Summary
agreeing with “the line of cases holding that it is unnecessary to plead specific instances of ‘other' wrongdoing in support of an allegation of a general business practice”
Summary of this case from Klaneski v. State Farm Mut. Auto. Ins. Co.Opinion
NNHCV166061980
05-09-2017
Gregorio Venegas v. Horace Mann Insurance Company
UNPUBLISHED OPINION
MEMORANDUM OF DECISION ON MOTION TO STRIKE [117.00]
Steven D. Ecker, Judge.
This lawsuit arises out of a dispute involving a property loss claim filed by plaintiff with his insurer, Horace Mann Insurance Company (" Horace Mann"). Plaintiff alleges that he sustained losses and damages as a result of a fire at a rental property owned by him in Wallingford, Connecticut. According to plaintiff, Horace Mann issued partial payments but refused to indemnify him for the full amount of the covered loss. The complaint, as revised, contains four counts. The First Count states a claim for breach of contract based on the terms of the insurance policy. The Second Count claims that defendant breached the duty of good faith and fair dealing owed to plaintiff under the same insurance policy. The Third and Fourth Counts set forth related but independent extra-contractual claims. The Third Count asserts a violation of the Connecticut Unfair Trade Practices Act, General Statutes § 42-110b et seq. (CUTPA), based on six specified acts of alleged wrongdoing in connection with the settlement of plaintiff's insurance claim, while the Fourth Count alleges liability under CUTPA for the same conduct, but here based on violations of the Connecticut Unfair Insurance Practices Act, General Statutes § 38a-815 et seq. (CUIPA). Horace Mann has moved to strike the Third and Fourth Counts only.
The court has carefully reviewed the relevant pleading (" Revised Complaint") and the memoranda of law submitted in connection with the pending motion. Relevant statutes and case authority have also been consulted. Applying the legal standards and principles that govern consideration of a motion to strike, see, e.g., Lawrence v. O& G Industries, 319 Conn. 641, 648-49, 126 A.3d 569 (2015), the court is of the opinion that the Third Count is legally insufficient under established precedent, and therefore strikes that count. The Fourth Count states a legally sufficient claim, however, and will not be stricken.
The Third Count of the Revised Complaint is stricken under the authority of Mead v. Burns, 199 Conn. 651, 663, 509 A.2d 11 (1986), and State v. Acordia, Inc., 310 Conn. 1, 33-35, 73 A.3d 711 (2013). Cf. Artie's Auto Body v. The Hartford Fire Ins. Co., 317 Conn. 602, 621-25, 119 A.3d 1139 (2015) (reaffirming holding of Mead and Acordia ). The Third Count purports to state a CUTPA violation without alleging a violation of CUIPA, indeed, without even mentioning CUIPA. Mead and its progeny make clear in this context that a plaintiff cannot bring a CUTPA claim based on an unfair insurance practice unless that practice violates CUIPA or (perhaps) some other statute regulating a specific type of insurance-related conduct. See Artie's Auto Body, supra, 317 Conn. at 624 (summarizing holding of Acordia and Mead ). The Third Count fails to anchor the alleged CUTPA violation to an underlying CUIPA violation, and must be stricken.
Count Four, by contrast, conforms to the pleading requirements set forth in Mead and its progeny by explicitly basing the alleged CUTPA violation on alleged CUIPA violations. Defendant nonetheless argues that Count Four must be stricken under General Statutes § 38a-816(6) and Lees v. Middlesex Ins. Co., 229 Conn. 842, 643 A.2d 1282 (1994), because plaintiff fails to allege with sufficient particularity that defendant's unfair settlement practices occurred with such frequency as to indicate a " general business practice." The specific issue confronting this court is whether, and to what extent, particularity is required in a plaintiff's allegations of a " general business practice" for the purpose of stating a legally sufficient claim under CUTPA based on a violation of General Statutes § 38a-816(6).
Defendant's position is grounded in the express language of CUIPA, which provides that a violation of § 38a-816(6) is triggered only if the enumerated unfair claim settlement practices are undertaken by the insurer " with such frequency as to indicate a general business practice . . ." Lees holds that a " CUTPA claim based on an alleged unfair claim settlement practice . . . require[s] proof, as under CUIPA, that the unfair settlement practice had been committed or performed by the defendant with such frequency as to indicate a general business practice." 229 Conn. at 850. " [T]he legislature has manifested a clear intent to exempt from coverage under CUIPA isolated instances of insurer misconduct." Id. at 849. " The term 'general business practice' is not defined in the statute, so we may look to the common understanding of the words as expressed in a dictionary . . ." General' is defined as prevalent, usual [or] widespread . . . and `practice' means [p]erformance or application habitually engaged in . . . [or] repeated or customary action." Id. at n.8 (citations and internal quotation marks omitted).
The question presented here does not require the court to determine what proof the plaintiff ultimately will need to produce at trial to establish a CUTPA/CUIPA violation based on his allegations of unfair insurance claim settlement practices. The issue, rather, is one of pleading requirements, i.e., whether plaintiff's Revised Complaint contains the necessary allegation(s) of a " general business practice" to state a legally sufficient claim. The two issues are related, of course, but they are not the same.
The Revised Complaint, read literally, plainly contains the required allegation in the sense that the Fourth Count expressly alleges that the wrongful conduct involving the settlement of plaintiff's fire-loss claim " was committed by its employees including its claims adjusters, adjuster managers, and procedure managers, and the conduct occurred with such frequency as to indicate a general practice, and was carried out repeatedly in various and different manners over a prolonged period of time ." Revised Complaint, Fourth Count, ¶ 29 (emphasis added). The Revised Complaint also makes it clear that this allegation is not intended to refer to a " business practice" experienced only by plaintiff. Paragraphs 18, 24 and 30 of the Fourth Count enumerate at least five particularized violations of 38a-816(6) by defendant in connection with plaintiff's own claim, but then alleges that Horace Mann " has engaged in the above listed deceptive acts and practices with such frequency as to indicate it is a general business practice, specifically shown in the following examples . . ." Id., ¶ 31. Four " examples" of the wrongful business practice are described next, each in a separate sub-paragraph. Id. at ¶ 31(a) through (d). Paragraph 31(a) alleges that two individuals, Charles and Jolina Perdue, filed a complaint against Horace Mann in Kanawha [West Virginia] Circuit Court regarding an unreasonably low payment and substandard investigation in connection with the Perdue's fire-loss claim; paragraph 31(b) alleges that Horace Mann paid $7 million to settle a bad-faith claim arising out of Horace Mann's earlier failure to settle, on reasonable terms, a personal injury claim under a motor vehicle liability insurance policy; paragraph 31(c) alleges that a Massachusetts court, in or around 2003, found that Horace Mann failed to follow proper procedures in its handling of a fire-loss claim filed by Darlene McCord; and paragraph 31(d) alleges that a class-action lawsuit was filed in Texas, in 2000, based on claims that Horace Mann issued insurance policies that misled its insureds regarding policy benefits, and Horace Mann paid $5.4 million to settle the lawsuit.
The description of wrongdoing in paragraph 31(b) is not entirely clear. The court has done its best to interpret the allegation under principles applicable to the present procedural posture.
Appellate authority provides guidance regarding the requirements of pleading specificity under CUTPA, but there do not appear to be any appellate cases addressing the degree of pleading specificity required to state a claim of a " general business practice" under § 38a-816(6) in particular. The closest case is probably Macomber v. Travelers Prop. & Cas. Corp., 261 Conn. 620, 804 A.2d 180 (2002), in which the Supreme Court directly rejected an insurer's claim that a heightened pleading standard applies to allegations of an unfair business practice under CUTPA: " We are unpersuaded that there is any special requirement of pleading particularity connected with a CUTPA claim, over and above any other claim." Id. at 644. Prior to Macomber, the Appellate Court case had arrived at a contrary result, see S.M.S. Textile v. Brown, Jacobson, Tillinghast, Lahan & King, P.C., 32 Conn.App. 786, 797, 631 A.2d 340 (1993) (" A claim under CUTPA must be pleaded with particularity to allow evaluation of the legal theory upon which the claim is based."), but, at least to the extent that S.M.S. Textile intended to impose a heightened pleading requirement for CUTPA claims, this aspect of the Appellate Court's holding was overruled, sub silentio, in Macomber . Unless and until a controlling case holds otherwise, it seems sensible to read Macomber to mean that there is no heightened pleading requirement in the present context.
Unfortunately, the particularity requirement expressed in S.M.S. Textile was quoted by the Appellate Court more recently, in a post -Macomber case, see Keller v. Beckenstein, 117 Conn.App. 550, 569 n.7, 979 A.2d 1055 (2009). This was done without analysis, and without reference to Macomber, so it can be understood as dicta . Wholly apart from the later appearance of Macomber, the Appellate Court's holding on this point in S.M.S. Textile may be problematic for a different reason. S.M.S. Textile relies on a federal case to hold that " a claim under CUTPA must be pleaded with particularity." 32 Conn.App. at 797 (citing Sorisio v. Lenox, Inc., 701 F.Supp. 950, 962 (D.Conn.), aff'd, 863 F.2d 195 (2d Cir. 1988)). But Sorisio was decided in accordance with federal pleading requirements under Fed.R.Civ.P. 9(b), which has no counterpart in the Connecticut Rules of Practice. A number of CUTPA/CUIPA decisions by federal courts in the District of Connecticut have noted the difference between state and federal pleading standards, and have dismissed claims under the heightened federal standard while noting that the claims would have survived under state pleading rules. See, e.g., Panciera v. Kemper Independence Ins. Co., Civil No. 3:13cv1009 (JBA), 2014 WL 1690387, at *5 (D.Conn., April 29, 2014); Ensign Yachts, Inc. v. Arrigoni, Civil No. 3:09-cv-209 (VLB), 2010 WL 918107, at *17 (D.Conn., March 11, 2010). (There is case law in Connecticut holding that fraud must be pleaded with particularity, see Maruca v. Phillips, 139 Conn. 79, 81, 90 A.2d 159 (1952), but the " particularity" standards in state and federal court are not the same, and, in any event, the court is not aware of any appellate authority suggesting (contra Macomber ) that this rule extends to claims under CUTPA/CUIPA).
Without mentioning Macomber, numerous trial courts have addressed the narrow issue presented here (i.e., whether a plaintiff must plead specific instances demonstrating a " general business practice" under § 38a-816(6)). The results are divided. See Wesley Horton & Kimberly Knox, 1 Connecticut Practice Series: Superior Court Civil Rules, § 10-1, at pp. 469-70 (2016-17 ed.) (Authors' Comments, citing selected cases). This court has reviewed the superior court decisions on both sides of the issue, and agrees with the line of cases holding that it is unnecessary to plead specific instances of " other" wrongdoing in support of an allegation of a general business practice. See, e.g., O'Connor v. QBE Ins. Corp., No. CV126032396S, 2014 WL 3893061, at *22 (J.D. New Haven, June 27, 2014); Urban Apparel Plus, LLC v. Sentinel Ins. Co., No. CV136035293, 2013 WL 6171114, at *5 (New Haven, Oct. 31, 2013) ; Opin v. Ohio Cas. Ins. Co., No. CV-106011625, 2013 WL 4734766, at *7-*8 (J.D. New Haven, August 8, 2013); Fradera v. State Farm Mut. Auto. Ins. Co., CV116003104, 2013 WL 4419426, at *6-*7 (J.D. New Haven, July 26, 2013); Savanella v. Kemper Independence Ins. Co., No. CV-116003947, 2011 WL 7049491, at *2 (J.D. Litchfield, Dec. 28, 2011) ; Pettibone Tavern v. Onebeacon Midwest Ins. Co., CV-106006711, 2010 WL 4723384, at *5 (J.D. Hartford, October 28, 2010); Active Ventilation Prods. v. Property & Cas. Ins. Co. of Hartford, No. X09CV085023757, 2009 WL 2506360, *3-*4 (Complex Litigation, July 15, 2009). For this reason, even if Macomber did not control, this court would deny defendant's motion to strike the Fourth Count.
The Fradera case cites Macomber for the proposition that there is no special requirement of pleading with particularity under CUTPA, 2013 WL 4419426, at *6, but does not appear to treat Macomber as dispositive with respect to a CUTPA claim based on a violation of the " general business practice" element of § 38a-816(6) under CUIPA.
In addition to cases adopting either the " strict" view (requiring specific examples) or the " lenient" view (permitting a general allegation) is a line of cases adopting an intermediate view, based on the duration and nature of the alleged mistreatment and its seemingly methodical implementation, the plaintiff is confident that the conduct occurred in accordance with the insurance company's standard operating procedure. It is reasonable to infer, the argument goes, that plaintiff's experience is not idiosyncratic, and is based on an analysis first proposed by Judge Devine in Labonne v. Hingham Mut. Fire Ins. Co., No. CV 126014737, 2014 WL 2597802, at *5-*6 (J.D. New London, March 7, 2014) ; see RAMS II, LLC v. Mass. Bay Ins. Co., No. CV-136043177, 2016 WL 3266084, at *2-*5 (J.D. New Haven, May 23, 2016) [62 Conn.L.Rptr. 385, ].
To be sure, there are legitimate arguments on both sides of the issue. Defendant argues that plaintiff's conclusory allegations of a " general business practice, " in paragraph 29 of the Revised Complaint, fail entirely to provide any meaningful factual basis for the allegation. Defendant further contends that the four specific examples involving the experiences of other insureds, described in paragraph 31 of the Revised Complaint, are unrelated to the present case in subject matter, remote in time, and/or contain unsubstantiated complaints of a few random customers; as a matter of law, defendant says, these " examples" cannot establish a general business practice within the meaning of the statute or Lees, and therefore cannot save an otherwise insufficient pleading. Defendant also raises the concern that a lenient pleading requirement in this context, if abused, might permit a plaintiff to plead the necessary " general business practices" element blindly, with the hope that a " fishing expedition" during discovery might turn up support for what began as a groundless allegation.
Plaintiff responds by arguing that defendant's proposed pleading standard effectively repeals the right of private persons to file lawsuits under CUTPA to enforce CUIPA's unfair settlement practices provisions. He argues that individual insureds have no pre-suit access to the particularized information that defendant says is necessary to satisfy minimum pleading requirements. Customers in plaintiff's position typically " know" only that they were mistreated by the insurer in the claim settlement process, and, is not motivated by a rogue claim representative, but instead reflects the insurer's way of doing business generally. Plaintiff also suggests that the company has developed its claims procedure with an eye toward its aggregate effect over thousands of claims; a rational economic actor in defendant's position might reasonably choose to maximize its bottom line (at least in the short term) by issuing insurance policies, taking in premiums, and then, when claims are made, doing everything possible, within the limits of the law as enforced, to delay or deny full payment using the methods experienced by plaintiff.
A number of factors combine to lead this court to adopt the less-demanding pleading requirement in this particular context. First, as noted, Macomber (whether distinguishable or not in its particulars) squarely holds that there is no heightened pleading requirement under CUTPA, and this case is brought under CUTPA. Second, and relatedly, CUTPA is a remedial statute and should be construed accordingly. See General Statutes § 42-110b(d); Fink v. Golenbock, 238 Conn. 183, 213, 680 A.2d 1243 (1996). To apply a " strict" pleading requirement to a CUTPA claim based on a CUIPA violation is inconsistent with this underlying policy. Third, plaintiff's specific allegations of misconduct, though not stated in robust detail, are set forth as something more than pure legal conclusions entirely devoid of facts; he alleges with specificity numerous and repeated unlawful claim-settlement practices, Revised Complaint, Fourth Count ¶ ¶ 18, 24, and asserts that this conduct was carried out by defendant with such frequency, and at such diverse stages of the process, and over such a prolonged period of time, that the facts indicate a general business practice. Id. at ¶ 29. Fourth, plaintiff's argument regarding asymmetrical access to information is compelling, and the court finds Judge Shortall's analysis on this point persuasive, see Active Ventilation Products Products, Inc., supra, 2009 WL 2506360, *3-*4. Fifth, the initial pleading stage seems like the wrong time to demand the type of evidence-based allegations that would be necessary to state a claim for a CUIPA-based CUTPA violation under defendant's proposed rule. As previously noted, an individual insured usually will have a very difficult time, at the outset of a case, ascertaining and alleging the kind of specific facts that might establish the wrongful conduct at issue as part of the defendant's general business practice. Without the benefit of targeted discovery, the best that most plaintiffs can do--as plaintiff here appears to have done--is list a handful of " examples" of consumer complaints drawn from an internet search or incomplete survey of public filings. This use of anecdotal pleading seems to have become the litmus test used by some superior courts to decide whether a CUTPA claim based on CUIPA violations will survive a motion to strike. A plaintiff will list a few " examples" involving other insureds to suggest that his or her own allegations of wrongdoing are part of a larger scheme of mendacious general business practices, while the defendant will argue that the plaintiff's " examples" are nothing more than random, anecdotal, statistically meaningless detritus deposited on internet sites by a handful of disgruntled customers.
The anecdotal approach to pleading of a " general business practice" strikes the court as somewhat off the mark. It is easy enough in the internet age to locate allegations of dishonest business practices by insurance companies (or anyone else). But there should be far better means than resort to anecdote for deciding whether an insurer's conduct reflects a " general business practice." More reliable evidence presumably would take the form of internal memoranda, correspondence, incentive programs, statistics, relevant employee admissions, or other similar proof, and this information rarely is available prior to litigation. Even if anecdotal examples are the best or only proof available, moreover, there is no good way from the face of the complaint for the court or litigants to test the reliability or comparability or representativeness of this type of anecdotal pleading. For these reasons as well, the court agrees with those trial judges who have concluded that a defendant's challenge to an allegation of a " general business practice" under § 38a-816(6) ordinarily should await a motion for summary judgment. See O'Connor v. QBE Ins. Corp., supra, 2014 WL 3893061, at *22 (J.D. New Haven, June 27, 2014); Savanella v. Kemper Independence Insurance Co., supra, 2011 WL 7049491, at *2.
The court conducted a brief internet session to test this hypothesis, and quickly located a website containing a collection of customer complaints of allegedly wrongful claim settlement practices (in addition to the four examples in plaintiff's Revised Complaint) supposedly perpetrated over the past few years by the defendant insurance company. See https://expertinsurancereviews.com/insurance-company-review/#comments (last reviewed May 8, 2017). To be clear, the point is not that these internet postings have merit, but something closer to the opposite proposition: the legal sufficiency of a CUTPA/CUIPA claim should not be decided based on a plaintiff's use (or non-use) of such allegations in his or her complaint.
With respect to defendant's concern that a less-demanding pleading rule will encourage groundless allegations and " fishing expedition" discovery, whatever the merits of this view, courts probably should not take it upon themselves to devise strict pleading requirements as an ad hoc means to constrict the availability of redress under statutes intended by the legislature to be remedial in nature. It may be that a court will need to manage discovery with greater care in a case such as this so that the inquiry into defendant's " business practices" is not allowed to get out of control, but this can be done without excessive difficulty, so that all parties are treated in a fair and reasonable manner.
The motion to strike is granted as to the Third Count, and denied as to the Fourth Count. It is so ordered.