Opinion
Civil No. 3:04-CV-01996-PCD.
November 10, 2005
RULING ON DEFENDANT'S MOTION TO DISMISS
Pursuant to Fed.R.Civ.P. 12(b)(6), Defendant moves to dismiss Counts Two and Three of Plaintiff's complaint. Count Two alleges a breach of the implied covenant of good faith and fair dealing, while Count Three alleges violations of Connecticut General Statute §§ 38a-816, the Connecticut Unfair Insurance Practices Act ("CUIPA") and 42-110a, the Connecticut Unfair Trade Practices Act ("CUTPA"). For the reasons stated herein, Defendant's motion [Doc. No. 21] is granted without prejudice to Plaintiff's amending his complaint if done within 15 days hereof.
I. BACKGROUND
Plaintiff alleges that on May 18, 2004 he obtained a stipulated judgment for $175,000 in New Haven Superior Court against his dentist, Dr. Donald Evanko, in a negligence action where Dr. Evanko admitted liability for dental work done unto Plaintiff.
Plaintiff seeks to enforce this judgment not against the good dentist but against his insurance company, Defendant St. Paul Fire and Marine Insurance Company (Count One). Plaintiff additionally claims that Defendant breached its implied duty of good faith and fair dealing (Count Two) and violated CUIPA and CUTPA (Count Three).
II. STANDARD
A motion to dismiss should only be granted when it appears, "beyond doubt that the plaintiff can prove no set of facts which would entitle him to relief." Fed.R.Civ.P. 12(b)(6); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957). Although a plaintiff's prospects of winning on the merits may be remote or unlikely, "that is not the test." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 40 L. Ed. 2d 90 (1974). In deciding a motion to dismiss, the court must assume that all factual allegations in the complaint are true and draw all reasonable inferences in a light most favorable to the non-moving party. Id. The pleading standard in federal court is a liberal one with the purpose of putting the other party on notice of an alleged grievance. Conley, 355 U.S. at 46;Swierkiewicz v. Sorema, 534 U.S. 506, 513, 122 S. Ct. 992, 152 L.Ed.2d 1 (2002). A motion to dismiss, however, is not without its limits. Leeds v. Meltz, 85 F.3d 51, 53 (2d Cir. 1996). "Bald assertions and conclusions of law will not suffice." Id.;see also Hirsch v. Arthur Andersen Co., 72 F.3d 1085, 1088, 1098 (2d Cir. 1996).
III. DISCUSSION
1. Standing
Although not currently in dispute among the parties, it is helpful to address Connecticut General Statute § 38a-321, which provides the footing on which Plaintiff proceeds. Commonly referred to as the "direct action statute", § 38a-321 permits a judgment creditor to bring suit against the judgment debtor's insurer. Peck v. Public Service Mut. Ins. Co., 114 F. Supp. 2d 51, 54-55 (D. Conn. 2000) (plaintiff had standing via § 38a-321 against tort-feasor's insurer for claims of a breach of the implied covenant of good faith and fair dealing and CUIPA/CUTPA violations); see also Turgeon v. Shelby Mut. Plate Glass Cas. Co., 112 F. Supp. 355, 355 (D. Conn. 1953); Dacruz v. State Farm Fire and Cas. Co., 69 Conn. App. 507, 513, 794 A.2d 1117 (2002) (reversed on other grounds). Connecticut's direct action statute is recognized as substantive state law in this Circuit, and therefore, it will be applied as such in this diversity case. State Trading Corp. of India, Ltd. v. Assuranceforeningen Skuld, 921 F.2d 409, 414-416 (2d Cir. 1990). The relevant portion of § 38a-321 reads as follows:
Upon the recovery of a final judgment against any person, firm or corporation by any person, including administrators or executors, for loss or damage on account of bodily injury or death or damage to property, if the defendant in such action was insured against such loss or damage at the time when the right of action arose and if such judgment is not satisfied within thirty days after the date when it was rendered, such judgment creditor shall be subrogated to all the rights of the defendant and shall have a right of action against the insurer to the same extent that the defendant in such action could have enforced his claim against such insurer had such defendant paid such judgment.
Connecticut General Statute § 38a-321 (emphasis added). Plaintiff, therefore, as an alleged judgment creditor and subrogee, makes claim against Defendant with all of the rights that Dr. Evanko has. See Peck, 114 F. Supp. 2d at 56. Defendant, responds, by moving to dismiss Counts Two and Three of Plaintiff's complaint, claiming that Plaintiff fails to state a claim for which relief may be granted.
2. The Implied Covenant of Good Faith and Fair Dealing
Connecticut law recognizes a common law action for a breach of the implied covenant of good faith and fair dealing. Buckman v. People Express, Inc., 205 Conn. 166, 170, 530 A.2d 596 (1987);Owen v. Georgia-Pacific Corp., No. 3:03CV378DJS, 2005 WL 2098566, at *9 (D. Conn. Aug. 26, 2005); Franco v. Yale Univ., 238 F. Supp. 2d 449, 455 (D. Conn. 2002); Martin v. Am. Equity Ins. Co., 185 F. Supp. 2d 162, 164-165 (D. Conn. 2002);Fairfield Fin. Mortgage Group Inc. v. Salzar, No. CV000339752S, 2002 WL 1009809, at *3 (Conn.Super.Ct. Apr. 23, 2002).
To establish a breach of that covenant: (1) two parties must engage in a contract which plaintiff reasonably expects to benefit; (2) the benefit is denied or obstructed by the other party's actions; and (3) these injurious actions were the product of the defendant's bad faith. Owen, 2005 WL 2098566, at *9;Franco, 238 F. Supp. 2d at 455; Salzar, 2002 WL 1009809, at *3. Bad faith has been defined as, "not simply bad judgment or negligence, but rather implies a conscious doing of a wrong because of a dishonest purpose or moral obliquity." Buckman, 530 A.2d at 171. To withstand a motion to dismiss, Plaintiff needs to put Defendant on notice that Defendant allegedly, "neglected or refused to fulfill some duty or some contractual obligation not prompted by an honest mistake as to one's rights or duties." See Martin, 185 F. Supp. 2d at 164. Allegations of a mere coverage dispute or negligence by an insurer will not state a claim. Uberti v. Lincoln Nat'l Life Ins. Co., 144 F. Supp. 2d 90, 104 (D. Conn. 2001).
That said, the Court turns to Defendant's contention that Plaintiff fails to state a cause of action in Count Two. When deciding a motion to dismiss, the Court must construe the pleadings most favorably to Plaintiff. Rhodes, 416 U.S. at 236. Yet, even when applying these liberal pleading standards, Plaintiff cannot be found to have adequately stated a claim for a breach of the implied covenant of good faith and fair dealing.
The Court finds it prudent to comment on what Counts are actually at stake in Defendant's motion. Defendant moves to dismiss Counts Two and Three of Plaintiff's complaint. In Count Two, Plaintiff invoked the paragraphs of Count One. Thus, Count Two begins: "Paragraphs 1 through 6 of Count One are hereby incorporated and made Paragraphs 1 through 6 of this Count Two with the same force and effect as if fully set forth herein" (Comp.Ct. II ¶¶ 1-6.) Similarly, the paragraphs of Count Two were incorporated into Count Three. Arguably, Defendant, by moving to dismiss Count II, in effect moves to dismiss Count I, Plaintiff's § 38a-321 claim. Plaintiff's above quoted language is regarded as having referential effect only. Moreover, Defendant expressly does not move to dismiss Plaintiff's Count One (Def's Mem of Law In Support of Its Motion To Dismiss at 2.) Count One, therefore, is not currently at issue.
The first two paragraphs of Count Two merely allege that Defendant failed to defend or indemnify Dr. Evanko and that Dr. Evanko suffered a loss as a result (Compl. Second Count ¶¶ 7,8.) There is no factual indication of bad faith, implicitly or explicitly, in these two paragraphs (Id.) Thus, they merely indicate a contract dispute. What appears to be a breach of contract claim will not be construed as a claim for a breach of the implied covenant of good faith and fair dealing. See Martin, 185 F. Supp. 2d at 165.
In Count Two's final paragraph, in a wholly conclusory fashion, Plaintiff states that, "St. Paul breached its duty to act fairly and in good faith to its insured, Evanko, and should be held liable for the total judgment, supplementary payments and punitive damages." (Compl. Second Count ¶ 9.) To withstand a motion to dismiss, "bald assertions and conclusions of law will not suffice." Leeds, 85 F.3d at 53.
The Count Two pleadings, read in their entirety, fail to hint that Defendant's denial of coverage was the result of a "conscious doing of a wrong because of dishonest purpose of moral obliquity." Buckman, 530 A.2d at 171. Acts of bad faith are the very cornerstone of this tort. Some factual allegation in the pleadings, even a minor one, of bad faith, is necessary to put Defendant on notice. Plaintiff's bootstrapping provides no reasonable indication that Defendant breached its duty to act in good faith and fair dealing.
Accordingly, Count Two is dismissed without prejudice to Plaintiff's filing an amended pleading within 15 days.
3. The CUIPA Claim As a Basis For a CUTPA Violation
Although the Connecticut Supreme Court has failed to specifically address the issue, Napoletano v. CIGAN Healthcare of Connecticut, Inc., 238 Conn. 216, 221, n. 5, 680 A.2d 127 (1996), Connecticut courts generally do not recognize a private cause of action under CUIPA. See Lander v. Hartford Life Annuity Ins. Co., 251 F.3d 101, 118-119, n. 6-8 (2d Cir. 2001);Hipsky v. Allstate Ins. Co., 304 F. Supp. 2d 284, 290 (D. Conn. 2004); DeRossi v. Nat'l Loss Mgmt, 328 F. Supp. 283 (D. Conn. 2004); Hennessey v. Travelers Prop. Cas. Co., No. CV 980332786S, 1999 WL 240231 (Conn.Super.Ct. Apr. 14, 1999); but see Edelman v. Pacific Employers Ins. Co., No. CV 930533463 1994 WL 590632 (Conn.Super.Ct. Oct. 20, 1994).
Even though whether a private cause of exists under CUIPA is debated, violations of CUIPA may be alleged as a basis for a CUTPA claim. Mead v. Burns, 199 Conn. 651, 662, 509 A.2d 11 (1986); Lees v. Middlesex Ins. Co., 229 Conn. 842, 847-851, 643 A.2d 1282 (1994); United Tech. Corp. v. Am. Home Assurance Co., 118 F. Supp. 2d 174, 175-176 (D. Conn. 2000). Thus, "just as CUTPA is dependent on CUIPA for substantive content, CUIPA is dependent on CUTPA for enforcement by private parties." 12 ROBERT LANGER, JOHN T. MORGAN DAVID L. BELT, CONNECTICUT PRACTICE SERIES, UNFAIR TRADE PRACTICE § 3.15 (2003)
Although Plaintiff references both CUIPA and CUTPA violations in Count Three, there is no clear assertion that CUTPA claim is premised on a CUIPA violation or if they are claimed independently (Compl. Third Count ¶¶ 9-12.) Assertion of an independent CUIPA claim would depend on the minority position that CUIPA recognizes a private right of action. See Edelman, 1994 WL 590632 (Conn.Super.Ct. 1994). Plaintiff, nonetheless, is entitled to all favorable inferences and the entire record gives rise to the inference that the CUIPA violation is alleged within the framework of CUTPA. The parties' briefs address the issue this way. Moreover, the parties do not discuss or dispute a private right of action under CUIPA and Defendant does not move to dismiss on these grounds.
The Court, therefore, need not speculate if the Connecticut Supreme Court may come to allow a private right of action under CUIPA. See Peck, 114 F. Supp. 2d at 57.
Turning to the merits of Plaintiff's claim, he asserts that, "by failing and refusing to defend or indemnify Evanko, St. Paul violated one or more of the subsections of General Statutes § 38a-816." (Compl. Third Count ¶ 9.) (emphasis added.) Defendant argues that Plaintiff's CUIPA allegations are so vague that it does not have notice as to which subsection or subsections Plaintiff alleges were violated. Moreover, Defendant asserts that individual acts do not violate CUIPA; and a single failure to defend or indemnify an insured does not rise to the level of a § 38a-816 violation. The Court agrees with both of these arguments.
Connecticut General Statute § 38a-816 consists of 22 subsections and various subparts. Each subsection pertains to specific and unique behavior that, if proven, would amount to individual violations of the statute. Plaintiff, by pleading that Defendant is in violation of "one or more of these subsections", has not put Defendant on reasonable notice of what subsection was violated. The purpose of federal pleading, under Rule 8, is to put the other party on notice of the alleged wrongdoing.Conley, 355 U.S. at 41; Swierkiewicz, 534 U.S. 506, 512. Plaintiff, in effect, would endorse a pleading standard where it is sufficient to plead a long and complicated statute containing many discrete subsections, without additional and reasonable indication as to what subsection allegedly Defendant has violated. Rule 8(f) states that "all pleadings shall be so construed as to do substantial justice." To have any meaning, Defendant should not have to guess as to what portions of CUIPA are being pled. Moreover, if Plaintiff's standard were approved, Defendant would have to respond to every subsection within § 38a-816. See Fed.R.Civ.P. 8(d).
Even though Plaintiff and Defendant have narrowed their dispute to § 38a-816(6)(d) in their supporting briefs, the real possibility remains that Plaintiff could seek relief based on the other subsections that are not discussed in brief, yet preserved by his overreaching pleadings.
Plaintiff asserts that it can be inferred that Defendant is in violation of § 38a-816(6)(d), unfair claim settlement practices. It is well settled that to sustain a § 38a-816(6)(d) claim, the challenged settlement practice must amount to a routine business practice. Mead, 199 Conn. at 658-659, 663-664; Lees, 229 Conn. at 847-848; Peck, 114 F. Supp. 2d at 58. Plaintiff does not alleged that St. Paul's challenged settlement practices are a routine business practice. Compare Peck, 114 F. Supp. 2d at 58 (plaintiff survived a motion to dismiss by pleading that defendant, as part of its normal business practices, regularly engaged in wrongfully refusing to provide its insureds with a legal defense for claims within the scope of coverage or indemnify its insured for judgments within the scope of their policies).
4. The Independent CUTPA Claim
Plaintiff argues that he has independently pled a CUTPA violation by stating:
There is no need to evaluate the Plaintiff's allegations independently under CUTPA because he has adequately pled a violation of CUIPA as the basis for this CUTPA claim. Even engaging in a CUTPA analysis, however, the Plaintiff has properly pled that the Defendant's actions were immoral, oppressive, unscrupulous, and/or offensive to public policy.
(Plaintiff's Memo. In Opp. To Motion to Dismiss at 11.) In Lees it was held that where an independent CUTPA claim is based on the same underlying conduct as a CUIPA-through-CUTPA-claim, and the CUIPA-through-CUTPA-claim has fallen, there must be some elaboration or substantiation that the independent CUTPA can survive on its own. Lees, 229 Conn. at 850-851, n. 10. This conclusion was predicated on the state's legislative policy, "that isolated instances of unfair insurance settlement practices are not violative of the public policy of this state as to warrant statutory intervention." Id. at 850-851. With Lees in mind, the court in Peck stated that, "the parties agree that plaintiff's claims under CUIPA and CUTPA must be read together, since her CUTPA claim is premised upon the same alleged misconduct as her CUIPA claim." Peck, 114 F. Supp. 2d at 57.Peck interpreted the holding in Lees as stating that, "where plaintiff's CUTPA claim was premised on the same alleged unfair claims settlement practices as her CUIPA count, plaintiff's CUTPA claim could not survive the failure of her CUIPA claim." Id. at 58.
Plaintiff has not elaborated or substantiated different conduct on which he bases an independent cause of action under CUTPA. He merely recites the CUTPA words that Defendant's actions were, "immoral, oppressive, unscrupulous, and/or offensive to public policy." (Compl. Third Ct. ¶ 11.) This is no reasonable indication that the asserted conduct differs from Plaintiff's CUIPA-through-CUTPA allegations. Nor is there any hint that this conduct would satisfy the state's public policy, under CUTPA, which requires more than a mere isolated instance of some contract dispute. On this score, Judge Calabresi's remarks are most enlightening:
"We agree with the defendants and the vast majority of the courts in Connecticut that simple contract breach is not sufficient to establish a violation of CUTPA, particularly where the count alleging CUTPA simply incorporates by reference the breach of contract claim and does not set forth how or in what respect the defendant's activities are either immoral, unethical, unscrupulous or offensive to public policy . . . that a company violates CUTPA whenever it breaks an unprofitable deal, would convert every contract dispute into a CUTPA violation. We cannot assume that the Connecticut legislature, in enacting CUTPA, intended such an extraordinary alteration of the common law."Boulevard Assoc. v. Sovereign Hotels, Inc., 72 F.3d 1029, 1039 (2d Cir. 1995).
IV. CONCLUSION
For the reasons stated herein, Defendant's motion to dismiss Counts Two and Three is granted without prejudice to Plaintiff's amendment of the complaint compliant herewith.
IT IS SO ORDERED.