Opinion
No. 428988
Decided: March 2, 2000 Filed: March 2, 2000
MEMORANDUM OF DECISION
The plaintiffs, Anthony P. Perrelli and Ramona C. Perrelli (plaintiffs), are the owners of residential property at Strathmore Farms, a common interest community. The defendant Strathmore Farms Association, Inc. (Strathmore) is the association of owners of the Strathmore Farms units, and the defendant Great American Insurance Company (Great American) is its insurance provider.
The plaintiffs have filed a seven count complaint against the defendants. Only counts six and seven, directed at Great American, are at issue here. In count six, the plaintiffs allege a violation of the Connecticut Unfair Insurance Practices Act (CUIPA); General Statutes § 38a-815. Specifically, the plaintiffs allege that Great American issued an insurance policy to the Strathmore association for individual units, in violation of Strathmore's declaration, which requires that individual owners carry their own insurance on their units. The plaintiff's also allege that Great American issued the insurance policy based on an "altered [declaration] document" and that Great American was given notice of its reliance upon the altered document, but failed to make corrections to the coverage. In count seven, the plaintiffs allege that Great American breached its insurance contract.
CUIPA provides in relevant part: "No person shall engage in this state in any trade practice which is defined in section 38a-816 as, or determined pursuant to sections 38a-817 and 38a-818 to be, an unfair method of competition or an unfair or deceptive act or practice in the business of insurance, nor shall any domestic insurance company engage outside of this state in any act or practice defined in subsections (1) to (12), inclusive, of section 38a-816. The commissioner shall have power to examine the affairs of every person engaged in the business of insurance in this state in order to determine whether such person has been or is engaged in any unfair method of competition or in any unfair or deceptive act or practice prohibited by sections 38a-815 to 38a-819, inclusive." General Statutes § 38a-815.
Great American has filed a motion to strike counts six and seven. "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. . . ." (Citation omitted; internal quotation marks omitted.) Peter-Michael, Inc. v. Sea Shell Associates, 244 Conn. 269, 270, 709 A.2d 558 (1998) "In ruling on a motion to strike, the court is limited to the facts alleged in the complaint." (Internal quotation marks omitted.) Waters v. Autuori, 236 Conn. 820, 825, 676 A.2d 357 (1996).
I
Great American moves to strike count six on the ground that it "fails to state a claim (1) because CUIPA does not provide for a private right of action; (2) because CUIPA does not provide a cause of action to non parties to a contract, such as the plaintiffs or to third party beneficiaries; and (3) because CUIPA does not prohibit the action about which the plaintiffs complain."
The plaintiffs argue that they are entitled to a private right of action. They cite Griswold v. Union Labor Life Ins. Co., 186 Conn. 507, 520-21, 442 A.2d 920 (1982) for the proposition that an insured may bring a private action under CUIPA without first exhausting the insured's administrative remedies where the insured has no practical or adequate administrative remedies. The plaintiffs also argue that CUIPA prohibits the conduct about which they complain. In support, the plaintiffs assert that General Statutes § 38a-816 (8) prohibits "misrepresentations in insurance applications" and General Statutes § 38a-827 prohibits fictitious groupings for the sale of insurance.
The plaintiffs also cite National Semiconductor v. Allendale Mutual Ins. Co., 549 F. Sup. 1195, 1200 (D. Conn. 1982) for the proposition that the CUIPA administrative hearing provision does not preempt a tort cause of action for breach of the implied covenant of good faith and fair dealing. National Semiconductor is inapplicable to the present case because the present plaintiffs have brought a CUIPA claim and not a common law tort claim.
General Statutes § 38a-816 provides: "The following [is] defined as [an] unfair and deceptive [act] or [practice] in the business of insurance . . . (8) [m]aking false or fraudulent statements or representations on or relative to an application for an insurance policy for the purpose of obtaining a fee, commission, money or other benefit from any insurer, producer or individual."
General Statutes § 38a-827 (b) provides: "No insurance company authorized to do business in this state may offer any organization, association or group of individuals privileged rate or premium on property, casualty or surety insurance which is based on a fictitious grouping of members of such organization or association or of such individuals; and no person engaged in the business of insurance shall pay or allow dividends to such a group other than that offered to persons or risks not in such group and the public generally."
While neither the Connecticut Supreme Court nor the Appellate Court has addressed the precise question of whether CUIPA provides a private cause of action, this court reads Mead v. Burns, 199 Conn. 651, 663, 509 A.2d 11 (1986), as persuasive authority militating against finding such a cause of action. The precise question before the court in Mead v. Burns, supra, 199 Conn. 661, was whether the scope of liability under CUTPA extends to the insurance industry, an industry which is regulated by CUIPA. While the court in Mead held that it was "possible to state a [private] cause of action under CUTPA for a violation of CUIPA"; id., 663; it did not decide the question of whether CUIPA provides for a private right of action. See George v. Ericson, 250 Conn. 312, 319, 736 A.2d 889 (1999) (recognizing that generally a court decides only those issues that the case before it requires); Griswold v. Union Labor Life Ins. Co., supra, 186 Conn. 521 n. 12 (implicitly finding a private right of action under CUTPA to enforce violations of CUIPA, but reserving the question of whether CUIPA authorizes such a private right). In addition, this court has previously held that CUIPA alone does not provide for a private right of action. Stabile v. Southern Connecticut Hospital Systems, Inc., Superior Court, judicial district of Fairfield, Docket No. 326120 (October 31, 1996) ( 18 Conn. L. Rptr. 157, 163).
Because the plaintiffs cannot state a private right of action for violation of CUIPA alone, count six is legally insufficient. Great American's motion to strike count six is granted.
II
Great American also moves to strike count seven on the ground that it "must be dismissed for failure to state a claim" because "the plaintiffs lack standing to sue" Great American for breach of a contract to which the plaintiffs were not parties. In count seven, the plaintiffs allege that Great American breached its insurance contract with Strathmore by tendering a defense to Strathmore in the instant action. The plaintiffs allege that Great American's defense of Strathmore has placed them at a disadvantage as to payment of legal costs and resolution of this law suit.
The plaintiffs allege that the insurance contract only allows for a defense of directors and officers of Strathmore and does not cover payment of defense costs related to prior litigation.
The plaintiffs counter by citing out-of-state cases granting a third party beneficiary to a contract the right to sue for breach of said contract. In addition, at oral argument, the plaintiffs claimed standing as third party beneficiaries of the insurance contract and vindicators of the Common Interest Ownership Act (CIOA); General Statutes § 47-200 et seq.
"CIOA is a comprehensive legislative scheme that governs the creation, organization and management of all forms of common interest communities. . . . [CIOA] has five major parts. Part I of the act contains general provisions, including definitions of the three forms of common intent ownership: the condominium; General Statutes § 47-202 (8); the cooperative; General Statutes § 47-202 (10); and the planned community, a residual category of developments that are not condominiums or cooperatives but nonetheless come within the scope of the act. General Statutes § 47-202 (23). Part II of the act governs the creation, alteration and termination of common interest communities. General Statutes §§ 47-220 through 47-242. Part III concerns the managerial aspects of the common interest community, including the organization and power of the unit association. General Statutes §§ 47-243 through 47-261. Part IV affords protection to unit buyers through its disclosure and warranty provisions. General Statutes §§ 47-262 through 47-281. . . . CIOA expressly aspires to serve as a general act intended as a unified coverage of its subject matter. . . ." (Citations omitted; internal quotation marks omitted.) Fruin v. Colonnade One at Old Greenwich Ltd. Partnership, 237 Conn. 123, 13.0-31, 676 A.2d 369 (1996).
As a threshold matter, this court notes that despite Great American's somewhat confused argument in support of its motion to strike. — that the plaintiffs "lack . . . standing" and therefore "count seven must be dismissed" — the issue presented by the motion to strike is whether the plaintiffs have pleaded a cause of action for breach of contractual duty owed to them as third party beneficiaries to the contract.
Count seven is legally insufficient because the plaintiffs have failed to allege in their complaint that they were either parties or third party beneficiaries to the insurance contract between Great American and Strathmore. "[A] third party seeking to enforce a contract must allege and prove that the contracting parties intended that the promisor should assume a direct obligation to the third party." (Emphasis added.) Grigerik v. Sharpe, 247 Conn. 293, 315, 721 A.2d 526 (1998), on remand, 56 Conn. App. 314, A.2d (2000). The plaintiffs have thus failed to state a legally sufficient cause of action for breach of a contractual duty owed to them as third party beneficiaries to the contract.
In conclusion, Great American's motion to strike counts six and seven is granted.
BY THE COURT
Bruce L. Levin