Ana Diaz v. Allstate Fire and Casualty Insurance Company (2011)

Memorandum of Decision on Motion to Strike (No. 101)

Procedural/Factual Background

Plaintiff Ana Diaz brings this action for injuries sustained on or about October 16 when she allegedly was “run over by an underinsured automobile that was backing out of a parking space.”   She is suing her own automobile insurance carrier, defendant Allstate, under the uninsured motorist provisions of her policy whereby Allstate agreed to pay “all sums which an insured ․ shall be legally entitled to recover as damages from an owner or operator of an uninsured vehicle.”   Plaintiff alleges that she “exhausted the policy of the underinsured driver” and then filed a claim against her own uninsured motorist coverage, but the defendant has failed to make any payment or make an offer in response to that claim.

The First Count alleges the negligence of the other driver and claims for recovery of underinsured motorist benefits under the terms of the contract of insurance.   The Second Count alleges a pattern of unfair trade practices in that the defendant has failed to pay fair and reasonable damages to settle the plaintiff's claim in violation of the Connecticut Unfair Insurance Practices Act (“CUIPA”), Conn. Gen.Stat. § 38a–815, and in two other cases identified by name and docket number presently pending in the Superior Court for the Judicial District of Fairfield at Bridgeport.   The Third Count repeats all the allegations of the first two counts and alleges unfair trade practices under the Connecticut Unfair Trade Practices Act (“CUTPA”) ¹ and a common-law claim of violation of the covenant of good faith and fair dealing or bad faith failure to settle.

The defendant has moved to strike the Second Count and the Third Count.   The reasons advanced in the motion to strike are that these counts “fail to allege sufficient facts for liability under either ․ [CUIPA] or under [CUTPA] of a general Business Practice or to demonstrate corrupt, immoral, and/or unscrupulous behavior on the part of the Defendant or any fact to satisfy any of the three prongs of the ‘cigarette rule’ as required to state a legally sufficient claim under CUTPA, in that Counts Two and Three fail to allege sufficient facts to state a cause of action for bad faith or for the breach of the implied duty of good faith in that the Second and Third Counts are premature and fail to allege a cognizable cause of action or of any recoverable damages.”   Each party has filed briefs and the motion was argued at the short calendar of September 26, 2011.   For the reasons to be discussed, the motion to strike the Second Count is denied and the Motion to strike the Third Count is granted.

Discussion

A. Legal Standard

“The purpose of a motion to strike is to contest ․ the legal sufficiency of the allegations of any complaint ․ to state a claim upon which relief can be granted.”  (Internal quotation marks omitted.)  Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).  “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.)   Id. “In ruling on a motion to strike, the court is limited to the facts alleged in the complaint.”  (Internal quotation marks omitted.)  Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997).   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, 889 A.2d 810 (2006).  “Although grounds other than those specified should not be considered by the trial court in passing upon a motion to strike ․ where the trial court sustains a motion to strike on erroneous grounds, if another ground is appropriate, the granting of the motion will be upheld by [our Supreme Court) ․ Of course, the alternative ground must have been alleged in the motion to strike in some form.”  (Internal quotation marks omitted.)  Gazo v. Stamford, 255 Conn. 245, 259, 765 A.2d 505 (2001).

B. Second Count

The Second Count is not clearly drawn.   Paragraph 18 alleges that “the defendant's failure to pay fair and reasonable damages to settle the plaintiff's claim constitutes an unfair insurance practice in violation of the Connecticut Unfair Insurance Practices Act. C.G.S. Section 38a–815.”   Paragraph 19, without actually citing or naming CUTPA,² alleges a “pattern of unfair trade practices ” (emphasis supplied).   Construing the allegations of this count most favorably to the plaintiff, as the court must in the context of this motion to strike, the Second Count alleges an unfair trade practice in violation of CUTPA (which in § 42–110b(a) prohibits “unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce or unfair trade practices ”), by a pattern of failure to pay reasonable damages to its insureds under uninsured/underinsured motorist clauses of its automobile insurance policies in violation of CUIPA.³

Unlike CUTPA, which in § 42–110g(a) specifically authorizes a private action for damages by “[a]ny person who suffers any ascertainable loss of money or property ․ as a result of the use or employment of a method, act or practice prohibited by [CUTPA],” CUIPA has no similar provision authorizing a private right of action.   Our Supreme Court has not decided whether a private right of action exists under CUIPA.   See Napoletano v. CIGNA Healthcare of Connecticut, Inc., 238 Conn. 216, 221 n.5., cert. denied, 520 U.S. 1103 (1997).   Nevertheless, the majority Superior Court rule, and one previously adopted by this court, is that there is no private right of action under CUIPA.   Union Street Furniture & Carpet, Inc. v. Hartford Financial Services Group, Inc., Superior Court, Judicial District of Stamford–Norwalk at Stamford, Docket No. CV 04 4002621 (July 19, 2006, Jennings, J.) [41 Conn. L. Rptr. 671].   Although it is ordinarily not proper to bring a stand alone CUIPA claim, “it is possible to state a cause of action under CUTPA for a violation of CUIPA.”  Mead v. Burns, 199 Conn. 651, 663, 509 A.2d 11 (1986).   Unfair claim settlement practices under § 38a–816(6) as incorporated by § 38a–315, which the plaintiff alleges, require the allegation of more than a single act.  Lees v. Middlesex Ins. Co., 229 Conn. 842, 849, (1994).   The plaintiff must prove that the defendant committed the acts with such frequency as to indicate a “general business practice.”  Mead v. Burns, supra, 658.   There is a “general trend among Superior Court judges to grant a motion to strike a [count alleging violations of CUIPA] 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.”  (Internal quotation marks omitted.)   Ciarligio v. Firemen's Fund Ins. Co., Superior Court, Judicial District of Fairfield, Docket No. CV90–0276028 (December 10, 1993, Fuller, J.), 10 Conn. L. Rptr 579.   But there is a split of authority on the point.   Compare Union Street Furniture & Carpet, Inc. v. Peerless Indemnity Ins. Co., Superior Court, Judicial District of Stamford–Norwalk at Stamford, Docket No. CV08–5008699 (July 15, 2010, Brazzel–Massaro, J.) (50 Conn. L. Rptr. 316, 318) (allegation that the defendant engaged in an unfair practice in one other instance was “sufficient to provide a factual predicate for the plaintiff's assertion that the defendant has previously committed similar malfeasances to those alleged in the present case” and constituted a general business practice) and 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.) (allegation that “[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 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” was sufficient) with Asmus Electric, Inc. v. G.M.K. Contractors, LLC, Superior Court, judicial district of New Haven, Docket No. CV 04 0489527 (February 25, 2005, Lopez, J.) (legally insufficient to state that the defendant “has engaged in similar conduct with other persons and entities with such frequency as to indicate a general business practice”) and Currie v. Aetna Casualty & Surety Co., Superior Court, judicial district of Hartford, Docket No. CV 96 0558900 (August 12, 1999, Mulcahy, J.) (defendants' motion to strike granted regarding the allegation that the defendants “have continued to commit the acts referred to above as to the plaintiffs ․ 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 the present matter, the plaintiff cites two other pending matters in the Judicial District of Fairfield that also involve the defendant's failure “to pay reasonable sums,” which the plaintiff alleges constitute a pattern of unfair trade practices.   The insertion of two other cases does not itself amount to a sufficient allegation, but by including the factual basis of failure to pay reasonable sums, the allegation is sufficient.   Similar to the allegations in Union Street Furniture & Carpet, Inc. v. Peerless Indemnity Co. and Colonial Restaurant Supply, LLC, supra the plaintiff made a factual statement of the defendant's actions, that is, failing to pay reasonable sums and referred to other instances in which the defendant performed the same actions.   Although plaintiff has not specified the other instances of failure to make reasonable payment in specific detail, this court held in Union Street Furniture & Carpet, Inc. v. Hartford Financial Services Group, Inc., supra, that a plaintiff was entitled to conduct discovery, either pursuant to the discovery rules of the Practice Book or through a separate equitable action for a Bill of Discovery as to the details of the defendant's handling of other similar claims.   The plaintiff sufficiently alleges that the defendant engaged in a general business practice.

The defendant also argues that count two is legally insufficient because the plaintiff fails to allege sufficient facts to implicate the cigarette rule.⁴  The Connecticut Supreme Court has established that a CUIPA claim can form the basis of a plaintiff's allegations when alleging a CUTPA cause of action based on public policy governing insurance practices.  Mead v. Burns, supra, 199 Conn. 663–66.  (A pattern of unfair insurance practices prohibited by CUIPA offends the public policy of CUIPA and therefore satisfies the first prong of the cigarette rule.)   In CUTPA claims that allege violations of CUIPA, “it is the [violation of] CUIPA that is the equivalent of CUTPA's cigarette rule.”  (Internal quotation marks omitted.)   Smith v. Geico General Ins. Co., Superior Court, Judicial District of New London, Docket No. CV 08 5006746 (April 7, 2009, Martin, J.);   Lawlor v. Travelers Ins. Co., Superior Court, Judicial District of Litchfield, Docket No. CV 99 0081104 (June 11, 2001, DiPentima, J.) and Engelman v. Connecticut General Life Ins. Co., Superior Court, Judicial District of New Haven, Docket No. CV 92 0337028 (August 12, 1997, Barnett, J.) (20 Conn. L. Rptr. 331, 335).

Finally, the defendant asserts that the plaintiff's claims are premature because the plaintiff needs to “first establish a legal entitlement to recover damages from the owner/operator” of the uninsured automobile.   Multiple Superior Court judges have held that “[t]he determination of liability and tangential claims for bad faith ․ [and violations of] CUTPA ․ are properly brought in concert with one another ․ While in many cases legal liability may have to be determined by a judge or jury, our practice permits a party to assert a claim which is contingent on the disposition of another claim.”   Deak v. Allstate Ins. Co., Superior Court, Judicial District of Stamford–Norwalk at Stamford, Docket No. CV 04 4002059S (July 25, 2005, Tyma, J.) [39 Conn. L. Rptr. 706].   Further, “there is no requirement that a claimant who seeks uninsured [or underinsured] motorist benefits must first obtain a judgment against the tortfeasor.”   Khanthavong v. Allstate Ins. Co., Superior Court, Judicial District of Fairfield, Docket No. 324502 (December 3, 1996, Levin, J.) (18 Conn. L. Rptr. 304, 308).   Consequently, a claimant does not have to adjudicate the motorist's liability in order to bring claims against the insurer.   See Jones v. Safeco Ins. Co. of Illinois, Superior Court, Judicial District of Fairfield, Docket No. CV 98 0357614 S (April 28, 1999, Melville, J.).

As the plaintiff sufficiently alleges a general business practice of CUIPA violations and the plaintiff does not otherwise need to satisfy the cigarette rule in order to bring a claim sounding in a violation of CUIPA, and the claim is not premature the Second Count is sufficiently pleaded and shall not be stricken.

C. Third Count.

The specific reference to CUTPA missing from the Second Count appears inexplicably in the Third Count.   Although the main theory of the Third count seems to be a claim of common-law bad faith in failing to settle a claim, it also alleges in ¶ 21 that:  “Defendant's failure to make any offer constitutes unfair trade practices in violation of the Connecticut Unfair Trade Practices Act”;  and in ¶ 22 that:  “The defendant has negotiated in bad faith under the terms of its insurance policy and in violation of public policy and the law of the State of Connecticut with such frequency as to indicate a general business practice.”   Standing alone, those conclusory allegations would be inadequate to state a CUTPA claim, but the Third Count also incorporates all the allegations of the Second Count which in turn incorporates all the allegations of the First Count.   Having held that the Second Count sufficiently alleges a CUTPA violation by a pattern of unfair insurance practices that violate CUIPA, these CUTPA allegations in the Third Count will be largely ignored as surplusage, and the court will analyze the Third Count only as a claim of common-law breach of the implied covenant of good faith and fair dealing, or bad faith failure to settle.

In order to allege sufficiently a cause of action for 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. v. Connecticut Housing Finance Authority, 281 Conn. 227, 240 (2007).  “[T]he failure to make insurance payments, by itself, does not establish a claim of lack of good faith.”  (Internal quotation marks omitted.)   Seven Oaks Partners, LP v. Vigilant Ins. Co., Superior Court, Judicial District of Stamford–Norwalk at Stamford, Docket No. CV 09 5012672 (July 7, 2010, Adams, J.).

“The existence of a contract between the parties is a necessary antecedent to any claim of breach of the duty of good faith and fair dealing.”  Macomber v. Travelers Property & Casualty Corp., 261 Conn. 620, 638 (2002).   But, “A majority of trial courts have held that plaintiffs must plead facts that go beyond a simple breach of contract claim and enter into the realm of tortuous conduct which is motivated by a dishonest or sinister purpose” Lynch v. Covenant Insurance Co., Superior Court, Judicial District of Hartford, Docket No. 5027821 (August 11, 2009, Aurigemma, J.)

Bad faith ․ generally implies a design to mislead or to deceive another, or a neglect or refusal to fulfill some contractual obligation not prompted by an honest mistake as to one's rights or duties ․ [B]ad faith is not simply bad judgment or negligence, but rather it implies the conscious doing of wrong because of dishonest purpose or moral obliquity ․ [I]t contemplates a state of mind affirmatively operating with furtive design or ill will.

Buckman v. People's Express, Inc., 205 Conn. 166, 171 (1987).

In the Third Count of her complaint, the plaintiff makes no allegations of defendant's motive or purpose, but simply alleges that “by failing to pay the plaintiff a reasonable sum for personal injury damages, [the defendant) has breached its implied [covenant] of good faith and fair dealing” (¶ 20) and “[a]s a result of the defendant's breach of its implied covenant of good faith and fair dealing, the [p]laintiff has suffered damages (¶ 23).”   These two paragraphs plus the previously mentioned CUTPA-related allegation of ¶ 22 that the defendant “negotiated in bad faith” are the only allegations in support of the alleged breach of the covenant of good faith and fair dealing.   The plaintiff alleges that the defendant has failed to pay the plaintiff, but she does not allege that the defendant had a dishonest purpose or sinister motive, or engaged in any fraud or deception.   The plaintiff fails to point to any aggravating factors and the allegation of failure to pay insurance benefits, or even failure to enter into a reasonable settlement, by themselves are not sufficient to bring a claim for breach of the implied covenant of good faith and fair dealing and the Third Count therefore must be stricken.

CONCLUSION

For the foregoing reasons, the defendant's motion to strike the Second Count is denied, and the defendant's motion to strike the Third Count is granted.

Alfred J. Jennings, Jr.

Judge Trial Referee

FOOTNOTES

FN1. Conn. Gen.Stat. § 42–110a et seq..  FN1. Conn. Gen.Stat. § 42–110a et seq.

FN2. CUTPA is specifically alleged by name in the Third Count..  FN2. CUTPA is specifically alleged by name in the Third Count.

FN3. The plaintiff cites only § 38a–815 of CUIPA, but § 38a–815 incorporates § 38a–816 which defines as “unfair or deceptive acts or practices in the business of insurance”:  “failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed.” (6)(e);  and “not attempting in good faith to effectuate prompt, fair and reasonable settlements of claims in which liability has become reasonably clear” (6)(g).  See Nuzzo v. Nationwide Mutual Insurance Co., Superior Court, Judicial District of New Haven, Docket No. CV96–03940015S (July 1, 1998, Silbert, J.) (“Although the plaintiff did not specify the exact subsections of CUIPA upon which she relies, her complaint fully informed the defendant that she was proceeding under CUIPA”)..  FN3. The plaintiff cites only § 38a–815 of CUIPA, but § 38a–815 incorporates § 38a–816 which defines as “unfair or deceptive acts or practices in the business of insurance”:  “failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed.” (6)(e);  and “not attempting in good faith to effectuate prompt, fair and reasonable settlements of claims in which liability has become reasonably clear” (6)(g).  See Nuzzo v. Nationwide Mutual Insurance Co., Superior Court, Judicial District of New Haven, Docket No. CV96–03940015S (July 1, 1998, Silbert, J.) (“Although the plaintiff did not specify the exact subsections of CUIPA upon which she relies, her complaint fully informed the defendant that she was proceeding under CUIPA”).

FN4. “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 in 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.)  Updike, Kelly & Spellacy, P.C. v. Beckett, 269 Conn. 613, 655–56 (2004)..  FN4. “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 in 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.)  Updike, Kelly & Spellacy, P.C. v. Beckett, 269 Conn. 613, 655–56 (2004).

Jennings, Alfred J., J.T.R.