Opinion
No. CV05-4010695 S
August 31, 2011
MEMORANDUM OF DECISION
A.
This has been a difficult case to resolve; it involved ten days of trial and required the filing of 170 pages of post-trial briefs. The action was commenced in May 2005. The operative complaint is dated January 26, 2006 and lies in Breach of Contract, an action under the Connecticut Unfair Insurance Practices Act (CUIPA), the Connecticut Unfair Trade Practices Act (CUTPA) in two counts, and a claim of Breach of a Fiduciary Duty.
Certain basic allegations are common to all the counts of the complaint.
The initial allegations of the complaint are undisputed. The plaintiff resides at 83 Mulhaven Drive in West Haven. The defendant Biller Associates Tri-State, LLC (Biller) is located on State Street in North Haven. Biller is a licensed public insurance adjuster and at the relevant times of the complaint Biller had been engaged in the business of adjusting insurance claims. On November 19, 2002 an Allstate policy paid for by the plaintiff was in effect whereby the insurance company agreed to insure the plaintiff's property. On that date the residence located at the foregoing address was "damaged and/or destroyed by fire, smoke and water as the result of a fire."
After the fire in November 2002, the plaintiff "executed a Public Adjuster Employment Contract . . . pursuant to which she retained Biller to act as her public adjuster and to advise and assist in the adjustment and settlement of her fire loss . . ." Pursuant to the terms of this contract, for Biller's services, the plaintiff "agreed to assign out of the monies due from Allstate on account of the fire loss, a sum equivalent to ten percent . . . of the amount of the loss when adjusted with Allstate or otherwise recovered."
The court will quote the remaining factual allegations which form the basis of the Breach of Contract count and, in part, of the other counts. Many of these allegations are disputed by the defendant and the court will try to resolve and/or discuss the relevance of these allegations in the opinion.
"9. Upon information and belief, Biller and Allstate separately inspected the Property site in or about November 2002.
10. Biller provided a preliminary building repair estimate to Allstate in the amount of $109,208.91 on or about January 16, 2003 (hereinafter referred to as the "Biller Estimate").
11. Allstate provided its estimate of the scope of structural damages, in the amount of $85,333.81 to Biller on or about January 17, 2003 (hereinafter referred to as the "Allstate Estimate").
12. Three issues of contention between Biller and Allstate that related to recovery for structural damage under the insurance policy included: (1) an upper stairwell, (2) the basement bathroom, and (3) the basement cedar closet.
13. Specifically, Biller recommended demolition and replacement of the itemized rooms whereas Allstate found no damage and/or recommended repair and redecoration of the rooms.
14. There was a significant difference in cost associated with the two recommended courses of action.
15. There was also a significant difference between the pricing of materials necessary for replacement and/or repair in the Biller Estimate and the Allstate Estimate.
16. On or about March 6, 2003, Allstate extended a settlement offer to Plaintiff in the amount of $63,790.63, representing Allstate's estimated full replacement cost in the amount of $85,333.81, minus depreciation in the amount of $21,543.18.
17. Biller agreed, on behalf of Plaintiff, to accept said settlement offer from Allstate.
18. On or about March 6, 2003, Allstate made payment to Biller, acting on behalf of Plaintiff, in the amount of $63,790.63.
19. Biller promptly retained ten percent of the $63,790.63 payment from Allstate, and remitted the remainder to Plaintiff.
20. Biller represented to Plaintiff that said $63,790.63 settlement payment from Allstate was only an initial payment by Allstate relating to structural damage, and that Biller would continue to zealously assist Plaintiff to resolve the differences in scope and pricing between the Biller Estimate and the Allstate Estimate in order to obtain additional payments for structural damage up to the $125,096 policy coverage limit.
21. Biller failed and/or refused to make any effort to resolve the outstanding issues of contention with Allstate concerning the scope of the damage to the Property.
22. Biller failed and/or refused to make any effort to resolve the price differences between the Biller Estimate and the Allstate Estimate.
23. Biller failed and/or refused to monitor the progress of the repair or replacement or items on the Property as contained in its preliminary estimate.
24. Biller failed and/or refused to request release of the $21,543.18 depreciation withheld by Allstate.
25. After receipt of the March 6, 2003 and March 31, 2003 payments from Allstate, and its ten percent from the Plaintiff, Biller failed and/or refused to further assist or advise Plaintiff in the adjustment and settlement of her fire loss at the Property.
26. Upon information and belief, Biller accepted Allstate's settlement offer with respect to structural damage in the amount of $63,790.63 on Plaintiff's behalf in order to obtain a quick ten percent payment for itself and never intended to make further attempts to resolve the differences between the Biller Estimate and the Allstate Estimate.
27. There was little dispute that the fire damage was so great that Plaintiff would receive payment up to the full policy limit from Allstate for damage to the contents of the Property.
28. Accordingly, on or about March 31, 2003, Allstate made payment in the amount of $71,602.80 to Biller, on behalf of the Plaintiff, representing payment for damage to the contents of the Property.
29. Biller promptly retained ten percent of Allstate's payment for content damage, and remitted the remainder to Plaintiff.
30. In addition to the structural and content damage to the Property resulting from the fire, Plaintiff's insurance policy with Allstate also provided coverage for Additional Living Expenses ("ALE").
31. Biller failed and/or refused to promptly and accurately communicate terms and conditions of said insurance policy to the Plaintiff.
32. Biller failed to promptly and adequately present Plaintiff's claim for ALE to Allstate.
33. Biller effectively abandoned the Plaintiff after taking its ten percent share of the two largest settlement payments made to Allstate to Biller, on behalf of the Plaintiff.
34. Plaintiff commenced an action against Allstate seeking, among other things, reimbursement of ALE and release of the depreciation withheld by Allstate from the structural replacement payment.
35. Plaintiff satisfactorily resolved her litigation with Allstate and has withdrawn her action against Allstate.
36. As the result of Biller's failures, refusals and abandonment of Plaintiff, Plaintiff has been damaged."
As noted the Breach of Contract Count relies on these allegations and adds five paragraphs which state a contract existed between Thomas and Biller, the plaintiff fully performed her contractural obligations but Biller failed and/or refused to do so. Therefore Biller breached the contract and the plaintiff has been damaged. (Par. 37 through 41.)
The CUIPA count incorporates all the foregoing paragraphs and adds the following paragraphs:
"42. Biller misrepresented pertinent facts and/or insurance policy provisions relating to coverages at issue under the Allstate insurance policy.
43. Biller failed to acknowledge and act with reasonable promptness upon communications with respect to plaintiff's claims arising under the Allstate insurance policy.
44. Biller did not attempt in good faith to effectuate prompt, fair and equitable settlement of plaintiff's claim in which liability had become reasonably clear.
45. Biller's actions and/or failure(s) to act compelled plaintiff to institute litigation to recover amounts due under the Allstate insurance policy.
46. Biller commits the acts articulated in paragraphs 42 through 45 above with such frequency as to indicate a general business practice.
47. The unfair claim settlement practices articulated in paragraphs 42 through 45 above are defined as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance under Connecticut General Statute 38a-816(6).
48. As a result of the conduct of the Defendant alleged in this count, the plaintiff has suffered ascertainable loss of money or property."
The first CUTPA count, count three, incorporates the previous 48 paragraphs and adds paragraphs 49 through 53. These latter paragraphs allege the previously stated paragraphs set forth conduct which constituted a deceptive act or practice under § 42-110b(a) of the general statutes in the conduct of trade or commerce in that the conduct constituted a material misrepresentation likely to mislead a consumer.
The conduct was also an unfair act or practice under the above referenced statute because it violated public policy, was immoral, unethical, or unscrupulous and was substantially injurious to consumers. It caused the plaintiff substantial injury that could not be avoided and was not outweighed by any countervailing benefit to a consumer such as the plaintiff. Thus an ascertainable loss of money or property was suffered by the plaintiff.
The second CUTPA count, which is Count Four, incorporates all the foregoing counts and in paragraph 54 alleges:
"54. The conduct of the defendant alleged in paragraphs 42 through 45 of this count constituted an intentional and wanton violation of the plaintiff's rights or was done with a reckless indifference to those rights in that Defendant knew its representations and omissions were false or misleading or was recklessly indifferent to their truth or completeness and that its failure to acknowledge and act with reasonable promptness upon communications with respect to plaintiff's claims and failure to attempt in good faith to effectuate prompt, fair and equitable settlement of plaintiff's claim in which liability had become reasonably clear was without reasonable justification or excuse."
The Fifth and final count incorporates the previous 54 paragraphs and adds paragraphs 55 through 60. They allege that "as plaintiff's agent defendant occupied a fiduciary relationship to the plaintiff" and had an obligation of the "utmost good faith" in its relationship with the plaintiff, the defendant occupied a position of trust and confidence with the plaintiff (pars. 55 and 56) but as alleged in paragraph 57.
"57. Upon information and belief, while acting as agent for the Plaintiff, the Defendant used its position of trust and confidence to quickly compromise Plaintiff's claims in order to obtain a quick ten percent of each of the two largest payments made by Allstate to the Plaintiff, and thereafter effectively abandoned the Plaintiff."
Thus the defendant breached the duty of loyalty it owed to the plaintiff (par. 58) and the plaintiff suffered damages for which the defendant is liable (pars. 59, 60).
The court will now try to discuss the causes of action in this case and the legal principles governing their application or the barring of their application. Then it will rely on these discussions in a final section based on the facts of this case to determine whether the particular cause of action has been established. It will then discuss the counterclaim brought by the defendant against the plaintiff.
B.
The court will try to discuss each cause of action generally and in a later section discuss those causes of action in light of the evidence presented in the case. It will not discuss the causes of action in the order presented in the complaint.
(1) Breach of Contract
The elements of a breach of contract claim are straightforward. They consist of the formation of an agreement entered into by both parties, performance by one party, breach of the agreement by the other party and damages. Rosato v. Mascardo, 82 Conn.App. 396, 411 (2004). As stated in the Restatement (2d) Contracts, § 400.
"An agent who commits a breach of contract with his (sic) principal is subject to liability to the principal in accordance with the principles stated in the Restatement of Contracts."
Although usually invoked in building contracts or contracts to repair premises, a general principle in all contract cases is set forth in Section 612 of the Am.Jur.2d volume on Contracts, Vol. 17A. There it states that . . ."as a general rule, and unless the agreement evidences an intent to the contrary, there is implied in every contract for work or services a duty to perform skillfully, carefully, diligently, and in a workmanlike manner. A failure to comply with this implied duty to perform in a skillful and workmanlike manner may not only defeat recovery, but may entitle the other party to damages."
The section goes on to say that: "The standard of the skill required is the degree of skill, efficiency, and knowledge that is possessed by those of ordinary skill, competency, and standing in the particular trade or business for which the person is employed . . . No breach will be found if the contractor performed the work in accordance with industry standards," see generally Strickland v. Perruccio, 5 Conn. Cir.Ct. 142, 149 (1968); Perl v. Eagles's Wing, LLC (CV08-5004560, Holzberg, J., 2011) [ 51 Conn. L. Rptr. 625]; New Hampshire Ins. v. Hartford Sprinkler, 45 Conn. L. Rptr. 177 (Wagner, J, 2008), where it is noted that breach of the obligation to perform in a workmanlike manner is an implied condition but "No authority has been found in which an implied warranty to perform the services in a workmanlike manner has been given status as an independent cause of action; rather such a claim has been viewed as a breach of contract."
On this subject a federal district court case, cited in Am. Jur., has an interesting comment: "A contract that calls for the performance of services requires only that the obligated party perform in an objectively reasonable manner under the circumstances. Infallibility is not expected," Pierson v. Willets Point Contracting Corp., 899 F.Sup. 1033, 1049 (E.D.N.Y., 1995), citing Lunn v. Silfies, 431 N.Y.S.2d 282, 284-85 (1980) which sets forth the reasons for this position.
In Volume 23 of Williston On Contracts at § 63:25, a Nebraska case is quoted to the effect that: "Accompanying every contract is a common law duty to perform with care, skill, reasonable expediency and faithfulness the thing agreed to be done. A failure to observe any of these conditions is . . . a breach of contract," from Lincoln Grain, Inc. v. Coopers, 345 N.W.2d 300 (1984). A legal malpractice case is referred to for this rule, Santulli v. Englert, Reilly McHugh, 586 N.E.2d 1014 (N.Y., 1992). In the Am.Jur. article setting forth this principle a Texas case is cited, Archibald v. Act III Arabians, 755 S.W.2d 84 (1988) where the implied warranty under discussion was held to apply to horse training services no less.
Two other principles of contract law, being relevant to this case, should also be mentioned. As Williston notes as § 63:24: "In every contract there is implied a promise or duty to perform with reasonable expediency the thing agreed to be done; a failure to do so is a breach of contract." He goes on to note the reasoning behind this position: "The duty of a defendant to see that work is completed within a reasonable time may be clearly implied, as a plaintiff will not be deemed to understand the contract to provide that payment is to be conditioned upon the whim or caprice of the defendant, or its failure to act in good faith or to exercise due diligence in completing the work." (Also see Restatement (Second) Contracts, § 235, illus. 3; 17A Am.Jur.2d, "Contracts," Section 607).
Our state adopts this view. The court in DeCarlo Doll, Inc. v. DiLozir, 45 Conn.App. 633, 643 (1997) said that "When the terms of a contract's time of performance are indefinite . . . the result generally reached is that the time is neither unlimited nor discretionary . . . The promised performance must be rendered within a reasonable time." This is a question of fact for the trier. Parkway Trailer Sales, Inc. v. Woodbridge Bros., Inc., 148 Conn. 21, 26 (1960). Also see LaVelle v. Ecoair Corp., 74 Conn.App. 710, 725-26 (2003), Breen v. Phelps, 186 Conn. 86, 93 (1982).
One final point must be mentioned which will be discussed later in this opinion in the factual setting of the case. In Calamari Perillo On Contracts, 6th ed., Perillo substantial performance and material breach are discussed. Perillo has this thought: "Substantial performance and material breach are often opposite sides of the same coin. If a party has substantially performed, it follows that any breach by the party is immaterial. Conversely, if a party has materially breached, any performance by the party is not substantial," § 11.15 at page 371.
Part of the complications of this case revolves around the fact that various types of claims and issues arise out of the contract of insurance which the defendant contracted with the plaintiff to handle — assisted living expenses, contents reimbursement, depreciation, etc. Issues of delay in performance, care and skill required of the defendant, contributory fault, if any, on the plaintiff's part present themselves in these different contexts.
(2) Breach of Fiduciary Duty
A claim is made of breach of fiduciary duty against the defendant. The question that will be addressed by the court when it discusses the factual underpinnings of the case is whether there was simply a contractural relationship between the parties or did the nature of the relationship formed by the contract, by its very nature and the duties imposed on the defendant, create a fiduciary relationship between the parties.
In Ahern v. Kappalumakkel, 97 Conn.App. 189, 194 (2006), quoting from earlier case law said:
"Our Supreme Court has chosen to maintain an imprecise definition of what constitutes a fiduciary relationship in order to ensure that the concept remains adaptable to new situations . . ." Our Supreme Court has "specifically refused to define a fiduciary relationship in precise detail and in such a manner as to exclude new situations, choosing instead to leave the bars down for situations in which there is a justifiable trust confided on one side and a resulting superiority and influence on the other" [internal quotation marks omitted]). Consequently, under Connecticut law, a fiduciary or confidential relationship is broadly defined as a relationship that is "characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interests of the other . . . The superior position of the fiduciary or dominant party affords him great opportunity for abuse of the confidence reposed in him."
The fact that a relationship is formed by way of contract has no bearing on whether the relationship is fiduciary in nature. The question is what kind of relationship did the contract or agreement between the parties create, cf Breen v. Larson College, 137 Conn. 152, 153, 157 (1950) (contract to serve as college dean breached by violation of fiduciary relationship it created) Konover Development Corp. v. Zeller, 228 Conn. 206 (1994) partnership agreement created fiduciary relationship.
As indicated above, the issue is whether the relationship between parties formed by agreement or contract, in fact, creates a fiduciary relationship which under our law "is characterized by a unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interests of the other . . . The superior position of the fiduciary or dominant party affords him (sic) great opportunity for abuse of the confidence reposed in him," Cadle v. D'Addario, 268 Conn. 441, 455 (2004) (emphasis by this court), also see Falls Church Group v. Tyler, Cooper and Alcorn, LLP, 281 Conn. 84, 108 (2007); Konover Development Corp. v. Zeller, 228 Conn. 206, 219 (1994).
The cases are in agreement that "Once a (fiduciary) relationship is found to exist, the burden of proving fair dealing properly shifts to the fiduciary," Dunham v. Dunham, 204 Conn. 303, 323 (1987); Konover Dev. Corp. v. Zeller, supra. As the court added in Murphy v. Wakelee, 247 Conn. 396, 400 (1998): "Furthermore, the standard of proof for establishing fair dealing is not the ordinary standard of fair preponderance of the evidence, but requires proof either by clear and convincing evidence, clear and satisfactory evidence or clear, convincing and unequivocal evidence," also see in this regard, Przekop v. Przekop, 124 Conn.App. 238, 244 (2010).
It is interesting to note, however, that on the issue of damages Section 400 of the Restatement (2d) Agency states that: "An agent who commits a breach of his (sic) contract with his (her) principal is subject to liability to the principal in accordance with the principles stated in the Restatement of Contracts." No burden shifting rules apply as to damages despite the fiduciary nature of the relationship which agency creates, see comment (b). Also even if a breach of fiduciary duty is found that does not automatically entitle a plaintiff to punitive damages, a reckless indifference or a wanton and intentional violation of those rights must be shown, Dunn v. Peter Leepson, 79 Conn.App. 366, 371 (2003), cf Smith v. Snyder, 267 Conn. 456, 468-69 (2004) holding court has discretion to award or not award punitive damages where breach of fiduciary duties is basis of CUTPA violation. Our law is in conformity with the general view concerning the award of punitive damages where a breach of fiduciary duty is found, cf Coster v. Crookham, 468 NW2d 802, 810-11 (Iowa, 1991).
Another way of approaching the fiduciary relationship issue both as to whether it exists and the responsibilities it imposes is to regard it as a question of agency. Was their an agency relationship between the plaintiff and the defendant created by the contract of employment between the parties? For example, here it could be said that the plaintiff hired the defendant to act as her representative in dealing with Allstate as a result of a fire loss she suffered in November 2002 and an agency relationship was created. Does that mean a fiduciary relationship was created at the same time?
In answering this question the Restatement (Second) Agency is a good place to begin; it has been cited 73 times by our appellate courts between 1951 and 2010. Section 13 states that: "An agent is a fiduciary with respect to matters within the scope of his (sic) agency." Section 387 states that "Unless otherwise agreed, an agent is subject to a duty to his (her) principal to act solely for the benefit of the principal in all matters connected with (the) agency." The recent case of Charter Oak Landing Group, LLC v. August, 127 Conn.App. 428 (2011), adopts the view that an agency relationship creates a fiduciary duty of the agent toward the principle, id. page 441. The court quotes an earlier case, Taylor v. Hamden Hall School, Inc., 149 Conn. 545, 552 (1962), which says: "An agent is a fiduciary with respect to matters within the scope of his (sic) agency." Also see Maccomber v. Travelers Property and Casualty Corp., 261 Conn. 620, 639 n12; News America v. Marquis, 86 Conn.App. 527, 535.
What general duties does an agent have towards its principal? Section 377 states that a person contracting to be an agent with a party "is subject to a duty to act in accordance with his (sic) promise." Interestingly comment (b) says that "under ordinary circumstances, the promise to act as an agent is interpreted as being a promise to make reasonable efforts to accomplish the directed result." Section 379 states in subsection (1) that a paid agent has a duty "to act with standard of care and with the skill which is standard in the locality for the kind of work" which the agent has been hired to perform. The agent must thus act with that skill he or she represented as having (comment c).
Section 381 states that: "Unless otherwise agreed, an agent is subject to a duty to use reasonable efforts to give (the) principal information which is relevant to affairs entrusted to (the agent) and which, as the agent has notice, the principal would desire to have . . ."
As noted in the introductory note to Chapter 13 of the Restatement, Volume 2 "Agency is both a consensual and a fiduciary relation. Normally it is the result of a contract between the parties. Where this is true, the agent's duties include the performance of any contractural obligations; failure to perform these, if without excuse, is a breach of contract." The note goes on to say that "Even specific agreements, however, must be interpreted in light of the principles which are applicable to the relation of principal and agent" — one of which being the fiduciary nature of the relationship. Also "unlike most other contracting parties, the agent may be subject to tort liability to the principal for failing to perform his (her) duties," cf Pitt v. Brent Gotter, 112 Conn.App. 441 (2009).
Instructive on the issue of whether a fiduciary relationship was created by the agreement between the parties and the assumption by the defendant to act as a public adjuster regarding the plaintiff's claim under the policy, is the statutory scheme itself. Public adjusters are required to be licensed and fines and incarceration can be imposed for a person acting as a public adjuster without a license, § 38a-723, § 38a-725. Pursuant to § 38a-769 a person seeking to act as a public adjuster must apply to the insurance commissioner furnishing satisfactory evidence of good moral character and financial responsibility. The applicant must also submit to a written examination, subsection (c) and under subsection (f) the commissioner, as he or she deems necessary, may examine the books and records of any licensee. This suggest the degree of skill a public adjuster must have not possessed by the ordinary citizen he or she deals with, and also seems to recognize, statutorily at least, the ability public adjusters have to harm the interests of insureds if they exercise their trade improperly.
The court could find no Connecticut case directly on point as to the public adjuster-insured relationship but there is a Rhode Island case that concluded that where a public adjuster was hired by a person whose car had been damaged to negotiate a settlement of her claim with her insurance company a fiduciary relationship had been established.
The Rhode Island court upheld a Hearing Officer's conclusion that a fiduciary relationship had been established by the nature of the authorization or agreement the car owner signed for the public adjuster and due to the fact that he had "superior knowledge and expertise in his fields of endeavor and that (the insured) relied on this expertise." This inference was considered logical by the court since "it arises from the public adjusters' licensure to appraise damages to motor vehicles and to negotiate settlements with auto insurance companies." DiPaolo v. Marques, PC-08-0352 (R.I. Superior Court, 2010).
(3) CUIPA
This court changed a position it had previously taken and concluded in Edible Arrangements v. Kehil H Brenner, CV08-5019963 that CUIPA does not allow a private cause of action. Some trial courts take a different position. In footnote 4 of Lees v. Middlesex Ins. Co., 229 Conn. 842 at page 847 the court declined to answer the question. In Edible Arrangements this court rested changed position on the following basis:
"The court has read the discussion of this issue in Couch on Insurance 3d, Vol. 14, § 204.51, pp. 204-68 et seq. CUIPA is a version of one of the National Association of Insurance Commission's Model Acts. Couch notes that in the proceedings leading up to the adoption of the acts no private actions were provided for. Couch goes on to note that the bulk of legislation adopting the model acts, do not explicitly provide a cause of action as our statute does not. Couch notes such claims have "frequently been rejected." Some states allow an unfair insurance practice claim under their version of the Model Act but they appear to be in the minority. Couch finally notes other states have adopted the "expedient" theory that a violation of the insurance practices law serves as a violation of the state's general consumer protection law resulting in insureds being entitled to bring a private action under the latter, general statute based on a violation of the narrower insurance practices law, id., p. 204-72."
Interestingly in Carford v. Empire Fire, 94 Conn.App. 41 (2006), the court said:
It is well established that CUTPA affords a private cause of action. See Fink v. Golenbock, 238 Conn. 183, 212 . . . "CUTPA provides a private cause of action to `any person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a (prohibited) method, act or practice . . .' General Statutes § 42-110g(a)." The Supreme Court applied that provision to CUIPA in Mead v. Burns, 199 Conn. 651 . . . affirming "the existence of a private cause of action under CUTPA to enforce alleged CUIPA violations." Id. 663. Thus if the plaintiffs properly allege CUIPA violations, they may have a cause of action under CUTPA.
We have evidently adopted the "expedient" theory referred to in Couch thus supporting the view that CUIPA does not permit a private cause of action. Also see, Martin v. American Equity Ins. Co., 185 F.Sup.2d 162, 166 (D.Conn. 2002), which also held that the majority of state and federal courts considering CUIPA have held CUIPA does not provide a private cause of action, citing among other cases Lander v. Hartford Life and Annuity Ins. Co., CT Page 18487 251 F.3d 101, 119, fn7 (CA 2, 2001). Martin also noted in support of its position that CUIPA does not permit a private cause of action, that (1) CUIPA provides an administrative procedure permitting the Insurance Commissioner can "take action against a person engaging in an unfair insurance practice" and (2) Mead v. Burns itself characterized CUIPA as a penal statute, id. page 166.
A general discussion of CUIPA as it applies to this case is necessary since the CUTPA count relies on an alleged CUIPA violation.
In any event the CUIPA count here alleges a violation of § 38a-816(G) entitled "Unfair Settlement Practices" of the General Statutes and further alleges, in order to make this claim viable, a general business practice. The statute specifically requires the latter allegation and it has been held to be a prerequisite of an action under § 38a-816(G). In Mead v. Burns, 199 Conn. 651, 660 (1986), relied on the model regulations of the National Association of Insurance Commissioners saying the model act proscribes unfair claims settlements "only if the insurer performs any of the acts or practices . . . with such frequency as to indicate a general business practice." Couch at § 204:52 states forbidden unfair settlement practices must "arise from habit, custom, usage or business' policy of the insurer, so that, viewing the insurer's conduct as a whole, the finder of fact is able to conclude that the practice or practices are sufficiently pervasive or sufficiently sanctioned by the insurance company that the conduct can be considered `a general business practice" and can be distinguished by fair minds from a mere isolated event," citing Elmore v. State Farm Auto Ins. Co., 504 S.E.2d 893, 902 (W.Va., 1998). Lees v. Middlesex Ins. Co., supra, puts the issue in terms of saying proof of improper handling of a plaintiff's claim without evidence of misconduct by the insurer "in the processing of any other claim, does not rise to the level of a general business practice as required by § 38a-816(G) 229 Conn. at page 849; Quimby v. Kimberly Clark, 28 Conn.App. 660, 669, 671-72 (1992), used similar language noting the same wrongful conduct was shown in the handling of other claims. Quimby relied on the language in Mead v. Burns, 199 Conn. 651 (1986). That court said "the definition of unacceptable insurer conduct in § 38a-816(G) reflects the legislative determination that isolated instances of unfair insurance settlement practices are not so violative of the public policy of this state as to warrant statutory intervention," CT Page 18488 id. page 666. Interestingly Couch has a certain view of the general business practice requirement; at § 204:52 page 204-76, in an "observation" he states: "The jurisdictions that require proof of a general business practice are considered pro-insurance."
There is another difficult problem, at least for the court, presented by this case. Are "public adjusters," people hired and contracted with by insureds to negotiate and advance settlements with insurance companies after a covered loss, even subject to CUIPA and its provisions. In its previous memorandum in this case the court assumed public adjusters were covered by the act and in this case the parties did not directly address the issue. Only upon research did the court conclude this issue was not as clear as once assumed.
Section 38a-815 defines the persons and entities covered by CUIPA. It reads as follows:
"§ 38a-815. Unfair practice prohibited
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. When used in said sections, "person" means any individual, corporation, limited liability company, association, partnership, reciprocal exchange, interinsurer, Lloyd's insurer, fraternal benefit society and any other legal entity engaged in the business of insurance, including producers and adjusters."
(Emphasis by this court.)
The question is given the purpose of CUIPA and the type of activity it is aimed at does it make sense to say public adjusters are subject to it? The answer could be — well, Section 38a-815 uses the word "adjusters," therefore public adjusters fall under the act. But the problem as the court sees it, is that "adjusters," used in the statute is a generic term. There are several types of adjusters — public adjusters, casualty adjusters (see § 38a-769 regarding licensing of casualty adjusters, so-called independent adjusters, and insurance adjusters). Independent insurance adjusters are hired by insurance companies, after a claim of loss, to investigate a claim, see for example Weimer v. Allstate Ins. Co., CV10-6010177 (Zoarski, J.), Grossman v. Homesite Ins. Co., 48 Conn. L. Rptr. 162, (Adams, J.); insurance companies themselves have insurance adjusters who investigate and evaluate claims and the cases call them adjusters, see Romprey v. Safeco Ins. Co., 129 Conn.App. 481, 498 (2011); Utica Mutual Ins. Co. v. Precision Mechanical Services, 122 Conn.App. 521, 530 (2010), Wilfert v. Allstate Ins. Co., CV06-5001294 (Nadeau, J., 2007).
The Practice Book mandates their availability when pretrials are held, see Practice Book § 14-13, also see, for example use of term "insurance adjuster" in statutes such as § 38a-335a requiring disclosure of policy limits by insurance adjuster or its company in case of serious accident or § 14-16c requiring an insurance adjuster's appraisal report where a vehicle is claimed to be totaled.
Section 38a-815 limits its application to persons or entities in "the business of insurance." Are public adjusters "in the business of insurance" in any meaningful sense suggested by that term? It could be said that they are in that business since the Insurance Commissioner must issue a license to permit people to act as public adjusters, § 38a-769. Pursuant to that statute examinations for the position are administered and a licensee's books and records are subject to examination by the Commissioner. A license to be a public adjuster "may" be reviewed "in the discretion of the commissioner." Public adjusters obviously deal with claims of loss by their clients who claim coverage under a policy; they evaluate the loss and work with insurance company adjusters to try to agree on the appropriate monetary reimbursement under a claim. It certainly would seem public adjusters are involved in the insurance business and the operations of that industry.
But let us look at the problem more closely rather than conducting a linguistic analysis. Are public adjusters themselves in the business of insurance? Were they meant to be regulated by the operation of § 38a-816(G) entitled "Unfair Claim Settlement Practices." In that statutory subsection there are fifteen listed forms of unfair settlement practices. If the language of these (a) to (o) subsections is read closely they clearly apply in most if not all instances to the actions or failures to act of insurance companies and their agents. For example look at (d) — (d) "refusing to pay claims without conducting a reasonable investigation based upon all available information," or (e), "failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed." These actions cannot possibly be taken by a public adjuster, hired by a claimant after a loss to get a claim evaluated and paid. The court could find no appellate cases dealing with this issue of public adjuster and CUIPA. It could find one trial court opinion that assumed public adjusters, hired by an insured after a loss by the insured are subject to § 38a-816, Steiger v. Giordano Associates, Inc., 31 Conn. L. Rptr. 617 (2002).
Couch and two cases from other jurisdictions have addressed this issue, Couch only indirectly. When Couch discussed unfair settlement practice claims under the state statutes he dealt with the general business practice requirement. The court would refer to its previous quote from Couch — he in effect said that such a practice could be assumed where the wrongful act was done with such frequency as to be considered "sufficiently persuasive or sufficiently sanctioned by the insurance company" — § 204:52 (emphasis by this court).
In Culberth v. Lawrence J. Miller, Inc., 328 Pa.Super 374 ( 477 A.2d 491) (1984) the court relied heavily on a U.S. Supreme Court case. The Culberth court had to decide whether its state's Unfair Insurance Practices Act applied to the appellees. Commenting on its act the court said the following:
"The Unfair Insurance Practices Act provides that no "person" shall engage in any trade practice defined or determined to be an unfair method of competition or an unfair or deceptive act in the "business of insurance." 40 P.S. § 1171.4. The purpose of the Act is to "regulate trade practices in the business of insurance in accordance with the intent of congress as expressed in the [McCarran-Ferguson Act, 15 U.S.C. 1011 et seq.]." 40 P.S. 11712 (emphasis added)."
The court went on to discuss whether public adjuster contracts are part of the business of insurance which the court will quote. In the quote the court relied upon Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119 (1982) and referred to Securities Exchange Commission v. National Securities, Inc., 393 U.S. 453 (1969). The Colberth court said the following:
"A consideration of public adjuster contracts in light of the three factors identified in Pireno leads to the conclusion that public adjuster contracts are not a part of the "business of insurance." Just as in Pireno, it is clear that public adjuster contracts do not play a part in transferring or spreading a policyholder's risk. Also, a public adjuster contract is not an integral part of the policy relationship between the insurer and the insured. Just as in Pireno, the public adjuster contract involves an arrangement between one party to the insurance policy, in this case the insured, and a third party. And just as in Pireno, the arrangement is a matter of indifference to the insurance company. Whether an insured is represented, and if he is, the particulars of the agreement, are of no concern to the insurance company. The agreement that an insured has with a third party who represents him, whether, as in some cases, it be a public adjuster, or, as in other cases, an attorney, is not a part of the claims adjustment process itself, which involves the relationship and interaction of the insured or his representative with the insurer or its representative. With respect to the third factor, unlike a peer review committee, a public adjuster is not a party wholly outside the insurance industry. The very service offered by a public adjuster is the representation of an insured. Nevertheless, no one factor is conclusive, and consideration of all three factors leads to the conclusion that a public adjuster contract is not a part of the "business of insurance." Cf Securities Exchange Comm'n v. National Securities, Inc., supra (merger of two insurance companies not part of "business of insurance" even though both companies are entities within the insurance industry)." Id. p. 385.
If public adjuster activities representing insured in dealing with the insurer are not subject to CUIPA, a CUIPA claim cannot be made in and of itself or by means of CUTPA. But there are other interesting consequences. If CUIPA does not apply, why cannot a CUTPA claim be made without the general business practice requirement being imposed on the viability of any such claim. Why should it be, since Mead made clear that this requirement must be imposed to enforce the legislature's desire not allowing single instance litigation under CUIPA; regulatory consistency requires such a limitation on actions against insurers under CUTPA, 199 Conn. at page 666. But if CUIPA does not apply because a public adjuster is not part of the "insurance industry" (see language of Mead at page 661), then CUTPA actions against this category of people should not have the aforementioned requirement imposed on them. The court could find no relevant case law but even assuming these observations have merit, the court concludes that the plaintiff cannot take advantage of them in this litigation. In her post-trial brief the plaintiff explicitly relies upon a violation of CUIPA as a basis for bringing an action under CUTPA.
In any event the court, despite its reservations, will analyze the CUIPA allegations as a vehicle to enforce the CUTPA claim as if a CUIPA claim is viable despite the fact that the defendant is a public adjuster.
(4) CUTPA
The court will make some basic observations about CUTPA. It has relied extensively on the excellent brief overview of the act by Attorney David Belt in Vol. 82, No. 4 of the Connecticut Bar Journal at page 389 et seq., entitled: "Unresolved Issues Under the Unfair Trade Practices Act." The court will often just paraphrase his observations and refer to cases Attorney Belt cites. Section 42-110b(a) provides three grounds for liability under CUTPA (1) unfair methods of competition (2) unfair acts or practices (3) deceptive acts or practices. As Belt notes our Supreme Court has adopted a three prong test to determine whether unfairness has been established.
"1. whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law or otherwise — whether, in other words, it is within 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."
See Tanpiengco v. Tasto, 72 Conn.App. 817, 819 (2002); Ventres v. Goodspeed Airport, 278 Conn. 105, 155 (2005); Larsen Chelsey Realty Co. v. Larsen, 232 Conn. 480, 507 (1995).
"All three criteria do not need to be established to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of these criteria or because to a lesser extent it meets all three," Updike, Kelly Spellacy, P.C. v. Beckett, 269 Conn. 613, 655, 666 (2004).
The second prong of the cigarette rule talks of immoral, unethical, oppressive or unscrupulous acts or practices. Belt notes that "a trade practice that is undertaken to maximize the defendant's profit at the expense of the plaintiff's rights" falls under the second prong of the rule, Votto v. American Car Rental, Inc., 273 Conn. 478, 485 (2005).
The Belt article notes that it is "well established that a simple breach of contract, even if intentional, does not constitute a CUTPA violation," see footnote 30 at page 398 of article where CT Page 18494 Lydall v. Ruschmeyer, 282 Conn. 209, 247 (2007) is cited for this proposition. That case mentioned a Connecticut Federal district court opinion to the effect that "substantial aggravating circumstances" must be shown to turn a breach of contract claim into a CUTPA violation. The reason for the rule is obvious, if every breach of contract became a CUTPA violation, given the punitive aspects of that act, contractural modes of doing business would collapse, cf Design on Stone, Inc. v. Brennan Constr. Co., 21 Conn L. Rptr. 659 (1998).
It has also been held that mere negligent conduct does not satisfy the second prong of the cigarette rule — that is that the conduct is "immoral, unethical, oppressive or unscrupulous." Williams Ford, Inc. v. Hartford Courant, 232 Conn. 559, 592-93 (1995), cf A-G Foods, Inc. v. Pepperidge Farms, Inc., 216 Conn. 200, 215-17 (1990) — mere negligence standing alone without implicating second and third prong of unfairness test does not violate CUTPA.
Updike, Kelly Spellacy, P.C. v. Beckett, 269 Conn. 613, 657-58 (2004) also suggests that not every violation of fiduciary duty compels a finding that CUTPA has been violated, also see Ostrowski v. Avery, 243 Conn. 355, 378 (1997).
The third prong requiring proof of substantial injury, here two consumers, was adopted from the test set out by the Federal Trade Commission by our court in McLaughlin Ford, Inc. v. Ford Motor Company, 192 Conn. 558, 569-70 (1984). The test is in three parts (1) the injury must be substantial (2) it must not be outweighed by any countervailing benefits to consumers that the practice produces and (3) it must not be an injury that consumers themselves could not reasonably have avoided. To justify a finding of unfairness under this test all three criteria must be met, id. Interesting cases discussing whether an injury is substantial under the first part of the test are Web Press Services Corp. v. New London Motors, 205 Conn. 479, 484 (1987) and Cheshire Mortgage Services, Inc. v. Montes, 223 Conn. 80, 113 (1992); they deal with the application of de minimus considerations to the application of the substantial injury test.
Another aspect of a CUTPA action that the court will discuss in this introductory section is that of "ascertainable loss." Ascertainable loss is a prerequisite for bringing a CUTPA action and is set forth in 42-110g(a) of the general statutes — as "Belt notes it is a form of statutory standing." The statute reads as follows:
"Any person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a method, act or practice prohibited by section 42-110b, may bring an action in the judicial district in which the plaintiff or defendant resides or has his principal place of business or is doing business, to recover actual damages . . . The court may, in its discretion, award punitive damages and may provide such equitable relief as it deems necessary or proper."
The 1984 case of Hinchliffe v. American Motors Corp., 184 Conn. 607, 612 et seq. Although that case involved the sale of a product its language has a bearing on any CUTPA claim including one claimed to arise out of a contract for provision of services. The court said "loss" encompasses a broader meaning than the word damage — damage is only a type or species of loss, id. p. 613. In fact:
"Whenever a consumer has received something other than what he (or she) bargained for, he (or she) has suffered a loss of money or property. That loss is ascertainable if it measurable even though the precise amount of the loss is not now. CUTPA is not designed to afford a remedy for trifles. In one sense the buyer has lost the purchase price of the item because he parted with his money reasonably expecting to receive a particular item or service. When the product fails to measure up, the consumer has been injured; he has suffered a loss. In another sense he has lost the benefits of the product which he was led to believe he had purchased. That the loss does not consist of a diminution in value is immaterial, although obviously such diminution would satisfy the statute. To the consumer who wishes to purchase an energy saving subcompact, for example, it is no answer to say that he should be satisfied with a more valuable gas guzzler."
The court referred to an Oregon case in holding "`ascertainable' means `capable of being discovered, observed or established.'"
Cases of interest given the facts of this case are Faragasso v. DeGeorge Home Alliance, Inc., CV97-0162664 (D'Andrea, J., 1998). The court did not grant a motion to strike because of a failure to allege "ascertainable loss": "Viewing in the light most favorable of sustaining the sufficiency of the complaint, this court determines that the plaintiffs have alleged facts which amount to an ascertainable loss. Here plaintiffs allege that they incurred additional expense as a result of the defendant's actions. Therefore the motion to strike the fifth count (a CUTPA count) of the plaintiff's revised complaint is denied."
In Volume 12 of the Connecticut Practice Series on Unfair Trade Practices at § 6.4, page 406, fn. 35 it is noted that . . ."most courts have held that emotional distress in and of itself, does not constitute an ascertainable loss of money or property," see for example Rees v. Flaherty, 32 Conn. L. Rptr. 292 (J. Scholl, 2002).
Also see the unreported decision of Judge Cabranes in the District Court applying CUTPA, Madonna v. Academy Collection Service, 1997 WL 530101 (D.Conn). The suit involved a claim that letters sent to the plaintiff constituted unlawful debt collection practices under the federal Fair Debt Collection Practices Act, 15 USC § 1692 et seq. and CUTPA. The court discussed the requirement of "ascertainable loss" as a prerequisite to a CUTPA action and said the plaintiff had not shown ascertainable loss:
The burden of proving damages is on the party claiming them . . . In this case, plaintiff has failed to specifically allege or prove any loss or injury suffered as a result of receiving Academy's letters. Only after the trial, in a post-trial memorandum, does plaintiff suggest a loss of a "minimal amount for postage and envelopes" used to mail "the offending letter to his counsel (expense of about $1.00)." . . . Under CUTPA, "the private loss indeed may be so small that the common law likely would reject it as grounds for relief, yet it will support an action under the statute." Weigel v. Ron Tonkin Chevrolet Co., 298 Or. 127, 690 P.2d 488, 494 (Or. 1984) (citing Hinchliffe). "While the court in [[ Hinchlifjfe] did not require that the plaintiff to prove a specific amount of damages, it did require that plaintiff show the existence of some loss or injury." After all, "CUTPA is not designed to afford a remedy for trifles." Hinchliffe, 440 A.2d at 814. Yet, even in his Post Trial Memorandum plaintiff offers not one scintilla of evidence to support his claim of damages caused as a result of defendant's letters. Thus, plaintiff has not met "his burden under CUTPA of offering evidence that any ascertainable loss of money or property was sustained as a result of the alleged misrepresentations."Hinchliffe is still our law; it was cited, for example, in Artie's Autobody Shop v. Hartford Fire Ins. Co., 287 Conn. 208, 218 (2008) which underlines that the plaintiff in a CUTPA action must also "prove the loss was caused by or `as a result of' the prohibited act" the statute's language makes this clear, § 42a-110g(a). In Abrahams v. Young Rubricam, Inc. 240 Conn. 300, 306 (1997) a proximate cause test was used — was the harm which occurred of the same general nature of the foreseeable risk created by the defendant's act.
The civil jury instructions on the website of the Judicial Branch put it quite concisely. "CUTPA — Ascertainable Loss
Even if the plaintiff proves that the defendant committed an unfair trade practice or deceptive act or engaged in unfair competition that violates CUTPA, the plaintiff cannot recover unless (he/she/it) sustained an "ascertainable loss." The plaintiff has the burden of proving this "ascertainable loss." A loss is a deprivation detriment or injury. A loss is ascertainable if it is capable of being discovered, observed or established, but need not be measured by a dollar amount."
In addition to Hinchliffe Collins v. Anthem Health Plans, Inc., 275 Conn. 309, 344-45 (2005), Service Road Corp. v. Quinn, 241 Conn. 630, 644 (1997), and Prishwalko v. Bob Thomas Ford, Inc., 33 Conn.App. 575, 586 (1984) are cited.
Before it concludes its general discussion of CUTPA issues that may arise in this case, it would also note Belt's comment at pages 440-44 of his article in the Bar Journal. He notes that under our law once a fiduciary relationship is established the defendant fiduciary has the burden of showing by clear and convincing evidence that the duty has not been violated. Attorney Belt then cited Ostrowski v. Avery, 243 Conn. 355 (1997) where the court reversed a judgment for the plaintiffs on the claims of breach of a fiduciary duty and a violation of CUTPA holding the trial court had improperly allocated the burden of proof to the plaintiffs. Belt recognizes that the court focused on the burden of proof that applied to the breach of fiduciary duty count but notes . . . "it also reversed the judgment with respect to the CUTPA count. Arguably, reversal of the CUTPA count could have been unnecessary had the burden of proving that count on these circumstances been on the plaintiff," see Ostrowski at pp. 363-64 and at pp. 378-79. This court does not believe that conclusion is necessarily true. What must be thrown into the equation is the previously referred to language in Ostrowski at page 378 that a breach of fiduciary duty does not compel a conclusion that CUTPA has been breached. At the most the facts establishing a breach of fiduciary duty can be established under the burden shifting and heavy burden rubric of fiduciary duty law — already addressed in a breach of fiduciary duty count — but why should that translate into a diktat on a separate legal question whether CUTPA has been violated?
C.
The court will now try to apply the foregoing observations to the specific claims before the court in light of the evidence produced at trial.
(1) Breach of Fiduciary Duty Claim in this Case (a)
There is no real question that the defendant Biller Associates by its contract with the plaintiff Catherine Thomas acted as her agent in advancing her fire loss claim with the Allstate Insurance Company, Mrs. Thomas's insurer. Interestingly the actual employment contract is printed on two sides of one page. It merely says the plaintiff agreed to hire the defendant "to advise and assist in the adjustment and settlement" of her claim arising out of a fire loss (no date indicated). It states Biller Associates would take a 10% fee "of the amount of the loss when adjusted with the Insurance Companies or otherwise recovered." The back page of the document says the defendant "shall forward to you any written settlement offer from the insurance company." Through this contract Biller Associates agreed to act as Catherine Thomas's agent in dealing with the insurance company, Allstate, for all claims arising out of the fire loss. The ensuing conduct of the parties after the December 12, 2002 contract conforms the nature of the relationship. The trial testimony and the Allstate Claims file indicates that Louis Maffeo and David Biller, with input and submissions from Dennis Thomas, prepared the contents list of items destroyed by the fire as well as inspected the building loss along with Allstate adjusters and negotiated these matters and the final settlement offers with Allstate representatives. The claims file indicates that neither the plaintiff or Dennis Thomas, who had her power of attorney, engaged in none of these activities directly with Allstate.
Correspondence between Allstate and David Biller and Biller and Allstate confirms that Biller Associates was acting as the plaintiff's representative or agent in handling the fire loss claim — January 17, 2003 letter to David Biller from Allstate setting forth Allstate's estimate of the scope of damages; January 16, 2003 Biller letter to Allstate enclosing a preliminary building estimate; February 15, 2003 Biller letter enclosing contents inventory which indicates he had discussed it with the Allstate adjuster to which the letter was directed; February 20, 2003 Biller letter setting forth living expenses incurred as a result of the fire; March 6, 2003 letter to David Biller containing estimate of damaged items and repairs needed to restore damaged property to its preloss condition. On March 31, 2003 Biller sent Ms. Reardon of Allstate a letter inquiring the status of Allstate's personal property inventory — the language is interesting (as will be discussed) it states the letter is a follow up of many inquiries regarding this subject. Biller sent a March 24, 2003 letter to Allstate enclosing living expense bills. And Allstate sent to him two checks for such expenses made out to Catherine Thomas. Mr. Maffeo sent a fax to an Allstate representative for various expenses needed to preserve the damaged property on April 13, 2003. On April 9, 2003 a fax from a Ms. Allen of Allstate was sent to David Biller requesting additional information regarding living expenses. On August 4, 2003 Biller sent a check to Thomas for payment on the balance of a lease she had entered into as a result of the fire.
David Biller also sent letters to Catherine Thomas. On June 26, 2003 he informed Thomas that Allstate "contacted us to inquire as to the status of repairs." He told her repairs, under the policy, must be made in a reasonable amount of time and if they are not additional living expenses would be terminated. On September 13, 2003 Biller advised Thomas of the limitations on bringing suit against Allstate for funds Thomas claimed were owing. All of the foregoing makes it obvious that Biller was in fact acting as the agent of Thomas and Allstate regarded him as such and that Biller in so acting was exercising skills not available to insureds in advancing their claims — a fact recognized by the statutory scheme previously discussed and by Biller Associates in brochures advertising its services.
See earlier reference to §§ 38a-723, 38a-725, § 38a-769.
But the fact that a fiduciary relationship existed between the parties is only the first step in analyzing whether the defendant breached that relationship and what if any consequences resulted from that breach harmful to the plaintiffs. References to case law are not a prerequisite to the simple proposition that in the area of compensatory damages the very word compensatory requires proof that the defendant's actions or failures to act caused damage or injury to the plaintiff. And despite burden shifting and higher levels of proof attendant to actions for violations of fiduciary duty, the plaintiff must prove those damages.
(b)
A place to begin is to discuss what losses were covered by the policy issued by the insurer as a result of fire loss.
There are three components to the coverage (a) loss of personal property, the contents of the home (b) loss to the building (dwelling loss) which would involve the cost of repair (c) and so-called additional living expenses (a.l.e.) which represent the increased cost of living brought about by the loss of the home. If the company issues an initial check for dwelling loss, it holds back a sum called withheld depreciation which the insured is entitled to receive if repairs are completed within a set time after the loss. The additional living expenses are to be paid by the insured for a twelve-month period. The purpose of these provisions is to encourage and require people who have suffered a loss to start repairs as soon as possible so as to minimize the a.l.e. insurance companies will be required to pay. Basically it makes risks manageable for insurers and allows them to spread those risks in order and offer prospective and current insureds the lowest fair rates of insurance.
In this case the plaintiff received a contents check in the amount of $71,602.80 which represented the full policy limit under the terms of the insurance contract signed by the plaintiff with Allstate. As to the dwelling loss the initial check was for $63,790.63 and the withheld depreciation was $21,543.18 (total of $85,333.81). Alternative living expenses included initial payments for hotel accommodations and then house rental expenses, computer and electronic rentals, and rental of furniture. Eventually the plaintiff received the policy limit on the dwelling expenses and did receive additional living expenses for the full twelve-month period under the policy.
However, despite the foregoing the plaintiff advances several grounds for claiming a violation of fiduciary duty by the defendant.
As to the additional living expenses a sum in excess of $4,000 the plaintiff claims she was entitled to was not turned over to her because of a miscalculation by Allstate and it is further claimed this was or should have been apparent to the defendant in the spring of 2003. Present counsel did secure payment of a.l.e. monies of over $13,000 but a legal fee of over $4,000 was charged. Also the plaintiff retained other counsel who secured payment of withheld depreciation after that date. As to the a.l.e., Allstate threatened to cut off any payments for computer and electronic expenses on the grounds rental of such items was economically wasteful since the insured should have purchased rather than rented these items. Dennis Thomas who acted as power of attorney for the plaintiff testified that after April 4, 2003 she did not receive any a.l.e. for rental of computers and electronics (and perhaps furniture rental, although the record is not clear on this) until a lawyer was retained; housing rental costs, however were paid. To secure the full a.l.e. she was entitled to receive, the plaintiff had to hire a lawyer whose fee was over $4,000.
A claim is also made that the withheld depreciation regarding the dwelling should have and indeed could have been secured by the defendant if it had secured the necessary information and documentation from the plaintiff and approached Allstate with a demand — tied in directly to the foregoing is the plaintiff's assertion that her son Dennis Thomas who exercised power of attorney for her and other family members (at least one) tried to contact David Biller and he never returned messages left on his voicemail. It is also claimed that the defendant inexcusably delayed presenting the list of damaged contents to Allstate for two months resulting in a delay in the contents reimbursement check.
Furthermore Allstate sent the dwelling loss check to Biller on March 6, 2003 but he did not deliver a check from the defendant minus its fee until April 9, 2003. The contents check was sent to Biller March 31, 2003 and Mr. Biller delivered this check and the dwelling loss check to the plaintiff only on April 9, 2003.
(c)
The court will now try to address the facts of this case and the allegations made in support of the breach of fiduciary duty claim. The court will test those facts against the general discussion of an agent's fiduciary obligations toward his or her principal set forth in an earlier part of this decision. But the most succinct statement of the "scope of duty of a fiduciary" is set forth in 37 Am.Jur.2d in the article on "Fraud and Deceit" where at Section 31 it states:
"§ 31 — Scope of duty
Where a confidential or fiduciary relationship exists, it is the duty of the person in whom the confidence is reposed to exercise the utmost good faith in the transaction with due regard to the interests of the one reposing confidence, to make full and truthful disclosures of all material facts, and to refrain from abusing such confidence by obtaining any advantage to himself or herself at the expense of the confiding party. A fiduciary duty is a duty of loyalty. The existence of a fiduciary relationship necessarily assumes that one of the parties has a duty to act for, or to give advice for, the benefit of the other upon matters within the scope of the fiduciary relationship. Should an advantage be obtained by a fiduciary, he or she will not be permitted to retain the benefit, and the transaction will be set aside even though it could not have been impeached had no such relation existed, whether the unconscionable advantage was obtained by misrepresentations, concealment or suppression of material facts, artifice, or undue influence."
(i)
An important aspect of the claim against the defendant rests on the testimony of Dennis and Melanie Thomas that numerous attempts to contact the defendant were made by them in response to the defendant's June 26, 2003 letter to the plaintiff inquiring about the status of the repairs and the September 13, 2003 letter advising the plaintiff about the need to initiate litigation within the time periods set forth in the policy of insurance. The testimony was that they were never called back despite these efforts to let David Biller know what was going on with the house.
Returning client's phone calls and receiving material information from them is a necessary part of a public adjuster's fiduciary responsibilities. How else does he respond to the insurer's inquiries and especially in a case like this thwart any decision by the insurer to, for example, cut off adjusted living expenses which have as a prerequisite a diligent effort by the insured to complete any repairs in a diligent manner? Dealing with client communications also is necessitated if the public adjuster is to be able to provide material and relevant information to the insured, see previous references to Restatement (2d) Agency and quote from Am.Jur.2d, § 31 "Fraud and Deceit" article.
The court believes that there are several problems with this aspect of the claim. Perhaps it is a minor point but the testimony was that messages were left on voicemail — this would more dramatically underline the failure to return calls. The problem is that the defendant LLC did not install a voicemail system until 2006, long after the adjustment of this claim.
Also in evaluating this unreturned phone call claim it is important to time periods in mind. There apparently was no problem in communicating with Biller experienced by the Thomases in the months immediately after the loss while the dwelling loss and contents loss claim were being adjusted. List of contents were prepared by Dennis Thomas, the plaintiff's son, and given to Biller Associates. There was contact between Biller and Thomas and especially between Lewis Maffeo, an employee of the defendant LLC, and Thomas. Maffeo was a friend of the Thomas family who in fact referred them to the defendant; he was their neighbor. After the fire he helped get a rental, food and clothing and apparently loaned the Thomases funds. Maffeo testified they would call him and he never failed to return calls; Melanie, Dennis's wife called him a lot. Dennis Thomas said Maffeo talked to him once or twice at the rented house. He also said after receiving the June 26, 2003 letter from David Biller to the effect that Allstate wanted to be informed of the status of the repairs he called Biller and Maffeo but was never called back. Maffeo, however, testified that after April 9, 2003 when the checks for the dwelling loss and contents loss were delivered to the plaintiff he did not hear from them or at least not very often.
It is difficult to understand why Maffeo was not contacted at home or at the office if the Thomases had information of material importance to their claim. What possible motive or reason would Maffeo, a family friend, have not to return their calls?
Furthermore, Dennis Thomas testified that throughout the period the defendant handled the claim he continued to mail various receipts to the defendant to qualify for additional living expenses. He certainly knew how to communicate with Biller Associates when it was in his interest to do so and there certainly is nothing wrong with that. But if he had material information about how the repairs were going or a.l.e. claims and his or his wife's calls were not being returned why wasn't a letter written to the defendant complaining of such lack of response or detailing the information he wanted the defendant to be aware of in handling the claim. The same observation would apply to other members of the Thomas family.
The question also presents itself as to what all these purported calls were being made for, what information was sought to be communicated or what information was to be elicited? Not much in the way of detail was provided. Testimony was elicited that people going through the harrowing experience of trying to get their lives back together after a loss of their home will often call their public adjuster repeatedly. It would be a good thing if the calls would be returned or answered but lacking information as to the contents of these calls how is it possible to conclude there was a violation of fiduciary duty.
One telling part of the testimony at least for the court raised the whole question of whether there was truly any lack of communication from one party to another in any material sense. During the cross-examination of Dennis Thomas Allstate's claims diary was referred to by defense counsel. A claims diary is a running record kept by insurance companies of all contacts, exchanges, and work progress during the adjustment of a claim. Mr. Thomas was referred to the July 25, 2003 entry which said Biller Associates called to say the dwelling would be furnished by October 30, 2003. As the June 26, 2003 letter to the plaintiff from the defendant indicated it was crucial to give this information to Allstate; they could cutoff the additional living expenses if they determined repairs were not being diligently pursued. During cross of Thomas it was noted the October 30th date was obviously and necessarily communicated to Biller. It would have had to come from someone on the Thomas side of this dispute. The response from Dennis Thomas to this observation was "I would hope so."
The issue of lack of response by the defendant to the needs of their client or appropriate contact with Allstate representatives to adjust this claim can be approached from another perspective. We can look at the claims diary itself. It is 65 pages in length running from the loss report date of November 19, 2002 to November 24, 2003. In this entire document there are only three instances of what very generously be called a lack of communication problem vis a vis the defendant.
On one occasion an Allstate representative could not reach Mr. Maffeo — he was on vacation (1/8/03). On 1/22/03 a call was received from someone who identified herself as the plaintiff's daughter. She told an Allstate agent she could never get in touch with the public adjuster because he was too busy and wanted to find out what the policy covered. The agent explained the coverage and David Biller was informed of the call. There is nothing to indicate coverage was in dispute in this case or lack of information about coverage prejudiced the plaintiff in any way. The claims diary indicates Biller was certainly busy; the first 54 pages are involved with communications about a.l.e. payments as well as the process of adjusting the dwelling loss and contents loss claims. The diary underlines the rather intense and repeated contacts between Maffeo and Biller in dealing with Allstate agents and adjusters.
The final instance that the court could find in the diary concerning lack of Biller contact with Allstate is dated July 25, 2003. The note from an Allstate agent, reads: "I have allowed 6 months for repairs, most of the 2nd story needed to be gutted. Insured's PA (public adjuster, i.e. defendant) has never responded to my calls about the issue. I suggest sending ALE cutoff letter based on this date, it is certainly reasonable." Just above this entry it noted that the dwelling check was issued 3/6/03 and the anticipated repair date was 9/30/03.
Biller testified that Maffeo was told at the April 9, 2003 meeting of the possibility of the purchase of a modular home by the Thomas family. They signed a contract to do so in May of 2003 with a company called Lufam Homes. From the point of view of a public adjuster representing the plaintiff the most important part of the July 25th entry in the claims diary is the suggestion that a letter cutting off a.l.e. should be sent. Allstate appears to be expecting repairs on the damaged but existing house with a six-month window to complete the repairs. What was the defendant adjuster to do — call Allstate as promptly as an inquiry is received and tell this company, oh by the way we're not going for repairs the insured wants to replace the old house with a modular home two and a half times as large — this to a company which Maffeo, Biller and the defendant expert all said was very tough to deal with, see also testimony of plaintiff's expert at page 104 of 11/19/08 Transcript.
On the same date Biller (using perhaps cryptic wording) told Allstate the dwelling would be finished by October 30, 2003, already one month beyond the September 30, 2003 date noted as the completion date by Allstate. No cutoff letter was apparently sent based on the foregoing circumstances and in any event rental payments continued.
There is also no indication that any inexcusable failure to return calls by the defendant or its agents caused any damage to the plaintiff. As just noted Biller informed Allstate of the October 30, 2003 repair completion date, this information had to be given to the defendant in response to the June 26th letter. Rental payments continued; disputes about a.l.e. for furniture and electronics and any other items had nothing to do with Biller's failure to return calls which could have garnered information to forestall a cut off of a.l.e. for these or any other items. There was a suggestion that a shortfall of several thousand dollars in a.l.e. payments occurred in the spring of 2003. Counsel suggested if Biller simply called the Thomases this could have been rectified and Allstate made to deliver full payment. But Dennis or Melanie Thomas never testified themselves that this was why they were calling. Could Biller himself have figured out there was a shortfall? If so, this might have a bearing on whether failure to do so was a violation of fiduciary duty or breach of contract separately considered, but what does it have to do with a failure to return calls?
(ii)
Much time an effort was spent by both sides on withheld depreciation. The insured had a dwelling loss claim and they received a settlement check of $63,790.63. The full replacement value of the home was determined to be $85,333.81. The insured has to spend in excess of the latter figure to receive the difference between the full replacement value and the settlement check. This is called withheld depreciation and in this case was determined to be $21,543. This figure was agreed upon in early March 2003. The plaintiff in fact did not receive a check for withheld depreciation until after she hired a lawyer on November 3, 2003.
The defendant's expert in this case was Jonathan Wilkofsy. He is an attorney in a firm representing victims of disasters. He is also general counsel to state public adjuster groups in New Jersey and New York. He has been involved in training and teaching public adjusters although he is not a licensed public adjuster. He does not have a good opinion, to put it mildly of the insurer in this case. He testified that the building and contents portion of this claim was resolved within five months which is very quick given the nature of this insurer's practices. The court would note that this resolution was achieved by Biller's efforts.
A. He also testified, in a comment relevant to the previous discussion by the court that a claim such as this could not be settled without contact and communication with the client.
B. In another portion of his testimony Wilkofsky also testified not directly related to the withheld depreciation issue about another matter germane to the issues raised in this case concerning violation of fiduciary duty. There was a dispute between Biller and Allstate regarding three areas of damage to the home which would have apparently affected the determination of building loss which could have been the subject of appraisal provided for in the insurance policy. The testimony of Dennis Thomas was that Biller never advised him about the possibility of appraisal. David Biller disagrees. The defendant's expert said only $5,000 was involved and the cost of the appraisal process militated against using it. Even if the abstract proposition is accepted that appraisal was not mentioned as an option and a fiduciary acting as a public adjuster should have done so, no evidence was presented that appraisal was a sensible choice and failure to engage in that process caused damage to the plaintiff or how and why this would have been so.
In any event the defendant's expert testified withheld depreciation could not be obtained, especially from this insurer unless the insured actually spent more than $85,333.81 on repairs. As of November 6, 2003, the day before the modular home was delivered to the site only (1) a contract had been signed on May 23, 2003 to deliver it and (2) a check for $50,000 had been given to Lufam Homes which sells modular homes.
On November 7th the home was delivered and Mr. Thomas delivered a check for the remaining balance of $150,000 to Lufam. The plaintiff's expert, an experienced public adjuster said 12 days, between November 7, 2003 and November 19, 2003 (the one-year anniversary of the fire loss) would have been enough time to secure the withheld depreciation from Allstate since the conditions for receiving withheld depreciation had been met.
In a September 12, 2003 letter the plaintiff had been advised by Biller that if she had any claims against Allstate for withheld depreciation or other funds suit must be brought within one year of the 11/19/02 date of loss. In fact an attorney had been hired. There is no indication Biller was made aware of this but once an attorney is involved the public adjuster has a limited if any role.
In any event a mere twelve days to get the insurer to agree to pay the withheld depreciation would seem to a risky gamble. The defendant's expert said, in his judgment Allstate might have still asked for an inspection of the property even though there was a representation that the $100,000 check had been delivered to Lufam Homes.
To approach the problem from another perspective, as indicated the defendant's expert stated to receive the withheld depreciation the money on "repairs" (here a sum over $85,000) must actually be spent and Allstate would require proof that it was spent. The plaintiff's expert was somewhat equivocal. He suggested at one point the withheld depreciation could have been obtained — he would have presented the insurer with a copy of the contract wherein the Thomases incurred a contractual obligation to pay well over the $85,000 for the modular home — "good faith" evidence of their willingness and ability to meet that obligation being evidenced by the $50,000 check already delivered to Lufam Homes. A copy of that first check could have been sent to Lufam Homes. At another point he seems to indicate all that would not have been enough to secure release of the money. In any event what rational insurer would agree to release these funds under such circumstances. What if Lufam could or would not comply with its contractual obligations? What if the money otherwise available for the final payment were to be spent by the Thomas family?
But not to worry you can always get an extension from the insurer allowing suit to be brought after the policy time limit says the plaintiff's expert; the defendant's expert says Allstate never agrees to an extension. But the point is that Biller sent a letter September 20th warning the insured about the need to bring suit within one year of the loss if she hoped to get withheld depreciation. A lawyer was in fact hired. Even assuming the Thomas family had tried to reach Biller unsuccessfully after the September 20th letter what could that call possibly have accomplished? Biller had already informed Allstate in July the repairs would be completed October 30, 2003 this despite the fact that Allstate set a September 30th deadline for repairs with the specter of an a.l.e. cutoff in the wings. Up until November 7th no house was delivered, no check could be transferred.
Under all these circumstances advising the Thomases of the need to file suit (ergo, the need to hire a lawyer) was a fulfillment of the defendant's fiduciary obligations. Speculating on the availability of a 12-day window for Allstate to be approached to release the funds does not under these circumstances permit a finding of violation of fiduciary obligations.
Furthermore one serious gap in this case is the failure to present testimony from Allstate representatives handling this case or having authority on the granting of extensions to sue or terms under which withheld depreciation is released to insurers.
In any event what are the damages proven to show that Biller's actions or failures to act with regard to the withheld depreciation caused any loss to the plaintiff? None have been shown.
(iii)
The plaintiff also claims a violation of fiduciary duty was shown by the fact that the dwelling loss check was received by Biller on March 6, 2003 but not given to her until the April 9th meeting in Biller's office where the contents check, dated March 31, 2003 was also given to the plaintiff. But testimony was presented by Mr. Maffeo and the plaintiff's expert that repairs cannot be commenced until the contents issue is resolved. There is an interesting letter from David Biller to Ms. Reade of Allstate dated March 31, 2003 in which he expressed a great deal of upset at Allstate's delay in settling the contents issue and referred to the many inquiries he made to Allstate on the subject complaining construction cannot begin until the issue was resolved. The letter is hardly self serving unless it can be said David Biller had a premonition Biller Associates was going to be sued by the plaintiff in 2005. Under the circumstances it can hardly be said that this delay in handing over the dwelling loss check displayed reckless, wanton, or intentional indifference to the rights of the insured.
Neither is there any evidence that a "woulda, coulda" argument has any viability. In other words if the contents check had been delivered to the plaintiff in early March, one month before the April 9th meeting there is no indication or evidence presented that a contract with Lufam Homes would have been promptly entered into; after receipt of the two checks on April 9, 2003 the Lufam contract was not entered into for at least a month. In addition, and perhaps even more to the point there is nothing to indicate the modular home could have been delivered before November 7, 2003 thus allowing for receipt of the withheld depreciation long before the one-year anniversary of the loss and shortening the a.l.e. obligations of the insurer. No Lufam Homes representative testified as to these matters.
Beyond the foregoing speculation as to injury what would be the damages — loss of interest that could have been earned between March 6, 2003 and April 9, 2003? In any event the court cannot find a breach of fiduciary duty based on this particular argument.
(iv)
Two other arguments for violation of fiduciary duty are made. There was an inexcusable delay on Biller Associates' part in turning over the aged inventory list of contents lost to Allstate because of the fire. It is argued that the list was ready by the end of December but was not sent until February 18, 2003 — approximately a month and a half of delay. From this much speculation is put forward. If the list had been sent to Allstate earlier the contents check would have been delivered by Allstate over a month earlier, the modular home would have been delivered therefore at least by October avoiding the panic inducing deadline for withheld depreciation. But there is little to nothing in the transcript as to when Biller was informed that a modular home was the choice made rather than repair of the existing premises. Dennis Thomas said nothing on this point, Maffeo said he believes he was told this at the April 9, 2003 meeting where the checks were delivered to the Thomases, Biller said he did not know when he learned of the modular home solution and denies he told the Thomases that the house was a total loss. In other words what evidence is there that Biller had reason to believe the plaintiff was thinking of buying a modular home. Allstate on its part did not think the house was a total loss, see 11/21/02 entry in Allstate Claims Diary, at page 9 of Exhibit 1, entry of same date on page 11 talking about need to replace roof cover of the house and need to seal and repaint basement. There is an 11/20/02 entry reflecting conversation with David Biller who was said to have "limited information" on the loss. The entry is hard to read and does use the words "total loss" but the words cannot be put in context, page 12. A page 14 entry describes first floor as a total loss, see also page 15. An entry at page 21 says the first floor will require gutting and describes work that will have to be done on upper levels and the roof. This was written after a scope of damage inspection by an Allstate adjuster and David Biller. As late as July 25, 2003 an Allstate adjuster was still talking in terms of repairs which required gutting of most of second floor and for which six months had been allowed to make repairs. Why would you talk about gutting a structure that you knew was going to be entirely replaced, see page 61 of exhibit 1.
If Biller had no reason to think a modular home was in the offing and repairs were contemplated and Dennis Thomas did not mention the possibility until April 9, 2003, all that could be said is that, from the defendant's perspective, failure to send Allstate the inventory list could have delayed the start of repairs but how long would they have taken and when did the plaintiff decide to contract for a modular home, why was there a delay in the contract for such a home — necessary predicates for deciding whether delay in submitting the inventory list caused actual delay in the modular home plan.
From all of this the court agrees there was no good reason why, as the plaintiff's expert said, that the inventory list was not sent into Allstate immediately upon its completion. But it has difficulty in concluding from all of this that such a failure to act was reckless, wanton, or intentional or is deserving of any damage award.
Perhaps even more to the point although the inventory list for contents was not sent to the insurer until February 18, 2003 what evidence is there that Allstate would have sent a check for contents any earlier than it did. As it was David Biller had to send on March 31, 2003 a forceful letter demanding that Allstate act on the contents claim and resolve it by delivering a check — a claim presented on February 18th, a month and a half before.
Besides even if a delay was caused by the defendant's failure to send in the inventory list as soon as possible, as previously discussed, what evidence is there that Lufam Homes could have delivered the modular home earlier than November 7, 2003 and, if so, how much earlier.
(v)
The plaintiff also argues that the defendant failed to keep track of alternative living expenses that she and her family were entitled to receive. The result of this is that a lawyer had to be retained who recovered over $13,000 in a.l.e. expenses after November 19, 2003. There is apparently no claim that all the a.l.e. was eventually not recovered. The claim rather has to be that because of the defendant's failure to live up to its contractual and fiduciary obligations the plaintiff had to hire a lawyer and pay her a contingency fee to recover a.l.e. that she was entitled to receive.
What the court found confusing about this claim is how the amounts delivered to the plaintiff through the attorney's efforts are related to the alleged shortfall in a.l.e. payments for the months of December through March 2003. For furniture and electronics rental $2,217.20 was allocated per month for a four-month total of $8,868.80. But in the April 4, 2003 Allstate letter to Biller a check for only $4612.06 was included, leaving a shortfall, which the plaintiff claims the defendant should have picked up of $4,256.74. Apart from the fact that advances were made prior to April 4th on these types of a.l.e. was this $4,256.74 figure included in the recovery of other $13,000 secured from Allstate through the intervention of the attorney? That would still leave over $9,000 in a.l.e. recovered by the attorney but what do these expenses entail? Are they exclusively for furniture and/or electronic rentals? Were the sums not paid because Biller did not submit the invoices? The defendant submitted rental invoices and they were paid by Allstate. Was a portion of the $13,000 figure for expenses incurred in September or October, for example, which Allstate would not have paid in the ordinary course until three or four months went by? The April 4, 2003 letter, for example, includes payment for a four-month period going back to December 2002. Was one motive for Allstate's settlement to avoid the expense of litigation? Did part or all or most of the settlement figure include payment for furniture and electronic rental which Allstate had threatened not to continue to pay, taking the position these items should have been purchased? If that is true who else but an attorney could get Allstate to pay the rental sums; the defendant cannot bring suit.
In any event any award based on the a.l.e. aspect of the claim is too speculative both as to the substantive merits of the claim and as to what if any damages should be awarded on this aspect of the claim.
(vi)
For all the foregoing reasons the court cannot find what if any self dealing went on here which would clearly be a violation of fiduciary duty owed by the defendant to the plaintiff. The argument made is that every effort was made by the defendant to recover on the dwelling loss and contents claims, over $150,000 was involved and Biller wanted to collect the 10% fee. But the defendant basically abandoned the plaintiff when it came to pushing for a.l.e. payments — the money was not to be made there despite the 10% fee authorized by the contract.
But the a.l.e. was no paltry amount; for the four-month period from December 2002 to the end of March 2003 almost $4,000 was apparently due and owing. Besides the defendant makes its money by charging 10% on monies paid out by insurers — why would they abandon the a.l.e. portion of the claim. Also the defendant's entire course of conduct does not comport with the position taken by the plaintiff. David Biller started working on the claim before a contract was signed, Maffeo loaned the Thomas family $900 to help tide them over before Allstate started paying out monies. Biller did not take the 10% fee on advances made for at least a period of time. And Biller apparently still was able to secure rental payments for at least a substantial period of time before a lawyer became involved.
With this aspect of the breach of fiduciary duty claim as with the others that have been discussed what is further lacking is any testimony or further evidence besides the claims diary from Allstate adjusters or representatives. As to the claim as it applies to a.l.e. the court has difficulty finding a breach of fiduciary duty. The burden shifting mandates of a fiduciary duty violation claim and the clear and convincing evidence requirements will not cure an absence of evidence and even if that observation is incorrect given the facts of this case there is an absence of proof as to damages.
Also even if nominal damages were deemed to be appropriate, as discussed earlier in the opinion, that would not entitle the plaintiff to punitive damages absent a showing of reckless wanton or intentional conduct which the court cannot find.
(2) Breach of Contract Claim
The plaintiff relies, in her brief, on the allegations of breach of fiduciary duty to establish the Breach of Contract claim. For the same reasons as discussed in the previous claim the court cannot conclude that the defendant failed to perform its contractual obligations in an objectively reasonable manner as one case discussed in the general remarks on breach of contract said. It must be kept in mind here that the contents claim and dwelling loss claim were resolved within five months of the loss, these involved payouts by Allstate of over $130,000 with a withheld depreciation figure of over $21,000 which was agreed to in the beginning of March 2003, less than four months after the loss. The defendant's expert who has long experience with the insurer involved in this case said that represented an extremely quick resolution of these claims. The court for the reasons stated does not accept the allegations advanced against the defendant regarding the withheld depreciation aspect of the claim. That figure was able to be calculated as a result of the defendant's resolution of the dwelling loss claim. On the contents and dwelling loss claim the plaintiff received the maximum under the policy. What does that leave us with — a $13,000 claim for a.l.e. which for the reasons previously stated, the court cannot decipher without engaging in speculation. Referring to the earlier general discussion on breach of contract concepts it would apply, the court concludes there was a substantial performance of contractual obligations and the promised performance was rendered with a reasonable time.
Or to put it another way, even if all or most of the actions or failures to act alleged by the plaintiff are accepted as violative of a duty owed to the plaintiff under the contact what damages have been shown to result from those actions or failures to act — and if that cannot be established, how can it be said, given all the circumstances of the case and the monies secured from Allstate by the defendant's efforts, that there was not substantial performance of contractual obligations.
(3) CUIPA CLAIM
Our court has reserved decision on whether a private cause of action can be asserted under CUIPA, Napoletano v. Agua, 238 Conn. 216, 225 N.5 (1996).
This court believes the better view is that no private cause of action lies under CUIPA for the reasons discussed in the beginning of this decision. Furthermore the court has reservations as to whether CUIPA and specifically § 38a-816 applies to public adjusters. If this latter point is correct the CUTPA count must fail because, as previously noted, for the CUTPA violation the plaintiff relies exclusively on an alleged violation of CUIPA. In the next section, however, the court will assume a CUIPA violation can be established against public adjusters.
(4) VIOLATION OF CUTPA
A plaintiff can bring a cause of action under CUTPA to enforce alleged CUIPA violations, Lees v. Middlesex Ins. Co., 229 Conn. 842, 850-51 (1994); Carford v. Empire Fire, 94 Conn.App. 41, 47 (2006). Mead v. Burns, 199 Conn. 651, 660 (1986), as previously noted by the court held CUIPA only prescribes conduct if the insurer "performs any acts or practices . . . with such frequency as to indicate a general business practice."
The plaintiff alleges § 38a-816 of CUIPA was violated because of the following unfair or deceptive practices of the defendant (1) failure to acknowledge and act with reasonable promptness upon communications concerning claims arising under the insurance policy with Allstate (2) not attempting, in good faith to effectuate prompt, fair and equitable settlement of the claim when liability had become reasonably clear (3) compelling the plaintiff to institute litigation to recover amounts due under the policy.
To prevail on the CUTPA claim, the plaintiff must show that the just mentioned practices violated the so-called cigarette rule adopted by the Federal Trade Commission and accepted by our courts as a test of whether a CUTPA violation has been shown. The court has previously set forth the Cigarette Rule and has noted that all three of the criteria set forth therein need not be established to support a finding of unfairness, Updike, Kelly Spellacy, P.C. v. Beckett, 269 Conn. 613, 655, 656 (2004).
An important consideration in these cases and certainly in the case now before the court is the requirement that when actions are brought under statutes like CUIPA a general business practice must be shown. A case cited by the plaintiff states "Proof of violations evidencing a general business practice, by the same company in different cases, can be obtained from other attorneys, claimants, or people having knowledge of the company's general practice," Klaudt v. Flink, 658 P.2d 1065, 1068 (1983). Klaudt cites Jenkins v. JC Penney Casualty Ins. Co., 280 SE.2d 252, 260 (W.Va, 1981); Jackson v. State Farm Mutual Auto Ins. Co., 600 SE.2d 346 (W.Va, 2004) is also cited for the proposition that a statistical analysis is not necessary to prove a general business practice, id. page 357. That court cited CT Page 18516 Jenkins to the effect that "proof of several breaches by an insurance company of W.Va. Code, 33-11-4(a) would be sufficient to establish . . . a general business practice." Id.
The plaintiff also relies on habit or custom evidence to support its position that the fiduciary duties alleged to have been violated with regard to the plaintiff were part of the defendant's general business practice. A predicate to the argument made is the observation in Tait Prescott, Handbook of Connecticut Evidence that as to a business or organization: "The practice of doing certain things in a certain way in the regular course of business is admissible to prove such a course of conduct was followed on a particular occasion," § 4.21.4, page 178. The link of this proposition to this case is provided by counsel's reference to Section 382 of Vol. II of Wigimore where it is said . . ."the prior or the subsequent existence of a quality or condition is evidential of its existence at a given time . . . The prior or the subsequent existence of such fact is always evidential to show its existence at a time in issue, upon the general experience that such facts involve a human attitude more or less continuous and permanent," see also Gasiorowski v. Hose, 897 P.2d 678, 682 (Ariz.App.Div., 1994), where the court said where habit or routine practice was at issue subsequent incidents "(are) relevant and probative if (they have) any tendency to make any fact of consequence more or less probable" and thus upheld the allowance in evidence of subsequent incidents, but see DeMatteo v. Simon, 812 P.2d 361 (N.M.App. 1991).
All the foregoing is well and good but it should be remembered that the habit here for example of returning or not returning calls concerns the practice of David Biller not the defendant Biller Associates, see previously discussed testimony of Maffeo.
What evidence has been presented on general business practice, how is it related to habit evidence? In 929 Am.Jur.2d article on "Evidence" at § 408, p. 411 it states:
"In order for evidence of a person's habit to be admissible to prove that person's conduct on a particular occasion, examples of habit must be sufficiently numerous and regular. A party must lay an adequate foundation to show that the habitual conduct has become semi-automatic and invariably regular. If the testimony is too vague, general and ambiguous to establish a habit, it should not be allowed."Grewe v. West Washington Cty, 707 NE.2d 739 (Ill.App., 1999), is cited which makes the interesting observation that "The routine practice of an organization differs conceptually from habit. The operation of an organization depends to a large extent upon establishing and following routines. Therefore evidence of a routine practice of an organization is admissible as tending to prove that it was followed on the occasion in question," id. p. 745. The Am.Jur. article also cites Kimberlin v. PM Transport, Inc., 563 SE.2d 665, 669 (Va, 2002). where the court said: "In order for evidence of a person's habit to be admissible to prove that person's conduct on a particular occasion, examples of habit must be sufficiently numerous and regular. Moreover, because of the danger of abuse in such evidence, habit `is never to be lightly established,'" id. page 669.
The plaintiff makes the broad claim that two former employees of Biller Associates, Donna Read and Lewis Maffeo "each provided consistent testimony to demonstrate that during the years 2002 through 2008 David Biller had a habit of not returning phone calls and failing to promptly process communications which resulted in many complaints from clients, and delays for clients in the settlement of their losses. Each employee provided consistent testimony that they discussed the habit with David Biller on multiple occasions and that Mr. Biller acknowledged its existence and the problems it caused."
There are various problems with this position especially since the plaintiff relies on the testimony of Maffeo and Read in tandem. The period of fiduciary obligation between the plaintiff and the defendant ran from the end of 2002 through December 2003 and probably more exactly the beginning of November of 2003 when the plaintiff hired an attorney or attorneys to represent her on withheld depreciation and a.l.e. claims.
Donna Read worked for Biller Associates from 2006 to 2008. Her testimony covered a period several years after the handling of this case by Biller Associates. She resigned from Biller Associates and at the time of her testimony had a pending suit against the defendant for breach of contract, unjust enrichment, negligent misrepresentation, conversion, violation of § 42-482 of the general statutes and apparently a CUTPA violation. Query whether the type of practices she alleges David Biller engaged in would advance claims she made in her own litigation — was she paid on commission for example? At one point she sued a former employer, Nationwide and David Biller gave deposition testimony on that case which was no longer pending at the time of this trial. When asked if his testimony was favorable or unfavorable to her she said she read the transcript but could not say one way or the other whether Biller's testimony was favorable or unfavorable to her. Lastly at the time of her testimony she was working for a competitor of Biller Associates.
Read's testimony was problematical in other respects. One aspect of her testimony dealt with David Biller's common practice of not returning calls. Some of the people she had signed up as clients would call her and complain about this. We are not benefited, however, with the nature of the call and why the callers were trying to reach Biller. Were they just calls by obviously anxious and distraught people who had just suffered a fire loss and called on matters and under circumstances that had nothing to do with the issue of whether the failure to return calls in specific situations had anything to do with unfair claims practices? As an aside the same could be said about Maffeo's testimony on this subject which the court will discuss shortly. But as to both Read and Maffeo, apparently they very well might have been aware of the particular individuals who called, none of these people testified.
And as discussed Biller Associates was not represented solely by David Biller. Query would Maffeo or Read return these calls — how else would they learn people had problems reaching David Biller.
Interestingly enough Read also testified David Biller was not timely on inspection of losses, he did not write up building estimates but would make a quick inspection and then leave the site. This happened with every loss, sometimes months would go by — all of this resulted in delays for clients in settling claims.
But that can hardly be said here. The dwelling loss and contents claim were settled within five months of the loss. The withheld depreciation could not (in the court's view) have been secured before November 7, 2003 at the earliest and all that remains is the unpaid a.l.e. claim as to which the court has expressed some confusion. Even at that the $13,000 plus figure recovered by the attorney represents well under 10% of the monies secured from Allstate by the defendant's efforts.
Subsequent actions or lack thereof can be relevant on the issue of habit or custom before those actions but relevance does not mean the suppositions underlying that evidence have to be accepted. It cannot logically be said that when a witness testifies as to event occurring several years after the fact this is of no relevance on the issue of habit or custom.
At one point Read's testimony became more equivocal. She said she would cover appointments for David Biller which indicates someone from Biller Associates attended to the client but then seemed to say after she "was there for a while" it became more frequent. Does this mean poor client contact was not such a problem when she first started — if so, by her own testimony, how can subsequent patterns of behavior define what happened earlier.
Read's testimony was not the only testimony on the general business practice issue. Donna Vinci also testified she is a receptionist or secretary at the defendant's business. Her motives cut the other way because at the time of her testimony she was employed by Biller Associates and had been so employed since March of 2002. She said in 2002 and 2003 she had no memory of having received phone calls from clients saying David Biller never returned their calls. After 2004 it would happen occasionally, since 2004 some calls like this were received but not many. She has no memory of anyone being really irate. The complaints usually involved situations where people were upset that return calls were not made as timely as people wanted. She also testified since 2002 Biller Associates has opened 2000 files — hardly what one would expect from a public adjuster business which, according to Read, failed to pursue every claim in a timely manner. The fact remains that while Vinci testified her employer was sitting in court.
For the court the most important witness on general business practice was Lewis Maffeo. He was no longer employed by Biller Associates and his testimony in general did not have the black and white aspect of Vinci or Read. He had some criticisms of how David Biller operated and seemed concerned with telling his story not with making a point. It can hardly be said that his testimony was consistent with that of Donna Read.
Mr. Maffeo started working with Biller Associates in May 1998 and left in September 2005; he returned in April 2007 and left in December 2007. He was a street solicitor, prepared estimates, worked on claims for lost or damaged contents and took over negotiations with regard to these claims. He was friendly with and a neighbor of the Thomas family and referred them to Biller Associates; he even loaned them $900 dollars right after the loss.
His testimony at points was confusing but generally he said problems with claims taking too long to settle periodically occurred in 2001 and 2002 but became more acute towards the end of 2005 as business increased. From 1998 to 2005 he did not remember a client running out of A.L.E. payments because of delays in settlement of claims. A couple of times this happened but this occurred towards the end of 2007.
As far as returning calls was concerned angry clients calling became a problem in 2005, that is why he left his first employment at Biller Associates. In 2001, 2002, 2003 there was not a problem in this regard. Claims took "a little longer" to settle in 2002 and 2003; he speculated it was due to being understaffed. There was not a problem in 2002. David Biller would sometimes sit on things but interestingly when they could not reach him they would call Maffeo who, of course, also worked for Biller Associates. But Maffeo on more than one occasion said there was not a real problem in 2002 or 2003 regarding returning calls; a few times there was a problem. But when a client called him he would call the client back.
Interestingly at one point on the issue of timeliness and delay on settling claims the following came out in testimony: plaintiff's counsel asked "Didn't you tell me that Mr. Biller fought so much with the adjusters that he was not taking into consideration the timeliness of it all? Maffeo answered it is our job to fight, we fought too much at the end to get as much money as possible."
It is somewhat revealing to compare the testimony of Read and Maffeo. She began work in 2006 and stayed for two and a half years and testified about problems concerning returning calls and lack of timeliness in efforts to settle cases after that point. Maffeo does not appear to differ from her observations but states the problem really began in 2005. If Maffeo alone had testified, the court does not believe it could seriously consider finding a general business practice under CUIPA. How does it help the plaintiff's analysis to say, through Read, well after 2006 it was a real problem. Rather than viable evidence of habit or custom, it is really a bootstrap argument.
In any event whether because of the fiduciary relationship the defendant against a CUTPA allegation has the burden of proof on all aspects of such a claim that burden has been met as to negating an allegation of a general business practice and if the burden remains with the plaintiff, here a general business practice has not been shown.
Even if the court has erred in reaching this conclusion the court further concludes that the substantive requirements of a CUTPA violation have not been established by the plaintiff under the so-called Cigarette Rule requirements and if the burden is on the defendant because of the fiduciary relationship the defendant has met its burden of negating the existence of a CUTPA violation.
The court would rely on its discussion of the alleged violation of fiduciary duty previously discussed in this opinion. The plaintiff clearly relies on her argument for violation of fiduciary duty to establish a CUTPA claim.
In its discussion of the fiduciary duty violation allegations the court speculated about the propriety of a nominal damage award in the absence of proof of actual damages proximately caused by the defendant. Even if nominal damages were called for, this, however, is not an appropriate case to award punitive damages. Such an award is discretionary and under Gargano v. Heyman, 203 Conn. 616, 622 (1987), where the court applied to CUTPA the common-law standards for such damages, there must be a showing of reckless indifference to the plaintif's rights or an intentional violation of those rights, see generally Vol. 12 of Connecticut Practice Series, "Unfair Trade Practices," § 6.11. The court further considers that an award of attorneys fees is not appropriate. Any violation of CUTPA was not established. As previously discussed the plaintiff received the maximum amounts for dwelling loss and contents loss claims, it has not been established that the defendant's actions or failures to act caused harm to the plaintiff regarding withheld depreciation. The claim based on the additional living expenses would require speculation and surmise by the court. The court also concludes self-dealing has not been established.
In fact, for the court, the damage claim underlines the absence of actual damages or to the plaintiff. She only demands that (1) the fees paid to the plaintiff for the contents and dwelling losses be "disgorged" — does this assume no actual damages were suffered on these two major aspects of the defendant's representation of the plaintiff and (2) out of pocket expenses for the $4,169.11 attorney fee charge to recover additional living expenses — the court has previously discussed the difficulties presented by this claim. Given the monies actually recovered by the defendant for the plaintiff application of a notion of proportionality would argue against awarding any sizeable attorneys fees, even if the plaintiff had prevailed on any of her substantive claims, see discussion in 2008-2009 supplement to Volume 12 of Connecticut Practice Series of § 6.12 at page 225 and citation to Farrar v. Hobby, 506 U.S. 103 (1992).
This assumes the ascertainable loss requirement has been met.
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In conclusion the court finds (1) no violation of fiduciary duties and/or no establishment of actual damages for any alleged violation (2) similarly the court concludes the contract between the parties has not been materially breached (3) a private action under CUIPA does not lie and the court, in addition, believes the CUIPA section relied on by the plaintiff does not apply to public adjusters (4) a CUTPA violation has not been established (a) no general business practice has been shown (b) a violation of CUIPA is claimed which, as indicated, the court does not believe applies to public adjusters (c) a substantive violation of CUTPA has not been shown even if a CUIPA claim could be advanced in this case.
COUNTERCLAIM
The defendant has filed a counterclaim claiming the plaintiff breached the terms of the public adjuster employment agreement by her failure to pay the 10% fee on checks issued by Allstate for withheld depreciation on in settlement of the plaintiff's lawsuit against Allstate which involved a check for additional living expenses. The demand is for $3,495.05.
The court will not award the demand requested. The document constituting the agreement was prepared by Biller Associates who thereby assumed a fiduciary relationship with the plaintiff. It states that in consideration of its services as a public adjuster on monies due or to become due from an insurer the fee will become due and assigned out of the funds so released by the insurer.
In fact the a.l.e. were recovered through the efforts of the attorney in filing suit and it would be an unfair reading of the contract to say that under these circumstances the defendant is entitled to a fee whether or not any wrongdoing or failure to act by the defendant caused delay in release of these expenses. The defendant cannot have it both ways (to coin a phrase) by saying you cannot blame us if Allstate did not release the a.l.e. since it is their decision to do so or not do so then if the funds are delivered to the insured through the efforts of an attorney argue it is entitled to a 10% fee. The contract language should be much clearer (and could be since it was drafted by the plaintiff) if such a result is desired especially in light of the fiduciary nature of the relationship.
Similarly on the withheld depreciation, although the court has concluded that the defendant cannot be faulted for earlier release of these funds and its efforts determined the amount thereof as to which there is no complaint, it was still necessary for the plaintiff to hire an attorney to secure the release of the funds.
In light of its decision the court does not feel it is necessary to decide whether the public adjuster contract is a "valid" contract. The parties certainly acted as if it was. The ten percent fee was taken out by the defendant, for example, at the time the dwelling loss and the contents check were delivered to the plaintiff on April 9, 2003; at that time both sides seemed to recognize the propriety of this deduction which only came out of an application of contract wording. The date of loss was not included but under the circumstances the court can assume both sides were aware of it and it can be a fill in term because of the parties' actions which assumed there was an operative contract. The fact that Biller started working in the plaintiff's interests before the contract was actually signed is hardly a reason to invalidate its terms.
Or to put it another way if the defendant were to say at any point after the alleged contract was signed 10% is not enough, I should get or should have gotten 20% and that piece of paper we signed giving me only 10% is just that, a piece of paper not a contract, it would not be an argument that could be accepted if a rational contractual regime is to operate in our legal system.