.4
In 2006, at the request of the Commissioner of Consumer Protection for the state of Connecticut, pursuant to § 42–110m (a),5 the plaintiff brought this action.6 After trial, the court, having concluded that the defendant had breached a fiduciary duty owed to its clients and that this breach violated both CUTPA and CUIPA, rendered judgment in favor of the plaintiff and ordered only that the defendant “account for nondisclosed [program] based commissions for products purchased by consumers in the state of Connecticut.” The court denied the plaintiff's request for injunctive relief. See footnote 6 of this opinion. The court subsequently denied the plaintiff's motion seeking an articulation of the scope of the ordered accounting. This appeal followed.
The defendant claims that the trial court improperly incorporated the concept of fiduciary duty into its analysis of whether the defendant had violated CUIPA and rested its conclusion that the defendant had violated CUIPA solely on its finding of a violation of fiduciary duty. Furthermore, the defendant argues, the lack of a CUIPA violation is fatal to the plaintiff's CUTPA claim. The plaintiff responds that the court did not predicate its conclusion that the defendant violated CUIPA on any fiduciary duty owed by the defendant to its clients. Rather, the plaintiff contends, the defendant mischaracterizes the rationale of the trial court in so arguing. Additionally, the plaintiff claims that its CUTPA claim does not stand or fall with the CUIPA violation because a CUIPA violation is not a necessary predicate to the conclusion that an insurer violated CUTPA. We agree with the defendant that the court improperly relied on the concept of fiduciary duty in concluding that the defendant violated CUIPA. We further conclude that, in the absence of a valid CUIPA claim in the present case, the plaintiff's CUTPA claim must fail.
The defendant challenges the trial court's conclusion that it violated CUIPA on the basis that in doing so, the court improperly determined that breach of a fiduciary duty constitutes a violation of CUIPA. The plaintiff asserts that the defendant mischaracterizes the rationale of the trial court, which the plaintiff reads as identifying and ruling on two independent claims: a claim that the defendant violated CUTPA by breaching its fiduciary duty to disclose a conflict of interest to its clients, and a claim that the defendant violated CUIPA by engaging in conduct that was misleading or deceptive. Although the trial court's memorandum of decision is not entirely clear as to the basis for its conclusion that the defendant violated CUIPA, we believe that the defendant's reading of the decision is more accurate. We therefore agree that the court improperly predicated its conclusion that the defendant violated CUIPA on the court's determination that the defendant had breached a fiduciary duty owed to its clients.
This issue presents a question of law, over which our review is plenary. See Fisher v. Big Y Foods, Inc., 298 Conn. 414, 423–24, 3 A.3d 919 (2010) (“[T]he scope of our appellate review depends [on] the proper characterization of the rulings made by the trial court. To the extent that the trial court has made findings of fact, our review is limited to deciding whether such findings were clearly erroneous. When, however, the trial court draws conclusions of law, our review is plenary and we must decide whether its conclusions are legally and logically correct and find support in the facts that appear in the record.” [Internal quotation marks omitted.] ).
In order to resolve the dispute between the parties as to the proper understanding of the rationale of the trial court as it pertains to the court's conclusion that the defendant violated CUIPA, we examine in detail the court's discussion of fiduciary duty. The court introduced the principle of fiduciary duty in the course of its consideration of the plaintiff's CUTPA claim, and began that analysis by observing that “a violation of CUTPA may be established by showing ․ a practice amounting to a violation of public policy.” (Citation omitted; internal quotation marks omitted.) Daddona v. Liberty Mobile Home Sales, Inc., 209 Conn. 243, 254, 550 A.2d 1061 (1988). To make the required showing, the court noted, a litigant must show that the challenged practice “without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise․” (Internal quotation marks omitted.) Cheshire Mortgage Service, Inc. v. Montes, 223 Conn. 80,105–106, 612 A.2d 1130 (1992). The court then turned to the common law for the source of the public policy violation, setting forth principles of agency and fiduciary duty. The court concluded that the defendant owed a fiduciary duty to its clients, based on its findings that the defendant had held itself out to clients as independent, sought to establish a relationship of trust and confidence with clients, and encouraged clients to expect that the defendant would act in their best interests. The court next concluded that the defendant breached that fiduciary duty by failing to disclose the existence of the program to its clients. The court reasoned that the program created a conflict of interest for the defendant between the incentive created by the program to direct clients toward products offered by the participating insurers and the duty that the defendant owed to the clients to make recommendations solely based on the clients' best interests, consistent with the relationships of trust and confidence established between producers and clients. In light of the existence of a fiduciary duty, the court concluded that the failure to disclose the conflict of interest amounted to a betrayal of the trust and confidence that the clients placed in the defendant. Accordingly, the court concluded that the defendant's failure to disclose that conflict of interest “violated Connecticut's public policy of respecting fiduciary obligations as that policy existed in 1999–2002” and that by doing so the defendant had “engaged in conduct prohibited under CUTPA.”
The trial court next considered the defendant's claim that even if the court concluded that the defendant's conduct constituted a breach of fiduciary duty in violation of public policy, the plaintiff could not prevail in its CUTPA claim, because it had failed to prove that the defendant's conduct violated CUIPA. The court explained its interpretation of this court's holding in Mead v. Burns, 199 Conn. 651, 509 A.2d 11 (1986), namely, that when a party seeks to hold a defendant in the insurance industry liable under CUTPA, that party bears the burden “to prove that the CUTPA claim is also a CUIPA violation.” Having concluded that the plaintiff had established its CUTPA claim—that the defendant's conduct violated CUTPA because it violated the state's public policy requiring adherence to fiduciary duty—the court turned to the question of whether that violation also violated CUIPA. The court then stated in a conclusory manner that the defendant's “nondisclosure of the existence of the [program] to its customers was ‘deceptive or misleading’ as those terms are used in CUIPA.” The only analysis supporting that conclusion is the court's discussion of the defendant's alleged breach of fiduciary duty and its statement that the plaintiff bore the burden to prove that the CUTPA violation—a violation of the public policy requiring adherence to fiduciary duty—was also a CUIPA violation. Our reading of the trial court's decision, therefore, is that the court predicated its conclusion that the defendant violated CUIPA on its determination that the defendant breached a fiduciary duty owed to its clients.
We now turn to the defendant's substantive claim, that is, whether the trial court properly relied on the common-law principle of fiduciary duty to conclude that the defendant's actions violated CUIPA. Put another way, we must examine whether the court properly looked beyond the confines of CUIPA itself and relied on the common law to conclude that the defendant's actions constituted an unfair insurance practice. To the extent that this question requires us to consider whether the legislature intended CUIPA to serve as the comprehensive and exclusive means of identifying unfair insurance practices, it involves a question of statutory interpretation. “The process of statutory interpretation involves the determination of the meaning of the statutory language as applied to the facts of the case, including the question of whether the language does so apply․ When construing a statute, [o]ur fundamental objective is to ascertain and give effect to the apparent intent of the legislature․ [General Statutes] § 1–2z directs us first to consider the text of the statute itself and its relationship to other statutes. If, after examining such text and considering such relationship, the meaning of such text is plain and unambiguous and does not yield absurd or unworkable results, extratextual evidence of the meaning of the statute shall not be considered․ When a statute is not plain and unambiguous, we also look for interpretive guidance to the legislative history and circumstances surrounding its enactment, to the legislative policy it was designed to implement, and to its relationship to existing legislation and common law principles governing the same general subject matter․ A statute is ambiguous if, when read in context, it is susceptible to more than one reasonable interpretation.” (Internal quotation marks omitted.) Hartford/Windsor Healthcare Properties, LLC v. Hartford, 298 Conn. 191, 197–98, 3 A.3d 56 (2010).
We begin with the language of CUIPA. Section 38a815 provides in relevant part: “No person shall engage in this state in any trade practice which is defined in section 38a–816 as, or determined pursuant to sections 38a–817 and 38a–818 to be, an unfair method of competition or an unfair or deceptive act or practice in the business of insurance․ The [Insurance] [C]ommissioner shall have power to examine the affairs of every person engaged in the business of insurance in this state in order to determine whether such person has been or is engaged in any unfair method of competition or in any unfair or deceptive act or practice prohibited by sections 38a–815 to 38a–819, inclusive․” Section 38a–815 thus identifies two different ways in which a practice may be determined to be an unfair insurance practice in violation of CUIPA: the practice may fall under one of the defined unfair insurance practices in § 38a–816, or the Insurance Commissioner (commissioner) may determine, pursuant to General Statutes §§ 38a–817 and 38a–818, that the practice constitutes “an unfair method of competition or an unfair or deceptive act or practice in the business of insurance․” General Statutes § 38a–815.
The next provision of the statutory scheme identifies certain practices that “are defined as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance․” General Statutes § 38a–816; see footnote 2 of this opinion. The twenty-two subdivisions now codified in § 38a–816 list a broad array of different practices. To illustrate the breadth of that list, we observe in brief summary that those practices include misrepresentations and false advertising of insurance policies; false advertising generally; defamation; boycotts; coercion and intimidation; false financial statements; unfair claim settlement practices; failure to maintain complaint handling procedures; misrepresentation in insurance applications; any violation of General Statutes §§ 38a–358, 38a–446, 38a447, 38a–488, 38a–825, 38a–826, 38a–828, 38a–829, 38a–465 to 38a–465q, 38a–478 or 42–260; denial of reimbursement on the basis of race, color or creed, or unfair discrimination against licensed practitioners of the healing arts; coercion of debtors; discrimination in provision of insurance on the basis of physical disability, mental retardation, blindness, exposure to diethylstilbestrol, genetic information, or being a victim of family violence; failure to pay a health care provider within defined time periods; when a motor vehicle has been declared to be a total constructive loss, failure to pay one of certain defined amounts under an automobile insurance policy; and, with respect to a managed care organization, failure to establish a confidential procedure for medical record information.
It is important to observe that, in addition to setting forth a broad array of practices, § 38a–816 defines each listed practice in specific detail. For example, § 38a–816 (1), which addresses misrepresentations and false advertising of insurance policies, includes “[m]aking, issuing or circulating, or causing to be made, issued or circulated, any estimate, illustration, circular or statement, sales presentation, omission or comparison which: (A) [m]isrepresents the benefits, advantages, conditions or terms of any insurance policy; (B) misrepresents the dividends or share of the surplus to be received, on any insurance policy; (C) makes any false or misleading statements as to the dividends or share of surplus previously paid on any insurance policy; (D) is misleading or is a misrepresentation as to the financial condition of any person, or as to the legal reserve system upon which any life insurer operates; (E) uses any name or title of any insurance policy or class of insurance policies misrepresenting the true nature thereof; (F) is a misrepresentation, including, but not limited to, an intentional misquote of a premium rate, for the purpose of inducing or tending to induce to the purchase, lapse, forfeiture, exchange, conversion or surrender of any insurance policy; (G) is a misrepresentation for the purpose of effecting a pledge or assignment of or effecting a loan against any insurance policy; or (H) misrepresents any insurance policy as being shares of stock.” This subdivision thus carefully delineates the specific means of dissemination that come within the definition of “[m]isrepresentations and false advertising” and specifies the types of representations that can qualify as misleading under the statute, providing a very detailed description of which types of practices the legislature intended to include under the category of “[m]isrepresentations and false advertising of insurance policies.” General Statutes § 38a–816 (1).
The itemization of different types of unfair insurance practices in § 38a–816 is significant. We have stated that “[u]nless there is evidence to the contrary, statutory itemization indicates that the legislature intended the list to be exclusive.” (Internal quotation marks omitted.) Bridgeport Hospital v. Commission on Human Rights & Opportunities, 232 Conn. 91, 101, 653 A.2d 782 (1995). In addition, § 38a–816 is not merely a list, it expressly identifies itself as a definitional statute. The introductory sentence of that statute provides that “[t]he following are defined” as unfair insurance practices. General Statutes § 38a–816. By framing the list as a definitional one, the legislature already constrained the discretion of courts to look to other sources in finding a particular insurance practice to be “unfair” in violation of CUIPA. “When legislation contains a specific definition, the courts are bound to accept that definition.” International Business Machines Corp. v. Brown, 167 Conn. 123, 134, 355 A.2d 236 (1974). This stands in sharp contrast to a list that recites that the category “includes” the following, thereby suggesting that items not listed might also come within the category.
Section 38a–816 does not, however, expressly provide that the list is intended to be exclusive, and, as we already have observed, § 38a–815 provides that the commissioner may determine, pursuant to §§ 38a–817 and 38a–818, that a particular practice constitutes an unfair insurance practice in violation of CUIPA. Both sections suggest that the commissioner has the authority to recognize a violation of CUIPA notwithstanding the failure of the particular practice at issue to conform to any of the defined practices in § 38a–816.
Sections 38a–817 and 38a–818 authorize the commissioner to conduct a hearing to determine whether a party has engaged in an unfair or deceptive insurance practice in violation of CUIPA. Both sections recognize the commissioner's authority to determine that the practice at issue violates CUIPA, notwithstanding the failure of the practice to come within one of the defined practices listed in § 38a–816. The commissioner may proceed under § 38a–817 (a) “[w]henever the commissioner has reason to believe that any such person has been engaged or is engaging in violation of sections 38a–815 to 38a–819, inclusive, in any unfair method of competition or any unfair or deceptive act or practice defined in section 38a–816, and that a proceeding by the commissioner in respect thereto would be in the interest of the public․” Following the hearing, if the commissioner determines that the practice is an unfair or deceptive insurance practice in violation of CUIPA, but is not one of the defined practices in § 38a–816, the commissioner may issue a cease and desist order. If the commissioner determines that the practice is one of the defined practices in § 38a–816, the commissioner may order additional penalties and remedies. General Statutes § 38a–817 (b).
Section 38a–818, the companion provision to § 38a–817, authorizes the commissioner to conduct a hearing “in the same manner as the hearings provided for in section 38a–817,” “[w]henever the commissioner has reason to believe that any person engaged in the business of insurance is engaging in this state in any method of competition or in any act or practice in the conduct of such business which is not defined in section 38a–816, that such method of competition is unfair or that such act or practice is unfair or deceptive and that a proceeding by him in respect thereto would be to the interest of the public․” (Emphasis added.) General Statutes § 38a–818. If the commissioner determines that the practice violates General Statutes §§ 38a–815 to 38a–819, inclusive, he may file a petition in Superior Court seeking an order enjoining or restraining the person from engaging in the practice at issue. General Statutes § 38a–818.
Sections 38a–817 and 38a–818, read together with §§ 38a–815 and 38a–816, suggest that the legislature intended to provide in § 38a–816 a comprehensive list of insurance practices that are unfair or deceptive in violation of CUIPA, but that it recognized the need to authorize the commissioner to act in the event that a person is engaging in a practice that had not yet been defined expressly as an unfair insurance practice in § 38a–816, but that could possibly, following a hearing conducted by the commissioner, be determined to constitute an unfair or deceptive insurance practice. It is also significant that the statutory scheme confers upon the commissioner different levels of authority to act, depending on whether the commissioner has reason to believe that the person is engaging in a practice that violates § 38a–816, and, subsequently, whether the commissioner determines that said practice violates § 38a–816. The existence of a violation of § 38a–816 is the standard by which the commissioner's authority to investigate, and subsequently, to order further procedures, remedies or penalties, is statutorily determined. It is also significant that nowhere in §§ 38a–815 to 38a–819, inclusive, is the Superior Court authorized to act in the absence of a violation of § 38a–816, unless the commissioner first has made the requisite finding that a person or entity has violated CUIPA by engaging in an unfair or deceptive insurance practice that is not defined in § 38a–816.
There is nothing in the record of the present case that reveals that the commissioner initiated any proceedings against the defendant pursuant to the authority established in §§ 38a–817 and 38a–818, which, accordingly, are not at issue in the present case. The question we must address, therefore, is whether the legislature intended § 38a–816 to preclude the courts from determining that a party engaged in an unfair insurance practice in violation of CUIPA based on legal authority other than § 38a–816, specifically, the common law. With respect to that question, although the statutory language strongly suggests an answer in the affirmative, we cannot say that the language is plain and unambiguous. Accordingly, we turn to the origin and history of the statutory scheme of CUIPA for further guidance. CUIPA was enacted in 1955 and was based on a model insurance trade practices act promulgated by the National Association of Insurance Commissioners in 1947. Mead v. Burns, supra, 199 Conn. at 659, 509 A.2d 11. The impetus behind both the promulgation of the model act and the subsequent enactment of CUIPA was “to preempt federal regulation.” Id. During the floor debate of House Bill No. 978, Representative J. Frederick Bitzer explained that there was a need to have a statute that set forth in detail the powers of the commissioner with respect to unfair trade practices in the insurance industry, noting that doing so would “bar the Federal Trade Commission from entering into the field of supervising [this area] which properly belongs to the [I]nsurance [C]ommissioner.” 6 H.R. Proc., Pt. 2, 1955 Sess., p. 1037; see also Conn. Joint Standing Committee Hearings, Insurance, 1955 Sess., p. 37, remarks of W. Ellery Allyn (“[t]he reason this bill is in is because of the Federal Trade Commission's indication that they will move in on certain matters if they are not regulated by the [s]tate”). From the outset, therefore, the legislative intent in passing CUIPA was to occupy the field with regard to unfair trade practices in the insurance industry.
The legislature's intent to define comprehensively unfair insurance practices in this state is further evidenced by subsequent amendments to CUIPA. Number 73–73 of the 1973 Public Acts enacted the most significant revisions to CUIPA. Testifying before the Insurance Committee regarding the proposed changes, the Insurance Commissioner at the time, Paul B. Altermatt, explained that the changes “more fully [spell] out what constitutes an unfair [insurance] practice” and considerably modernized the existing statutory scheme. Conn. Joint Standing Committee Hearings, Insurance and Real Estate, 1973 Sess., p. 46. Describing the nature of some of the specific revisions, he explained that “unfair claims settlement practices for instance ․ are now spelled out in detail․” Id. Altermatt elaborated that the revised provisions set forth in greater detail “precisely what is an unfair practice and what isn't as regards claims, and claims settlement practices.” Id. In discussion on the Senate floor, Senator P. Edmund Power stated that the purpose of the revisions were to “enable the [I]nsurance [C]ommissioner to more effectively carry out his responsibility of protecting our Connecticut citizens.” 16 S. Proc., Pt. 3, 1973 Sess., p. 1214. Senator Power's remarks reveal not only that the legislature intended to set out specifically the types of actions that constitute unfair insurance practices in a highly detailed manner, but also that the legislature viewed accomplishing that task as essential to the underlying purpose of CUIPA: enabling the commissioner to better protect consumers. The many subsequent amendments incorporating additional practices as violative of CUIPA demonstrate an ongoing legislative effort to keep the list of prohibited practices as current as possible and provide further evidence of the legislature's intent to provide in CUIPA a comprehensive list of unfair insurance practices. See, e.g., Public Acts 1980, No. 80–259 (adding refusal to insure because of physical disability or mental retardation); Public Acts 1984, No. 84–189 (adding denial of insurance based on individual's exposure to diethylstilbestrol); Public Acts 1986, No. 86–70 (adding refusal to insure or otherwise discriminating against individual based on blindness); Public Acts 1986, No. 86–407 (adding failure to pay claim within forty-five days of receipt of proof of loss); Public Acts 1995, No. 95–193 (adding refusal to insure individual because individual is victim of family violence); Public Acts 1997, No. 97–95 (refusal to insure individual on basis of genetic information). The legislative history of CUIPA, therefore, demonstrates that the legislature intended to occupy the field of defining unfair insurance practices, thereby precluding courts from incorporating common-law principles as a basis for finding an unfair insurance practice.
Accordingly, we conclude that the common-law principle of fiduciary duty cannot provide the foundation for a CUIPA violation. Section 38a–816 specifically enumerates, in its twenty-two subdivisions, those practices that are defined as unfair insurance practices in this state. None of those subdivisions identifies breach of fiduciary duty as an unfair insurance practice, or otherwise suggests that a breach of fiduciary duty can give rise to an unfair insurance practice. Because there is no statutory basis for concluding that breach of fiduciary duty constitutes a violation of CUIPA, we conclude that the trial court improperly incorporated this common-law concept into its CUIPA analysis by relying on its determination that the defendant had violated the fiduciary duty it owed to its clients to conclude that the defendant violated CUIPA.
We next address the defendant's claim that, in the absence of a CUIPA violation, the plaintiff's CUTPA claim must fail. The defendant contends that pursuant to our decision in Mead v. Burns, supra, 199 Conn. at 651, 509 A.2d 11, conduct in the insurance industry may constitute a CUTPA violation only if the conduct also violates CUIPA. The plaintiff responds that Mead applies only to CUTPA claims that are established through CUIPA, and its CUTPA claim is premised not on a CUIPA violation, but on the plaintiff's violation of the public policy requiring adherence to one's fiduciary duties. We conclude that the plaintiff's CUTPA claim was barred by Mead because conduct by an insurance broker or insurance company that is related to the business of providing insurance can violate CUTPA only if it violates CUIPA,7 and a CUTPA claim in this context cannot be based on breach of a common-law duty.
In Mead, the plaintiff claimed that the defendant insurance company had refused in bad faith to settle his claim without conducting a reasonable investigation, in violation of both CUIPA and CUTPA. Id., at 653–54, 509 A.2d 11. This court concluded that the trial court properly had struck the plaintiff's CUIPA claim because CUIPA requires “a showing of more than a single act of insurance misconduct.” Id., at 659, 509 A.2d 11. Addressing the question of whether the trial court properly had struck the plaintiff's CUTPA claim, the court observed that General Statutes (Rev. to 1985) § 38–62(d), which is now § 38a–817 (d), provides: “No order of the commissioner under sections 38–60 to 38–64 [now sections 38a–815 to 38a–819], inclusive, shall relieve or absolve any person affected by such order from any liability under any other laws of this state.” (Emphasis omitted; internal quotation marks omitted.) Id., at 661, 509 A.2d 11. In addition, CUTPA provides: “No person shall engage in ․ unfair or deceptive acts or practices in the conduct of any trade or commerce.” General Statutes § 42–110b (a); Mead v. Burns, supra, 199 Conn. at 661–62, 509 A.2d 11. Finally, CUTPA provides: “Nothing in this chapter shall apply to: (1) Transactions or actions otherwise permitted under law as administered by any regulatory board or officer acting under statutory authority of the state or of the United States․” General Statutes § 42–110c (a); Mead v. Burns, supra, at 662, 509 A.2d 11. This court concluded that, “[i]n combination, these statutory provisions do indicate that the legislature elected to subject insurance practices to multiple rather than to singular regulatory supervision.” Mead v. Burns, supra, at 662, 509 A.2d 11.
Having concluded that “it is possible to state a cause of action under CUTPA for a violation of CUIPA”; id., at 663, 509 A.2d 11; this court addressed the following question: “Under what circumstances, if any, may [insurance related] conduct that does not violate CUIPA constitute an unfair act or practice under CUTPA?” (Emphasis added .) Id. In support of his claim that “conduct not specifically prohibited by CUIPA may nonetheless offend the public policy of that [act] and therefore may be actionable under CUTPA”; id., at 664, 509 A.2d 11; the plaintiff relied on this court's decisions in Conaway v. Prestia, 191 Conn. 484, 464 A.2d 847 (1983), and Griswold v. Union Labor Life Ins. Co., 186 Conn. 507, 442 A.2d 920 (1982). Mead v. Burns, supra, 199 Conn. at 662–65, 509 A.2d 11. In Conaway, the plaintiff tenants claimed that the defendant landlord had violated certain statutes requiring landlords to obtain certificates of occupancy for each rental unit. Conaway v. Prestia, supra, at 486–87, 464 A.2d 847. The plaintiffs further claimed that this failure to comply with the statutes violated CUTPA. Id., at 487–88, 464 A.2d 847. The trial court concluded that the defendant had violated CUTPA by collecting rents from the plaintiffs without having complied with the statutory requirement for certificates of occupancy. Id., at 488, 464 A.2d 847. On appeal, this court adopted for the first time “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—whether, 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 businessmen) ].8 [Id .], 492–93, 464 A.2d 847․” (Citations omitted; footnote added; internal quotation marks omitted.) McLaughlin Ford, Inc. v. Ford Motor Co., 192 Conn. 558, 567–68, 473 A.2d 1185 (1984). This court concluded in Conaway that “the defendants' actions of receiving the rent, while not specifically prohibited pursuant to [the relevant housing statutes], unquestionably offended the public policy, as embodied by these statutes, of insuring minimum standards of housing safety and habitability ․ [and] amounted to unfair acts or practices within the meaning of § 42–110b.” Conaway v. Prestia, supra, at 493, 464 A.2d 847.
In Griswold v. Union Labor Life Ins. Co., supra, 186 Conn. at 508–509, 442 A.2d 920, the plaintiffs brought a claim that the defendant insurance company had refused to pay certain insurance policy benefits to which they were entitled. They further claimed that the defendant's conduct violated both CUTPA and CUIPA. Id., at 518–20, 442 A.2d 920. The defendant contended that the claim was barred because the plaintiffs had failed to exhaust their administrative remedies under CUIPA. Id ., at 518, 442 A.2d 920. This court concluded that, because the applicable revision of CUIPA did not “authorize the commissioner to award damages to an aggrieved person nor [did] he have the authority to determine a private right to damages ․ the plaintiffs had no practical or adequate administrative remedy which would require exhaustion.” Id., at 520, 442 A.2d 920. Accordingly, this court concluded that the plaintiffs were “entitled to maintain a private right of action for monetary damages [pursuant to § 42–110b] for alleged unfair trade practices, as defined by [CUIPA], without first exhausting the administrative remedies under [CUIPA]․” Id., at 520–21, 442 A.2d 920.
In Mead, this court stated that, “[a]lthough Conaway holds that CUTPA may authorize a cause of action that builds upon the public policy embodied in specific statutory provisions, such a CUTPA claim must be consistent with the regulatory principles established by the underlying statutes. In Griswold, [this court] held that a litigant complaining of unfair insurance practices was entitled to maintain a private right of action under CUTPA for alleged unfair trade practices, as defined by [CUIPA]․ The definition of unacceptable insurer conduct in [CUIPA] reflects the legislative determination that isolated instances of unfair insurance settlement practices are not so violative of the public policy of this state as to warrant statutory intervention. Under CUTPA, as under CUIPA, a litigant is bound by this legislative determination.” (Citation omitted; footnote omitted; internal quotation marks omitted.) Mead v. Burns, supra, 199 Conn. at 665–66, 509 A.2d 11; see also Lees v. Middlesex Ins. Co., 229 Conn. 842, 851, 643 A.2d 1282 (1994) (“[b]ecause the plaintiff's evidence was insufficient to satisfy the requirement under CUIPA that the defendant's alleged unfair claim settlement practices constituted a ‘general business practice,’ the plaintiff's CUTPA claim could not survive the failure of her CUIPA claim”).
Thus, this court in Mead and Lees clearly held that, if a plaintiff brings a claim pursuant to CUIPA alleging an unfair insurance practice, and the plaintiff further claims that the CUIPA violation constituted a CUTPA violation, the failure of the CUIPA claim is fatal to the CUTPA claim. It is less clear, however, whether Mead stands for the proposition that a plaintiff cannot bring a CUTPA claim alleging an unfair insurance practice unless the practice violates CUIPA. The trial courts are split on this issue. Compare Brico, LLC v. Travelers Casualty & Surety Co. of America, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV–09–5023993 (December 29, 2010) (51 Conn. L. Rptr. 161) (“a cause of action under CUTPA could ․ be maintained [only] if the cause of action also satisfied the necessary elements of a CUIPA violation”), and Newton & Associates, Inc. v. Labrasca, Superior Court, judicial district of Hartford, Docket No. CV–03–0828720S (February 4, 2004) (“[i]t is well settled law in Connecticut that in a CUTPA claim against an insurance company, the plaintiff must allege and prove the CUIPA claim in order to establish a CUTPA claim”), with Smith v. Geico General Ins. Co., Superior Court, judicial district of New London, Docket No. CV–08–5006746S (April 7, 2009) (“as long as the allegations under CUTPA are sufficient, the CUTPA count may stand, even if the CUIPA count is stricken” [internal quotation marks omitted] ), Palmieri v. Nationwide Mutual Ins. Co., Superior Court, judicial district of Fairfield, Docket No. FBT–CV–07–5012326S (January 28, 2009) (same), and Don Beach Movers, Inc. v. Transguard Ins. Co. of America, Superior Court, judicial district of New London, Docket No. CV–05–4002395 (March 8, 2006) (granting motion to strike CUIPA claim on ground that single instance of unfair insurance practice does not violate statute and denying motion to strike CUTPA claim based on same alleged conduct); see also Union Street Furniture Carpet, Inc. v. Hartford Financial Services Group, Inc., Superior Court, judicial district of Stamford–Norwalk, Docket No. FST–CV–04–40002621S (April 12, 2006) (granting motion to strike CUIPA claim on ground that CUIPA provides no private right of action and denying motion to strike CUTPA claim based on same conduct).
The trial court decisions that have concluded that a CUTPA claim based on insurance related conduct can be raised independently of any CUIPA claim can be traced to the decision in Don Beach Movers, Inc. v. Transguard Ins. Co. of America, supra, Superior Court, Docket No. CV–05–4002395. In turn, the trial court in that case relied on this court's decision in Macomber v. Travelers Property & Casualty Corp., 261 Conn. 620, 804 A.2d 180 (2002). In Macomber, this court considered a claim that the defendant insurance companies' conduct in entering into and funding certain structured settlements to settle claims with the plaintiffs violated CUTPA and CUIPA. Id., at 642–45, 804 A.2d 180. With respect to the CUTPA count, the plaintiffs alleged that the defendants “used and employed unfair and deceptive acts and practices in connection with the solicitation and entering into of structured settlements in connection with the sale of annuities․” (Internal quotation marks omitted.) Id., at 643–44, 804 A.2d 180. The defendants contended that this allegation was pleaded with insufficient particularity because the allegation did not conform to the cigarette rule. Id., at 644, 804 A.2d 180. This court was “unpersuaded that there is any special requirement of pleading particularity connected with a CUTPA claim” and, therefore, rejected the defendant's contention. Id. With respect to the CUIPA count, the defendants contended that CUIPA does not provide a private cause of action. Id., at 645 n. 14, 804 A.2d 180. This court concluded that the plaintiffs had alleged that the defendants had violated CUTPA by violating CUIPA and, therefore, there was no need for the court to consider whether CUIPA provides a private cause of action. Id.
In Don Beach Movers, Inc. v. Transguard Ins. Co. of America, supra, Superior Court, Docket No. CV–05–4002395, the trial court relied on Macomber for the proposition that a plaintiff alleging a CUTPA violation is not required to recite the elements of the cigarette rule in order to survive a motion to strike. This court in Macomber, however, simply did not address the question of whether a CUTPA claim related to insurance practices can exist independently of a CUIPA violation under Mead and Lees and, in our view, nothing in this court's reasoning in Macomber suggests that it can. Although this court in Macomber did not expressly find that the plaintiffs' CUTPA count was based on the alleged CUIPA violation, it observed that the CUTPA count involved “the solicitation and entering into of structured settlements in connection with the sale of annuities”; (internal quotation marks omitted) Macomber v. Travelers Property & Casualty Corp., supra, 261 Conn. at 643–44, 804 A.2d 180; and that the CUIPA count was based on “unfair and deceptive acts and practices in the solicitation of and sale of annuities․” Id., at 645, 804 A.2d 180. It would appear, therefore, that the alleged CUTPA violation in Macomber was based on the alleged CUIPA violation. To the extent that it is unclear whether the CUTPA count was based on the CUIPA count or, instead, was based on separate insurance related conduct, the most that can be said about Macomber is that the Mead /Lees issue simply was not raised.9
The trial courts that have concluded that Mead stands for the proposition that a plaintiff must establish a CUIPA claim in order to establish a CUTPA claim for insurance related business practices have engaged in little analysis of that issue. Nevertheless, we conclude that that determination is supported by Mead and by the legislative intent underlying CUIPA. As we previously noted herein, in Mead, this court stated that “[t]he definition of unacceptable insurer conduct in [CUIPA] reflects the legislative determination that isolated instances of unfair insurance settlement practices are not so violative of the public policy of this state as to warrant statutory intervention. Under CUTPA, as under CUIPA, a litigant is bound by this legislative determination.” (Footnote omitted.) Mead v. Burns, supra, 199 Conn. at 666, 509 A.2d 11. Thus, this court strongly suggested that the legislative determinations as to unfair insurance practices embodied in CUIPA are the exclusive and comprehensive source of public policy in this area.
Moreover, it would be difficult to reconcile the court's conclusion in Mead v. Burns, supra, 199 Conn. at 665–66, 509 A.2d 11, that a CUTPA claim that is based on a colorable CUIPA claim cannot survive the demise of the CUIPA claim with a conclusion that a plaintiff can raise a CUTPA claim that is based on insurance related conduct that does not even arguably come within the scope of CUIPA. In other words, if a plaintiff cannot claim that an insurance company violated public policy and, therefore, violated CUTPA, by refusing to pay a single insurance claim without conducting a reasonable investigation, even though the legislature has clearly expressed disapproval of such conduct in § 38a–816 (6)(D), we see no reason why an allegation of a specific type of insurance related conduct that the legislature has expressed no opinion about should be found to support a CUTPA claim.10
Finally, we concluded in part I of this opinion that the legislative history of CUIPA reveals that “the legislature intended to set out specifically the types of actions that constitute unfair insurance practices in a highly detailed manner ․ [and] viewed accomplishing that task as essential to the underlying purpose of CUIPA: enabling the commissioner to better protect consumers. The many subsequent amendments incorporating additional practices as violative of CUIPA demonstrate an ongoing legislative effort to keep the list of prohibited practices as current as possible and provide further evidence of the legislature's intent to provide in CUIPA a comprehensive list of unfair insurance practices․ The legislative history of CUIPA, therefore, demonstrates that the legislature intended to occupy the field of defining unfair insurance practices, thereby precluding courts from incorporating common-law principles as a basis for finding an unfair insurance practice.” (Citations omitted; emphasis added.)
Under the first prong of the cigarette rule, whether a business practice violates CUTPA depends on whether the practice, “without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise—whether, in other words, it is within at least the penumbra of some common-law, statutory, or other established concept of unfairness․” (Internal quotation marks omitted.) McLaughlin Ford, Inc. v. Ford Motor Co., supra, 192 Conn. at 568, 473 A.2d 1185. Because CUIPA provides the exclusive and comprehensive source of public policy with respect to general insurance practices, we conclude that, unless an insurance related practice violates CUIPA or, arguably, some other statute regulating a specific type of insurance related conduct, it cannot be found to violate any public policy and, therefore, it cannot be found to violate CUTPA.
More specifically, with respect to the question of whether an insurance entity's breach of its fiduciary duty violates CUTPA, we note that an insurer generally has a fiduciary relationship with its insured. See Hutchinson v. Farm Family Casualty Ins. Co., 273 Conn. 33, 53, 867 A.2d 1 (2005) (Norcott, J., dissenting) (“American jurisprudence ․ has long recognized that an insurer and its insured have a special relationship ․ that is characterized by elements of public interest, adhesion and fiduciary responsibility” [citations omitted; internal quotation marks omitted] ). Accordingly, many of the unfair practices described in CUIPA, such as the refusal to pay a valid insurance claim under § 38a–816 (6)(D), could be characterized as a breach of fiduciary duty. Nevertheless, this court held in Mead that, because a single failure to pay a valid insurance claim in violation of § 38a–816 (6)(D) does not violate CUIPA, it does not violate CUTPA. Accordingly, we conclude that a common-law breach of fiduciary duty arising in the insurance context that does not violate CUIPA or some other statute regulating the insurance industry cannot provide the basis for a valid CUTPA claim.
The judgment is reversed and the case is remanded to the trial court with direction to render judgment for the defendant.
In this opinion the other justices concurred.