LLC v. Travelers Casualty & Surety Co. of America (2010)

MEMORANDUM OF DECISION RE MOTION TO STRIKE

This action arises out of the plaintiff's claim for payment under a performance bond for services rendered in connection with its work on a public works project.   The plaintiff performed asbestos removal work in connection with projects at two schools in Bridgeport, Connecticut.   As required by statute, the projects were bonded by Southport Contracting, Inc. Southport contracted with Hargrove Environmental for asbestos removal, who in turn contracted with the plaintiff.   The defendant was the surety on the performance bond.

The complaint alleges a violation of Conn. Gen.Stat. § 49-42, the so-called “Little Miller Act,” in count one and a violation of Conn. Gen.Stat. § 42-110, Connecticut's Unfair Trade Practices Act (CUTPA) in count two.   The defendant moved to strike count two on the ground that the plaintiffs complaint alleges conduct governed by Connecticut's Unfair Insurance Practices Act (CUIPA) and as such must satisfy the elements of a claim brought pursuant to CUIPA in order to satisfy a claim under CUTPA.   The plaintiff responds in the first instance that the performance bond is not regulated by CUIPA as it is not “insurance.”   Alternatively the plaintiff avers that the CUTPA claim is not founded in CUIPA violations, but in a violation of CGS § 49-42, a distinct statutory regulatory provision governing these types of contracts.

For the reasons set forth below, the motion to strike is DENIED.

Standard of Review

The role of the trial court in ruling on a motion to strike is test the legal sufficiency of a pleading.  RK Constructors, Inc v. Fusco Corp., 231 Conn. 381, 384 (1994).   The court must “examine the [complaint] construed in favor of the [plaintiff] 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 (1997).  “[I]f facts provable in the complaint would support a cause of action, the motion to strike must be denied ․ Moreover, [w]hat is reasonably implied [in an allegation] need not be expressly alleged.” (citation omitted;  internal quotation marks omitted) Lombard v. Edward J. Peters, Jr., P.C. 252 Conn. 623, 626 (2000).

For purposes of the motion to strike, the moving party admits all facts well pleaded.  RK Constructors, Inc. supra. at 383 n.2. The same is not so of legal conclusions and a motion to strike may be granted if the complaint alleges “mere conclusions of law that are unsupported by the facts alleged.”   Novametrix Medical Systems, Inc. v. BOC Group, Inc. 224 Conn. 210, 215 (1992).

Discussion

In Mead v. Burns, 199 Conn. 651 (1986), the Supreme Court examined the interplay between CUIPA and CUTPA in the context of a claim brought against an insurer which alleged violations of both statutes.   After reviewing the scope of both statutes, the Court held that a cause of action could be maintained against an insurer under both statutes.  Id. at 663.   However, it further held that a cause of action under CUTPA could only be maintained if the cause of action also satisfied the necessary elements of a CUIPA violation.¹  Id. Thus, relying on Mead, the defendant argues that since the plaintiffs allegations here fall within the scope of CUIPA, it cannot maintain a cause of action under CUTPA unless it satisfies the pleading requirements of a CUIPA claim.

The plaintiff argues that the surety or the performance bond at issue here is not insurance” for purposes of bringing the defendant's conduct within the scope of CUIPA.   Thus, the plaintiff argues Mead is inapplicable.   Indeed, the plaintiff does not attempt to allege a CUIPA claim.   The plaintiff further maintains that the CUTPA claim arises out of the statutory violation identified in count one, the alleged violation of § 49-42.

In response, the defendant argues that even if this court were to hold that the CUTPA claim could be based upon a violation of § 49-42, the plaintiff has failed to set forth conduct in its CUTPA claim that is governed by § 49-42.

The court will address each issue in the order presented.

As indicated, the holding or meaning of the Mead decision is not in dispute.   At issue is its application to these allegations.   In first arguing against the application of CUIPA to the surety contract at issue here, the plaintiff relies upon Blakeslee Arpaia Chapman v. U.S.F. & G. Co., 11 Conn. L. Rptr. 169 (March 4, 1994) (Hurley, J.).   There, the trial court noted the common-law distinctions between surety contracts and insurance contracts and determined that CUIPA did not govern the surety contract at issue.   However, the court went on to hold that a violation of CGS § 49-42 could be the basis upon which a CUTPA claim is brought.²

In contrast, the trial court in Travelers Casualty et al. v. F & F Mechanical Contractors, Inc. et al., 29 Conn. L. Rptr. 719 (May 8, 2001) (Devlin, J.), rejected the reasoning in Blakeslee.   The court relied principally upon Conn. Gen.Stat. § 38a-271, which defines “doing an insurance business” to include “the making of or proposing to make, as a guarantor or surety, any contract of guaranty or suretyship.”   Based upon this statutory definition, the court found CUIPA applicable to the surety/performance bond at issue in that case.

As a preliminary matter, this court agrees that the surety contract and performance bond at issue here fall within the definition of “insurance” for purposes of CUIPA.   This is not dispositive of the motion to strike however.

Although the trial court in Travelers Casualty et al. v. F & F Mechanical Contractors, Inc. et al., 29 Conn. L. Rptr. 719 (May 8, 2001) (Devlin, J.) granted the motion to strike the CUTPA claim, that case did not involve allegations that the CUTPA claim was based upon a violation of § 49-42 or the unfair method by which it was violated.   However, in those cases in which a CUTPA claim has been brought against an insurer as a result of alleged violations of § 49-42, the overwhelming majority of superior court decisions have allowed the CUTPA claim to stand.   See, Premier Roofing Co. v. Insurance Company of North America et al., 13 Conn. L. Rptr. 544 (March 3, 1995) (Leheny, J.) (Mead does not preclude a CUTPA claim based upon alleged violations of § 49-42 against an insurer;  Mead holds only that if the CUTPA claim is based upon CUIPA, then the CUTPA count must adequately allege a CUIPA violation.);  DSM, Inc. v. Sentry Select Insurance Company et al.   31 Conn. L. Rptr. 650 (March 22, 2002) (DiPentima, J.) (Court denies motion to strike CUTPA claim because it is not based upon an alleged CUIPA violation, but is based upon an alleged violation of § 49-41 and § 49-42);  Wolverine Fire Protection Co. v. Tougher Industries et al., 29 Conn. L. Rptr. 731 (June 20, 2001) (Hale, J.T.R.) (Plaintiff may maintain a CUTPA claim as arising out of allegations pursuant to § 49-42);  Mercury Cabling Systems, LLC v. North American Specialty Insurance,Co., District of Hartford, Dkt. No. CV 054012782 (April 27, 2006) (Keller, J.) (same).  See also;  The Berlin Steel Co. v. Tratoras Construction, Inc., Judicial District of Hartford, Dkt. No. CV 054011659 (August 12, 2007) (Scholl, J.) (Summary judgment rendered in favor of insurer on both a CUTPA claim as well as a claim brought pursuant to § 49-42);  Acoustics, Inc. v. Travelers Insurance Co., 37 Conn. L. Rptr. 301 (May 8, 2004) (Cohn, J.) (Case against surety proceeded to summary judgment and/or trial on both CUTPA count as well as underlying allegation that insurer violated § 49-42);  Smith v. Allstate Indemnity Co., Judicial District of Fairfield, Dkt. No. CV 980354137 (November 30, 1999) (Melville, J.) [26 Conn. L. Rptr. 83] (Court denied motion to strike CUTPA claim regarding insurer's policies on the handling of uninsured motorist claims in light of underlying public policy embodied in the uninsured motorist statute, CGS § 38a-336).

Indeed, the trial court in DSM, Inc., supra., specifically relied upon Mead as recognizing that “CUTPA may authorize a cause of action that builds upon the public policy embodied in specific statutory provisions.”   The court then noted that the “public policy embodied” in § 49-41 was to protect “persons supplying labor or materials in the prosecution of the work” on public buildings, and determined that a CUTPA claim could be brought based upon a violation of those provisions.

This court is persuaded that a CUTPA claim may be brought against an insurer who is otherwise subject to CUIPA, for conduct giving rise to claims brought pursuant to § 49-42.

The final inquiry then is whether the complaint alleges violations of § 49-42, or, as argued by the defendant, alleges conduct which falls simply and exclusively within the scope of CUIPA.

Count one of the Amended Complaint dated August 4, 2010, as to which no motion to strike was filed, outlines the nature of the relationship between the various parties and entities involved in the school building projects.   It further alleges circumstances under which it is entitled to payment for its services on those projects;  its effort to obtain payment from, among others, the defendant;  the defendant's denial of payment;  and the lack of any basis upon which the defendant could deny payment.   Count one is brought pursuant to CGS § 49-42.

Count two, the purported CUTPA claim, first incorporates each of the allegations contained in count one.   Thereafter, count two includes a litany of factual allegations regarding the defendant's handling of its claim under the surety bond, to include particularly obfuscation in the determination of an “undisputed amount”-an alleged violation of § 49-42.   Count two alleges that the conduct identified violates the public policy of the state as “expressed in CGS § 49-42.”   While the allegations are not dissimilar to the types of allegations which might accompany a CUIPA claim, they are clearly set forth as a CUTPA claim arising out of the manner in which a violation of statutory obligations contained in CGS § 49-42 allegedly occurred.

The motion to strike is denied.

Dooley, J.

FOOTNOTES

FN1. In Mead, the plaintiff failed to allege a “general business practice” in violation of CUIPA.   The Court first held that allegations of a “general business practice” are necessary to maintaining a CUIPA claim.   The plaintiff argued however, that a CUTPA cause of action could still be maintained based upon a singular transaction involving an unfair settlement practice.   The Court disagreed, holding that the CUTPA claim could only survive if the CUIPA claim was sustainable.  Id. at 664..  FN1. In Mead, the plaintiff failed to allege a “general business practice” in violation of CUIPA.   The Court first held that allegations of a “general business practice” are necessary to maintaining a CUIPA claim.   The plaintiff argued however, that a CUTPA cause of action could still be maintained based upon a singular transaction involving an unfair settlement practice.   The Court disagreed, holding that the CUTPA claim could only survive if the CUIPA claim was sustainable.  Id. at 664.

FN2. Unanswered by the trial court in Blakeslee is whether, even if CUIPA governed the surety contract, a CUTPA violation based upon § 49-42 could still be maintained.   As discussed infra, that issue has been taken up by several subsequent superior court decisions..  FN2. Unanswered by the trial court in Blakeslee is whether, even if CUIPA governed the surety contract, a CUTPA violation based upon § 49-42 could still be maintained.   As discussed infra, that issue has been taken up by several subsequent superior court decisions.

Dooley, Kari A., J.