Opinion
No. CV 10-6017227-S
October 14, 2011
MEMORANDUM OF DECISION DEFENDANT BUCKLAND HILLS AGENCY MOTION TO STRIKE
On January 19, 2011, the plaintiff, United Steel, Inc., filed a nine-count amended complaint against the defendants, Buckland Hills Agency (the agency) and American Steel, Inc. The complaint alleges the following facts. In May 2007, the plaintiff hired American Steel as a subcontractor on a construction project at the Greenwich Middle School in Greenwich, Connecticut. The terms of the contract between the plaintiff and American Steel required American Steel to ensure that the plaintiff was named as an additional insured on American Steel's certificate of insurance. The subcontract further provided that American Steel would indemnify and hold harmless the plaintiff from claims arising out of the performance of the work. Buckland Hills Agency, on behalf of American Steel, and/or as an agent of American Steel delivered to the plaintiff a certificate of insurance naming the plaintiff as the certificate holder and representing that American Steel was insured for workers' compensation coverage, effective from August 4, 2006 through August 4, 2007.
An employee of American Steel suffered a back injury while working on the project and sought workers' compensation benefits from his employer. At a hearing held on March 8, 2010, a workers' compensation commissioner found that American Steel never had workers' compensation coverage at the time of the injury, and consequently, the plaintiff was required to make workers' compensation payments to the injured employee under Connecticut's principal employer statute, General Statutes § 31-291.
In counts one through five, respectively, the plaintiff alleges claims against the agency for fraudulent misrepresentation (count one), negligent misrepresentation (count two), violation of CUTPA (count three), equitable reimbursement (count four) and promissory estoppel (count five). In counts seven through nine, respectively, the plaintiff alleges claims against American Steel for breach of contract, negligent misrepresentation and violation of CUTPA. The agency has moved to strike all five claims against it on the ground that they fail to state a claim upon which relief can be granted. The issues have been fully briefed and was heard at short calendar on June 21, 2011.
Motion to Strike Standard
"The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). In ruling on a motion to strike, "[t]he role of the trial court [is] to examine the [complaint], construed in favor of the plaintiffs, to determine whether the [pleading party has] stated a legally sufficient cause of action." (Internal quotation marks omitted.) Dodd v. Middlesex Mutual Assurance Co., 242 Conn. 375, 378, 698 A.2d 859 (1997). "Thus [i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied . . . Moreover . . . [w]hat is necessarily implied [in an allegation] need not be expressly alleged . . . It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted . . . Indeed, pleadings must be construed broadly and realistically, rather than narrowly and technically." (Internal quotation marks omitted.) Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 252-53, 990 A.2d 206 (2010). Nevertheless, "[a] motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, supra, 262 Conn. 498.
I Fraudulent Misrepresentation
The agency argues that the plaintiff has failed to adequately state a cause of action for fraudulent misrepresentation in count one because the plaintiff's allegations fail to satisfy Connecticut's heightened pleading requirements for claims sounding in fraud. Specifically, the agency argues that a party claiming fraud must plead the cause of action with particularity. In response, the plaintiff argues that it has alleged a legally sufficient claim for fraudulent misrepresentation because count one pleads all the pertinent facts and allegations with as much particularity as is possible at this time, and the agency does not need anything further to meaningfully evaluate and respond to the complaint.
"Fraud consists in deception practiced in order to induce another to part with property or surrender some legal right, and which accomplishes the end designed." (Internal quotation marks omitted.) Weinstein v. Weinstein, 275 Conn. 671, 685, 882 A.2d 53 (2005). "In order to plead a cause of action for fraud, a plaintiff must allege that: (1) a false representation was made [by the defendant] as a statement of fact; (2) the statement was untrue and known to be so by [the defendant]; (3) the statement was made with the intent of inducing reliance thereon; and (4) the other party relied on the statement to his detriment . . . Furthermore, when a claim for damages is based upon fraud, the mere allegation that a fraud has been perpetrated is insufficient; the specific acts relied upon must be set forth in the complaint." (Citation omitted; internal quotation marks omitted.) Nazami v. Patrons Mutual Ins. Co., 280 Conn. 619, 628, 910 A.2d 209 (2006).
In the present case, the allegations in count one track the language for a claim of fraudulent misrepresentation. The plaintiff alleges that (1) the agency delivered the certificate of insurance as evidence of the existence of a workers' compensation policy even though no such policy existed and which contained inaccurate information; (2) the agency knew that American Steel did not have a workers' compensation policy; (3) the agency delivered the certificate of insurance making representations thereby which induced the plaintiff to enter into the subcontract with American Steel; (4) the plaintiff relied on the representations made by the agency that a workers' compensation policy existed; and (5) the plaintiff was damaged by its reliance on the agency's representations because it was found to be the principal employer and therefore was required to pay for the injured employee's workers' compensation claims. Therefore, the motion to strike as to count one must be denied.
II Negligent Misrepresentation
The agency argues that the plaintiff has failed to adequately state a cause of action for negligent misrepresentation in count two because Connecticut does not impose a duty on insurance brokers. In response, the plaintiff argues that the agency owes a duty to the plaintiff as a matter of law. Specifically, the plaintiff argues that when the agency assumed the responsibility to represent to the plaintiff that certain workers' compensation coverage existed in the course of its business as an insurance broker, it had a duty to use reasonable care when disseminating such information.
A
The Supreme Court has "long recognized liability for negligent misrepresentation . . . The governing principles [of negligent misrepresentation] are set forth in similar terms in § 552 of the Restatement (Second) of Torts (1977): One who, in the course of his business, profession or employment . . . supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information." (Internal quotation marks omitted.) Sturm v. Harb Development, LLC, 298 Conn. 124, 143-44, 2 A.3d 859 (2010). "Traditionally, an action for negligent misrepresentation requires the plaintiff to establish (1) that the defendant made a misrepresentation of fact (2) that the defendant knew or should have known was false, and (3) that the plaintiff reasonably relied on the misrepresentation, and (4) suffered pecuniary harm as a result . . . Whether evidence supports a claim of . . . negligent misrepresentation is a question of fact." (Internal quotation marks omitted.) Sovereign Bank v. Licata, 116 Conn.App. 483, 502, 977 A.2d 228, cert. granted on other grounds, 293 Conn. 935, 981 A.2d 1080 (2009).
In the present case, the plaintiff has alleged sufficient facts to support a claim for negligent misrepresentation. Count two of the complaint, which incorporates by reference paragraphs one through ten of count one, alleges that 1) the agency misrepresented that American Steel had insurance; 2) the agency knew that the information was false; 3) the plaintiff reasonably relied on this information in hiring American Steel as a subcontractor; and 4) the plaintiff suffered pecuniary harm as a result. Therefore, the motion to strike as to count two must also be denied.
B
The agency relies on Nazami v. Patrons Mutual Ins., Co., 280 Conn. 619, 910 A.2d 209 (2006) to support its position that certificates of insurance do not, as a matter of law, impose upon insurance brokers any duty of care to third parties. However, Nazami is distinguishable from the present case on its facts.
In Nazami, the plaintiff property owner alleged that she signed a home improvement contract with the contractor in reliance on the certificate of insurance issued by the insurance agent. Id., 622. The certificate specifically noted that the policy had taken effect on May 15, 2001, and would expire on May 15, 2002. Id. The certificate further provided that the insurer would mail written notice to the plaintiff should the policy be cancelled before the expiration date. Id. Nonetheless, the certificate disclaimed liability in the event that notice was not mailed. Id. Nearly six months after the agent issued the certificate of insurance, the plaintiff contracted with the home improvement contractor to renovate her home. Id. Ultimately, the plaintiff filed a claim for damages with the issuing insurer when the contractor caused water damage to her home. Id., 622-23. At that time, the plaintiff was informed that the insurance policy had been cancelled due to nonpayment of premiums. Id.
The plaintiff brought action against the home improvement contractor, its liability insurer and insurance agent for common-law fraud, negligent misrepresentation, violations of CUIPA and CUTPA and common-law negligence. Id., 623. The plaintiff alleged in count two that she had entered into an agreement with the contractor in reliance on the certificate of insurance and that the insurance agent "knew, or should have known, that the [c]ertificate, as drafted, might lead [the plaintiff] to believe . . . that [the contractor's] insurance coverage was guaranteed until the policy expiration date." Id. The plaintiff alleged that this conduct constituted common-law fraud, negligent misrepresentation and violations of CUIPA and CUTPA. Id. The plaintiff alleged in count five that the failure of the insurer and insurance agent to notify her that the policy was canceled constituted common-law negligence. Id. The defendants filed motions to strike counts two and five of the complaint. Id.
The Supreme Court held that the trial court properly struck counts two and five of the complaint. With respect to count two, the court noted that the allegations contained therein did not refer to any representations other than those in the certificate. Id., 626. "In fact, the certificate, on its face, specifically contemplates cancellation of the policy and alerts the certificate holder to the fact that the information contained therein is subject to all `terms, exclusions and conditions' of the policy. Moreover, the certificate does not provide that the policy was paid in full for the entire one year term or that it was in any way guaranteed. In other words, the plaintiff failed to allege that any false statement was made in the certificate." Id., 628-29. Consequently, the court concluded that the allegations in count two failed to state a cause of action for violations of CUIPA and CUTPA, negligent misrepresentation and common-law fraud because the statements made in the certificate did not misrepresent any facts. Id., 629.
With respect to count five, the court noted that "the certificate is the only possible source of a duty of care in the present case. In other words, the plaintiff contends that [the defendants] owed her a duty to inform her of the cancellation of [the insurance] policy by virtue of the issuance of the certificate." Id., 631. In order to determine whether a duty arose by virtue of the issuance of the certificate, the court explained that it must examine the factual circumstances surrounding such issuance. Id. The court held that the trial court properly struck count five because the face of the certificate specifically informed the holder that it was issued as "a matter of information only," conferred "no rights upon" the plaintiff, and did not constitute a contract between the defendants and the plaintiff. Id. In addition, the certificate clearly disclaimed any duty to inform the plaintiff that the policy was cancelled before its stated expiration date and any liability if notice was not mailed to the plaintiff. Id. Therefore, the court concluded that the allegations in count five failed to state a cause of action for negligence because the certificate of insurance created no duty to inform the plaintiff of the cancellation. Id.
The present case is factually distinct from Nazami, and the agency's reliance on it is misplaced. Herein, the plaintiff alleges that the certificate of insurance contained false information and that American Steel never had workers' compensation coverage as indicated on the certificate, unlike in Nazami where the certificate of insurance did not misrepresent any facts. In addition, herein, the plaintiff's claims are based on an alleged duty to use care when disseminating information about an insured's policy in the course of business as an insurance broker, whereas in Nazami, the claims were based on an alleged duty to inform of a policy's cancellation. The court agrees with the plaintiff that the crux of the plaintiff's case in Nazami was that the certificate of insurance, which contained accurate information, led her to believe that the policy would be in effect for the entire duration of the policy period. In the present case, the plaintiff alleged that the agency knew that the certificate of insurance contained false information and yet disseminated it anyway. Therefore, the court finds that Nazami is distinguishable and rejects the agency's argument that Connecticut law outright does not recognize the drafting or tendering of certificates of insurance as a basis for negligence, fraud or any CUTPA related actions.
III CUTPA
As to count three, the agency argues that the plaintiff has failed to adequately state a cause of action under CUTPA because the plaintiff's CUTPA claim does not satisfy the cigarette rule, and it is not pled with particularity to allow for evaluation of the legal theory upon which the claim is based. The agency also argues that the plaintiff's CUTPA claim is legally insufficient because the plaintiff's claim relies upon the agency's issuance of an alleged inaccurate certificate of insurance. The agency argues that this reliance is fatal because Connecticut does not recognize the drafting or tendering of certificates of insurance as a basis for any CUTPA related actions. In response, the plaintiff argues that it has sufficiently alleged facts to support the CUTPA claim because the facts alleged provide the agency with an appropriate basis upon which to evaluate the legal theories propounded, as well as satisfy the criteria set out in the cigarette rule for determining unfair trade practice.
CUTPA states, in relevant part, that "[n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." General Statutes § 42-110b(a). "It is well settled that in determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the [F]ederal [T]rade [C]ommission for determining when a practice is unfair: (1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise — 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 businesspersons] . . . All three criteria do not need to be satisfied to support a finding of unfairness." (Internal quotation marks omitted.) Harris v. Bradley Memorial Hospital Health Center, Inc., 296 Conn. 315, 350, 994 A.2d 153 (2010). "A claim under CUTPA must be pleaded with particularity to allow evaluation of the legal theory upon which the claim is based." (Internal quotation marks omitted.) Keller v. Beckenstein, 117 Conn.App. 550, 569 n. 7, 979 A.2d 1055, cert. denied, 294 Conn. 913, 983 A.2d 274 (2009).
"This court takes into account the Connecticut Supreme Court's view that it is `unpersuaded that there is any special requirement of pleading particularity connected with a CUTPA claim, over and above any other claim.' Macomber v. Travelers Property Casualty Corp., 261 Conn. 620, 644, 804 A.2d 180 (2002). The Supreme Court made this broad pronouncement in rejecting a party's argument that a CUTPA claim cannot survive a motion to strike unless it is so phrased as to conform to the three prongs of the Federal Trade Commission's cigarette rule. Id. Although it might be true that the effect of Macomber is that `[a] CUTPA claim no longer must be pleaded with particularity;' Sanderson v. ISOPur Fluid Technologies, Inc., Superior Court, complex litigation docket at Norwich, Docket No. CV 03 0127378 (April 30, 2004, Hurley, J.T.R.); there is nothing in Macomber to suggest that CUTPA is exempt from fact pleading requirements." Janet-McComiskey v. Ramm Fence Systems, Inc., Superior Court, judicial district of Stamford-Norwalk, Docket No. CV 10 6002771 (January 3, 2011, Adams, J.).
Count three alleges that 1) the agency is engaged in trade or commerce within the meaning § 42-110a; 2) the agency induced the plaintiff to enter into the subcontract with American Steel at a time when the agency knew or should have known that American Steel did not have workers' compensation insurance; 3) the agency misrepresented to the plaintiff that American Steel was covered under an insurance policy in violation of the Connecticut Unfair Insurances Practices Act (CUIPA); and 4) the plaintiff has suffered an ascertainable loss of money as a result of the agency's conduct. In addition, count three incorporates by reference paragraphs one through ten of count one, which allege that the agency knew that American Steel was never covered by the workers' compensation policy at issue, and it knew that the information contained on the certificate of insurance was false. The plaintiff has alleged sufficient facts to support a CUTPA claim because it has pled facts regarding the agency's false statements to induce the plaintiff to enter into a subcontract with American Steel. Specifically, the plaintiff alleged that the certificate of insurance contained a policy number of a workers' compensation policy that American Steel never had to induce the plaintiff to sign a contract with American Steel. These allegations support a claim that the agency's actions were offensive to public policy, deceptive, unethical and caused substantial injury to the plaintiff. Because the plaintiff has sufficiently alleged an unfair or deceptive trade practice under CUTPA, the motion to strike count three must also be denied.
IV Equitable Reimbursement
The agency argues that the plaintiff has failed to adequately state a cause of action for equitable reimbursement because equitable reimbursement is not a recognized cause of action in Connecticut. The agency also argues that to the extent that the court treats count four as a claim for indemnification, it remains legally insufficient because the plaintiff has not alleged facts which establish either a contractual or common-law basis for indemnification. In response, the plaintiff argues that it does not bring a claim for indemnification, but rather for equitable reimbursement or, equitable subrogation, because it was required to pay workers' compensation payments to the injured employee under Connecticut's principal employer statute, § 31-291. The plaintiff argues that such a cause of action is legally viable and has been properly pled in count four.
General Statutes § 31-291 provides, in relevant part, that a "principal employer shall be liable to pay all compensation under this chapter to the same extent as if the work were done without the intervention of such contractor or subcontractor." "The purpose of § 31-291 is to protect employees of minor contractors against the possible irresponsibility of their immediate employers, by making the principal employer who has general control of the business in hand liable as if he had directly employed all who work upon any part of the business which he has undertaken to carry on." (Internal quotation marks omitted.) Sgueglia v. Milne Construction Co., 212 Conn. 427, 433, 562 A.2d 505 (1989).
"Although [t]he legislature also might have expressly prescribed and conferred a right of action by a principal or principal contractor against a contractor or subcontractor, to recover compensation paid by the former, or a right to indemnity therefor [as has been done in other states] no such provision has been made or attempted in [this state] . . . In the absence of any statutory direction as to the respective rights and liabilities of the general contractor and the subcontractor, [our] Supreme Court . . . held that the general contractor was entitled to obtain reimbursement where he had been required to pay money which the subcontractor was under a primary duty to pay." (Citations omitted; internal quotation marks omitted.) Connecticut Industrial Builders, Inc. v. Strogoff, Superior Court, judicial district of Tolland, Docket No. CV 92 049323 (November 10, 1993, Hammer, J.) ( 10 Conn. L. Rptr. 330); see also Sgueglia v. Milne Construction Co., supra, 212 Conn. 427, 433-34 ("[i]t is only as between the principal employer and the subcontractor/immediate employer that the latter is primarily liable"); Johnson v. Mortenson, 110 Conn. 221, 228-30 (1929) (When a contractor has been required to pay money on behalf of an employee which a subcontractor as the immediate employer was under a primary duty to pay, "the former should be enabled to obtain reimbursement").
Unlike the cited cases, in count four, the plaintiff alleges that the agency, not American Steel, the immediate employer, should be required to pay the damages suffered by the plaintiff resulting from the finding that it was the principal employer of the injured employee. In fact, the plaintiff was forced to pay compensation pursuant to the principal employer statute because American Steel did not carry insurance at the time its employee was injured on the job. Because a claim of equitable subrogation, to the extent a cognizable one exists, would only lie as between a principal employer (contractor) and a subcontractor, the motion to strike count four must be granted.
V
CT Page 21832
Promissory Estoppel
As to count five, the agency argues that the plaintiff has failed to adequately state a cause of action for promissory estoppel because the plaintiff's allegations fail to allege facts to support the essential elements of a claim for promissory estoppel. Specifically, the agency argues that a certificate of insurance is not a promise or legal representation, and the terms on the certificate of insurance itself establish that it is not a promise and does not confer any rights upon the plaintiff. In response, the plaintiff argues that it has alleged all the pertinent facts and allegations necessary to support a claim for promissory estoppel."Under the law of contract, a promise is generally not enforceable unless it is supported by consideration . . . [The Supreme Court] has recognized, however, the development of liability in contract for action induced by reliance upon a promise, despite the absence of common-law consideration normally required to bind a promisor . . . Section 90 of the Restatement [(Second) of Contracts] states that under the doctrine of promissory estoppel [a] promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise." (Internal quotation marks omitted.) Stewart v. Cendant Mobility Services Corp., 267 Conn. 96, 104, 837 A.2d 736 (2003). "A plaintiff asserting a cause of action for promissory estoppel must plead and prove the following four elements: 1) the promisor made a clear and definite promise; 2) the promisee reasonably relied on the promise; 3) the promise induced the action taken by the promisee; and 4) injustice can be avoided only by enforcement of the promise." (Internal quotation marks omitted.) Corey v. Laurels Condominium Assn., Superior Court, judicial district of New Haven, Docket No. CV 02 0469807 (June 14, 2004, Hadden, J.).
In count five, the plaintiff alleges that: 1) the agency made a clear, unambiguous promise to the plaintiff that American Steel was covered by workers' compensation insurance, effective from August 4, 2006 through August 4, 2007; 2) in making this representation, the agency reasonably should have expected the plaintiff to act in reliance on the representation by hiring American Steel as a subcontractor; 3) the plaintiff hired American Steel as a subcontractor and was damaged when American Steel's employee was injured and sought workers' compensation benefits; and 5) the plaintiff has been damaged through its reasonable reliance on the promissory representation of the agency in an amount to be proven at trial. Although the plaintiff alleges that the agency made a clear and definite promise. Other than allegations regarding delivering or issuing the certificate of insurance, the complaint nowhere alleges any activity on the part of the agency that would reasonably support a "clear and definite promise," in satisfaction of the first element of a sufficient claim of promissory estoppel. Further, the allegations of count five conflate the claims of fraudulent and negligent representation with that of promissory estoppel in what the plaintiff refers to in count five as a "the promissory representation of Buckland Hills." Even when read most broadly in a light most favorable to sustaining count five, the facts alleged in the complaint along with those facts which may necessarily be implied therefrom do not support a claim of promissory estoppel. Accordingly, the motion to strike count five must be granted.
CONCLUSION
For the foregoing reasons, the motion to strike as to counts one, two and three is denied and the motion to strike as to counts four and five is granted.