The Connecticut Supreme Court’s recent decision reaffirming that a CUTPA claim against an insurance company (or agent or broker) must be strictly limited to alleging improper practices that are in violation of CUIPA will be particularly helpful to insurers in defending lawsuits asserting unfair trade practice and other bad faith claims. State of Connecticut v. Acordia, Inc., 310 Conn. 1 (Aug. 27, 2013). Plaintiffs’ attorneys have often attempted to bring suits for conduct that does not fall within the scope of CUIPA. Such claims should now be subject to dismissal either at the outset of the case, on the pleadings, or at summary judgment. This new decision is a particularly strong arsenal in defending unfair trade practice cases against insurers in Connecticut.
In Acordia the Connecticut Supreme Court held that in order to find a violation of the Connecticut Unfair Insurance Practices Act (“CUIPA”), (1) the plaintiff must establish that the behavior complained of violates one of the specifically defined practices pursuant to Conn. Gen. Stat. § 38a-816; or (2) the Connecticut Insurance Commissioner (“Insurance Commissioner”) must have determined that the behavior constitutes an “unfair method of competition or an unfair or deceptive act or practice in the business of insurance” pursuant to Conn. Gen. Stat. §§ 38a-817 and 38a-818. The Connecticut Supreme Court also resolved a split of authority among trial courts, holding that a plaintiff cannot establish a violation of the Connecticut Unfair Trade Practices Act (“CUTPA”) if the plaintiff fails to establish a violation of CUIPA.
In Acordia, at the request of the Commissioner of Consumer Protection for the State of Connecticut, the State of Connecticut brought an action against Acordia, an independent insurance broker. Plaintiff alleged that in 1999 Acordia initiated a program called the “millennium partnership program” (“Program”) where certain insurers who chose to participate agreed to pay 1% of the total value of the premiums that Acordia placed with the insurer in addition to any commission already paid to Acordia. In exchange, the insurer would be given “priority status,” and would be able to sell more insurance to Acordia’s clients. Acordia’s clients were never informed of the program. Despite the fact that the plaintiff failed to prove that any Acordia representatives steered their insureds toward any particular insurer or that any insured suffered monetarily from the Program, the trial court found that Acordia had breached its fiduciary duty to its insureds, and that it had violated both CUIPA and CUTPA. State v. Acordia, Inc., 2010 Conn. Super. LEXIS 800 (Conn. Super. Ct. Apr. 19, 2010) (Dubay, J.).
Acordia appealed, and the Supreme Court of Connecticut reversed the trial court’s decision. The Supreme Court first determined that an allegation of a breach of fiduciary duty did not fall within any of the enumerated and defined unfair insurance practices in Conn. Gen. Stat. § 38a-816, and there was no evidence that the Insurance Commissioner had determined that Acordia’s actions violated CUIPA. The Supreme Court reviewed the legislative history of CUIPA, and determined that the legislature intended that the list of unfair insurance practices in Conn. Gen. Stat. § 38a-316 was meant to be exclusive. The Supreme Court found that CUIPA provided a means by which the Insurance Commissioner could address other actions that he or she thought should be a violation of CUIPA, i.e., Conn. Gen. Stat. §§ 38a-817 and 38a-818 authorized the Insurance Commissioner to hold a hearing to determine whether a party has engaged in unfair and deceptive insurance practices, and issue a cease and desist order based on the hearing. Because no such hearing was held, and because the breach of fiduciary duty alleged did not violate one of the specified practices under CUIPA, the Supreme Court determined that the plaintiff failed to establish a CUIPA violation against Acordia.
The Supreme Court also clarified its holding in Mead v. Burns, 199 Conn. 651 (1986), and resolved a split of authority among trial courts as to whether a violation of CUTPA could be established if a plaintiff failed to establish a violation of CUIPA:
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.
While Acordia does not directly involve first party property coverage issues, the decision provides useful guidance for dispositive motion practice with respect to alleged CUTPA and CUIPA violations.