holding that plaintiff's CUTPA and CUIPA claims are not subject to the contractual suit limitation provisionSummary of this case from Brown v. State Farm Fire Casualty Company
The plaintiff, whose house had been destroyed by fire, filed a claim for both loss of dwelling and loss of contents under an insurance policy issued to her by the defendant. The defendant paid the loss of dwelling claim but made no payment on the loss of contents claim. Within three years of the defendant's denial of that claim, the plaintiff filed suit alleging that the defendant had breached its contract with her and that its failure to pay her claim violated the Connecticut Unfair Insurance Practices Act (38-60 et seq. [Rev. to 1981]) (CUIPA) and the Connecticut Unfair Trade Practices Act ( 42-110a et seq.) (CUTPA). The trial court rendered summary judgment for the defendant upon determining, inter alia, that, since the plaintiff's CUIPA and CUTPA claims arose from the relationship between the parties created by the insurance contract, they were barred by the one year limitation on actions on fire insurance policies that has been incorporated by statute (38-98 [Rev. to 1981]) into such policies. From the Appellate Court's judgment affirming the judgment of the trial court, the plaintiff, on the granting of certification, appealed to this court. Held: 1. The plaintiff's claims that the defendant's failure to pay her loss of contents claim violated CUIPA and CUTPA, not being actions on the policy, were not subject to the one year limitation of 38-98; there was no evidence that the legislature intended all actions, including CUIPA and CUTPA claims, between an insurer and an insured be included within the phrase "on this policy" contained in 38-98 or that the legislature intended to render meaningless the three year statute of limitations ( 42-110g [f]) applicable to CUTPA claims. 2. The defendant's claim that the one year limitation on actions contained in 38-98 should apply unless an insured advances a viable claim under CUIPA or CUTPA was unavailing since, by denying the defendant's motion to strike those claims, the trial court determined that the plaintiff had, in fact, alleged valid CUIPA and CUTPA violations.
Argued April 30, 1991
Decision released July 23, 1991
Action to recover insurance proceeds allegedly due under a homeowner's insurance policy issued by the defendant, brought to the Superior Court in the judicial district of Fairfield, where the court, Thompson, J., granted the defendant's motion for summary judgment and rendered judgment thereon, from which the plaintiff appealed to the Appellate Court, Spallone, Cretella and Landau, Js., which affirmed the trial court's judgment, and the plaintiff, on the granting of certification, appealed to this court. Reversed; further proceedings.
John T. Bochanis, with whom, on the brief, was Thomas J. Weihing, for the appellant (plaintiff).
John B. Farley, with whom, on the brief, were John W. Lemega and Daniel P. Scapellati, for the appellee (defendant).
The certified issue in this appeal is whether the Appellate Court correctly concluded that the claims of the plaintiff, Marion Lees, under the Connecticut Unfair Insurance Practices Act (CUIPA); General Statutes (Rev. to 1981) 38-60 et seq.; and the Connecticut Unfair Trade Practices Act (CUTPA); General Statutes 42-110a et seq.; are barred by the one year limit of General Statutes (Rev. to 1981) 38-98 for a suit on a fire insurance policy. We conclude that the plaintiff's claims are not barred and accordingly reverse the decision of the Appellate Court.
"[General Statutes (Rev. to 1981)] Sec. 38-60. UNFAIR PRACTICE PROHIBITED. No person shall engage in this state in any trade practice which is defined in section 38-61 as, or determined pursuant to sections 38-62 and 38-63 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 38-61. 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 38-60 to 38-64, inclusive. When used in said sections, `person' means any individual, corporation, association, partnership, reciprocal exchange, interinsurer, Lloyd's insurer, fraternal benefit society, and any other legal entity engaged in the business of insurance, including agents, brokers and adjusters." Section 38-60 has been renumbered, effective January, 1991, and now is found at General Statutes 38a-815. General Statutes (Rev. to 1981) 38-61 provides in relevant parts: "The following are defined as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance . . . "(6) Unfair claim settlement practices. Committing or performing with such frequency as to indicate a general business practice any of the following . . . (b)failing to acknowledge and act with reasonable promptness upon communications with respect to claims arising under insurance policies . . . (e) failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed . . . (f) not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear . . . (n) failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement. . . ." Section 38-61 has been renumbered, effective January, 1991, and now is found at General Statutes 38a-816.
"[General Statutes] Sec. 42-110b. UNFAIR TRADE PRACTICES PROHIBITED. LEGISLATIVE INTENT. (a) No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce. "(b) It is the intent of the legislature that in construing subsection (a) of this section, the commissioner and the courts of this state shall be guided by interpretations given by the Federal Trade Commission and the federal courts to Section 5(a)(1) of the Federal Trade Commission Act [ 15 U.S.C. § 45 (a) (1)], as from time to time amended. "(c) The Commissioner may, in accordance with chapter 54, establish by regulation acts, practices or methods which shall be deemed to be unfair or deceptive in violation of subsection (a) of this section. Such regulations shall not be inconsistent with the rules, regulations and decisions of the federal trade commission and the federal courts in interpreting the provisions of the Federal Trade Commission Act. "(d) It is the intention of the legislature that this chapter be remedial and be so construed."
General Statutes (Rev. to 1981) 38-98 provides in relevant part: "The standard form of fire insurance policy of the state of Connecticut . shall be as follows . "Suit. No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within twelve months next after inception of the loss." Section 38-98 has been renumbered, effective January, 1991, and now is found at General Statutes 38a-307.
The plaintiff brought this action against the defendant, Middlesex Insurance Company, for alleged violations of CUIPA and CUTPA and for breach of contract. The defendant moved to strike the plaintiff's CUIPA and CUTPA claims. The trial court, Berdon, J., denied the motion. The defendant next moved for summary judgment alleging that the plaintiff's suit was barred by the one year suit limitation provision in the insurance contract. The trial court, Thompson, J., granted the defendant's motion for summary judgment. The plaintiff appealed to the Appellate Court, which affirmed the trial court decision. Lees v. Middlesex Ins. Co., 23 Conn. App. 814, 581 A.2d 287 (1990). We granted the plaintiff's petition for certification to appeal limited to the above stated issue.
The defendant moved for special permission, pursuant to Practice Book 4140, for this court to review the trial court's decision on the motion to strike. We denied the motion. See footnote 13, infra.
The insurance policy one year suit limitation provision provides: "Suits Against Us. No action shall be brought unless there has been compliance with the policy provisions and the action is started within one year after the occurrence causing loss or damage." The one year suit limitation provision is statutorily required to be incorporated into every fire insurance policy. See General Statutes (Rev. to 1981) 38-99; see also State v. Biller, 190 Conn. 594, 611, 462 A.2d 987 (1983). The language in the insurance policy's one year limitation is not identical to that of General Statutes (Rev. to 1981) 38-98. See footnote 3, supra. The words "on this policy" are not included in the insurance policy provision. When a private contract of insurance conflicts with a statute, however, it must give way to the latter. Nationwide Ins. Co. v. Code, 187 Conn. 386, 399, 446 A.2d 1059 (1982). Therefore, we focus on the language contained in the statutory suit limitation of 38-98.
The trial court found the following facts for purposes of the summary judgment. On May 9, 1982, a fire destroyed the home of the plaintiff. At the time of the loss, the plaintiff's home was insured by the defendant. On August 9, 1982, the plaintiff filed two proof of loss statements with the defendant, one for loss of the dwelling and the other for loss of the contents of the dwelling. By letter dated August 16, 1982, the defendant rejected both proofs of loss as being "excessive and premature." On November 1, 1982, the defendant paid the plaintiff's claim for loss of the dwelling but, without explanation, made no payment on the claim for loss of the contents. There was no further communication between the parties until August 23, 1983, when the plaintiff made a written inquiry requesting an explanation for the denial of her loss of contents claim.
On August 16, 1985, the plaintiff instituted this suit by way of a three count complaint alleging that the defendant had: (1) breached the insurance contract; (2) engaged in unfair insurance practices in violation of CUIPA; see footnote 1, supra; and (3) engaged in unfair trade practices in violation of CUTPA. See footnote 2, supra. The defendant moved for summary judgment alleging that the one year suit limitation provision in the insurance contract barred the plaintiff's suit.
The trial court rendered summary judgment in favor of the defendant on all three counts. With respect to the second and third counts, the court held that "since the CUIPA and CUTPA claims necessarily arise from the relationship between the parties created by the insurance contract, they, too, are subject to the policy provision requiring the institution of suit within one year [as a matter of law]." The Appellate Court affirmed the judgment of the trial court. Lees v. Middlesex Ins. Co., supra.
Concerning the plaintiff's breach of contract count, the trial court held that the defendant was not estopped from asserting [the one year limitation] provision as a defense and, therefore, dismissed the breach of contract claim as being barred by that provision. The Appellate Court affirmed. On appeal, the plaintiff does not dispute the conclusion that her breach of contract claim is barred by General Statutes (Rev. to 1981) 38-98.
The plaintiff claims that the trial court was incorrect as a matter of law in granting summary judgment on the second and third counts because the CUIPA and CUTPA claims alleged in those counts are not actions "on this policy" but are independent statutory tort actions and, therefore, the one year suit limitation provision in 38-98 does not apply. The defendant claims that: (1) the trial court was correct in granting summary judgment because all claims by an insured against an insurer, regardless of their nature, are governed by the one year suit limitation provision of 38-98; and (2) even if the plaintiff's CUIPA and CUTPA claims are not governed by the one year suit limitation of 38-98, that limitation nevertheless controls unless the plaintiff has advanced a viable CUIPA or CUTPA claim. We agree with the plaintiff that her CUIPA and CUTPA claims are not subject to the one year suit limitation of 38-98.
The standard for appellate review of a trial court's decision to grant a motion for summary judgment is well established. "Practice Book 384 provides that summary judgment `shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.' "Zichichi v. Middlesex Memorial Hospital, 204 Conn. 399, 402, 528 A.2d 805 (1987); see also Gurliacci v. Mayer, 218 Conn. 531, 562, 590 A.2d 914 (1991). The issue, therefore, is whether the Appellate Court properly determined that judgment for the defendant was required as a matter of law because the plaintiff's CUIPA and CUTPA claims were barred by the one year suit limitation of 38-98 for a suit on the policy.
Construction of a statute is a question of law for the court. Griffin Hospital v. Commission on Hospitals Health Care, 200 Conn. 489, 496, 512 A.2d 199, appeal dismissed, 479 U.S. 1023, 107 S.Ct. 781, 93 L.Ed.2d 819 (1986). In every case involving the construction of a statute, our starting point must be the language employed by the legislature. King v. Board of Education, 203 Conn. 324, 332, 524 A.2d 1131 (1987). Section 38-98 requires the standard fire insurance policy form to contain the following provision: "No suit or action on this policy for the recovery of any claim shall be sustainable . . . unless commenced within 12 months next after inception of the loss." (Emphasis added.) To determine whether the plaintiff's CUIPA and CUTPA claims are governed by the one year limitation of 38-98, we must first determine if the plaintiff's CUIPA and CUTPA claims are actions "on this policy" as required by the statute. We conclude that they are not.
The plaintiff claims that her CUIPA and CUTPA claims are not actions "on [the] policy." The plaintiff contends that if 38-98 were interpreted to include all suits against the insurer, the words "on this policy" would be superfluous. By contrast, the defendant's claim is essentially that 38-98 should be interpreted to provide that any cause of action brought by an insured against her insurer is governed by the one year suit limitation in the statute. In support of its claim, the defendant relies on a line of cases that have held that any form of action, including tort actions, growing out of the contractual relationship, constitutes an action on the policy and, therefore, is governed by the limitation provision in the insurance contract. See Barrow Development Co. v. Fulton Ins. Co., 418 F.2d 316 (9th Cir. 1969); Hawley Enterprises, Inc. v. Reliance Ins. Co., 621 F. Sup. 190 (D. Conn. 1985); Zieba v. Middlesex Mutual Assurance Co., 549 F. Sup. 1318 (D. Conn. 1982); Modern Carpet Industries, Inc. v. Factory Ins. Assn., 125 Ga. App. 150, 186 S.E.2d 586 (1971); Zehner v. MFA Ins. Co., 451 N.E.2d 65 (Ind.App. 1983).
The plaintiff and defendant note in their briefs that there is a split of authority with respect to whether an action brought by an insured against the insurer alleging a common law tort, such as negligence, fraud or bad faith, is governed by the limitation provision in the Insurance policy for actions on the policy or by a tort statute of limitations. Compare Hearn v. Rickenbacker, 428 Mich. 32, 400 N.W.2d 90 (1987) (plaintiff's fraud claim against insurer not action on policy and, therefore, not governed by one year limitation in insurance policy); Plant v. Illinois Employers Ins. of Wausau, 20 Ohio App.3d 236, 485 N.E.2d 773 (1984) (plaintiff's bad faith claim against insurer based on duty imposed by law, not contract and not governed by one year suit limitation in insurance policy); Lewis v. Farmers Ins. Co., 681 P.2d 67 (Okla. 1983) (plaintiffs bad faith claim governed by tort statute of limitations); Warmka v. Hartland Cicero Mutual Ins. Co., 136 Wis.2d 31, 400 N.W.2d 923 (1987) (plaintiff's bad faith claim based on tort and governed by tort statute of limitations); with Barrow Development Co. v. Fulton Ins. Co., 418 F.2d 316 (9th Cir. 1969) (negligence claim against insurer governed by one year suit limitation in policy); Modern Carpet Industries, Inc. v. Factory Ins. Assn., 125 Ga. App. 150, 186 S.E.2d 586 (1971) (regardless of form of action, if source of right claimed has evolved from insurance policy, one year limitation in policy applies); Zehner v. MFA Ins. Co., 451 N.E.2d 65 (Ind.App. 1983) (plaintiffs tort action against insurer governed by one year limitation in the policy).
In support of its claim, the defendant places special emphasis upon two decisions of the United States District Court for the District of Connecticut. Hawley Enterprises, Inc. v. Reliance Ins. Co., 621 F. Sup. 190 (D. Conn. 1985) (plaintiff's CUIPA claim barred by one year limitation in policy); Zieba v. Middlesex Mutual Assurance Co., 549 F. Sup. 1318 (D. Conn. 1982) (alleged tortious conduct of insurer arises out of its obligations under contract and, therefore, plaintiff's bad faith claim governed by one year limitation in insurance policy). We note, however, that we need not defer to the district court's decisions on issues of Connecticut law. Rego v. Connecticut Ins. Placement Facility, 219 Conn. 339, 350, 593 A.2d 491 (1991).
In the construction of a statute, no word should be treated as superfluous or insignificant. O'Brien Properties, Inc. v. Rodriguez, 215 Conn. 367, 372-73, 576 A.2d 469 (1990). The statute states only that an action "on this policy" must be brought within one year. The defendant's interpretation of the statute, however, would in effect broaden the language to provide that any suit or action against an insurer must be brought within one year. Such an interpretation would render the words "on this policy" superfluous because all actions between the respective parties, whether "on [the] policy" or not, would be subject to the one year limitation provision. Had the legislature intended all actions between an insurer and an insured to be subject to the one year provision it could have explicitly so provided. We ordinarily decline to read into statutes provisions not clearly stated; Local 218 Steam Fitters Welfare Fund v. Cobra Pipe Supply Coil Co., 207 Conn. 639, 645, 541 A.2d 869 (1988); and we see no compelling reason to do so in this case.
Furthermore, the phrase "on this policy" strongly suggests that it was not intended to encompass CUIPA and CUTPA claims because that phrase and those claims ordinarily involve different factual inquiries, and because the duties ordinarily associated with them derive from different sources. In an action on an insurance policy, the conduct giving rise to the insurer's liability is a failure to pay out the policy proceeds when the insurer is contractually bound to do so. The factual inquiry focuses on the nature of the loss, the coverage of the policy and whether the parties have complied with all of the terms of the policy. In a CUIPA and CUTPA claim, however, the insurer's liability is ordinarily based on its conduct in settling or failing to settle the insured's claim and on its claims settlement policies in general. The factual inquiry focuses, not on the nature of the loss and the terms of the insurance contract, but on the conduct of the insurer. Furthermore, in an action "on [the] policy," the insurer's duty to comply with the policy provisions stems from the private insurance agreement and is contractual in nature. In a CUIPA and CUTPA claim, the insurer's duty stems not from the private insurance agreement but from a duty imposed by statute.
We note further that General Statutes 42-110g (f) provides for a three year statute of limitations for bringing a CUTPA claim. If we were to adopt the defendant's position that a CUTPA claim is governed by the one year provision in 38-98, it would render the statute of limitations prescribed in 42-110g (f) meaningless, as applied to claims based upon improper practices of insurers. We presume, however, that the legislature intended 38-98 and 42-110g (f) to be harmonious with each other and we therefore" `construe each to leave room for meaningful operation of the other.' "Milford v. Local 1566, 200 Conn. 91, 100, 510 A.2d 177 (1986). Thus, we interpret the statute of limitations in 42-110 (f) to operate independently of that prescribed in 38-98.
General Statutes 42-110g (f provides: "An action under this section may not be brought more than three years after the occurrence of a violation of this chapter."
Furthermore, although the legislature has not expressly provided a specific statute of limitation provision for CUIPA claims, it would be anomalous to apply the 38-98 limitations period to CUIPA claims since we have held that a private cause of action exists under CUTPA to enforce alleged CUIPA violations. Mead v. Burns, 199 Conn. 651, 665-66, 509 A.2d 11 (1986). This linkage counsels strongly against reading a CUIPA claim as an action "on [the] policy" under 38-98.
Finally, pursuant to 42-110g (a) and (d) the court may award punitive damages and reasonable attorneys' fees for a violation of CUTPA. These are damages that could be awarded even if the plaintiff's principal damages were proven to be only the amount of her loss covered by the policy. This further supports the conclusion that a CUTPA violation gives rise to a separate cause of action and is not governed by the limitations period provided in 38-98.
General Statutes 42-110g (a) and (d) provide in pertinent part: "ACTION FOR DAMAGES. CLASS ACTIONS. COSTS AND FEES. EQUITABLE RELIEF. (a) . . . The court may, in its discretion, award punitive damages and may provide such equitable relief as it deems necessary or proper. . . . "(d) In any action brought by a person under this section, the court may award, to the plaintiff, in addition to the relief provided in this section, costs and reasonable attorneys' fees based on the work reasonably performed by an attorney and not on the amount of recovery. . . ."
Our conclusion is not inconsistent with Hanover Ins. Co. v. Fireman's Fund Ins. Co., 217 Conn. 340, 354-55, 586 A.2d 567 (1991), in which we recently addressed the argument that an insurer's equitable claim to contribution was not one that rested "on the policy." In that case, two insurance companies had provided fire insurance coverage to the insured. When the insured's place of business was damaged in a fire, one insurance company paid the entire claim while the remaining company refused to pay. The company that paid the claim eventually brought a subrogation action against the nonpaying company, in which it sought reimbursement of one-half of the amount it had paid to the insured. Because that action had been brought more than one year after the fire loss, we held that it was barred by 38-98.
The insurer seeking reimbursement argued, however, that it had an independent, equitable right to contribution that did not rest "on the policy" and, therefore, was not barred by 38-98. Without deciding that question, we noted "that the policy of swift settlement of claims promoted by the one year suit provision in 38-98 would be undermined if insurers who failed to bring a timely subrogation claim could simply bypass the one year suit requirement . . . by also alleging an independent contribution claim . . . ." Hanover Ins. Co. v. Fireman's Fund Ins. Co., supra, 355.
Our discussion in Hanover rested on the understanding that in nearly every circumstance where an insurer had a subrogation claim against another insurer, it could also assert a parallel right to contribution. CUTPA and CUIPA claims, however, do not pose the same problem. Such claims, as we noted earlier, generally involve different factual inquiries than do breach of contract claims. Thus, there is a substantially reduced likelihood that a party asserting an untimely breach of contract claim would readily be able to circumvent the one year suit provision by alleging a CUTPA or CUIPA claim.
The defendant next claims that even if CUIPA and CUTPA claims are not actions on the policy, we should adopt the position that the one year suit limitation provision controls unless the insured has advanced a viable CUIPA and CUTPA claim. The defendant argues that if the plaintiff's CUIPA and CUTPA claims are essentially a pretextual attempt to recover the policy proceeds, the claims should be governed by the one year suit limitation provision. The defendant asserts that this rule applies here because the plaintiff has not alleged any misconduct on the defendant's part after the loss other than those acts relating to the denial of the claim. We reject this view.
This view has been adopted by at least one California appellate court. See Abari v. State Farm Casualty Co., 205 Cal.App.3d 530, 252 Cal.Rptr. 565 (2d Dist. 1988) (plaintiff's bad faith and unfair practice claims barred by one year suit limitation for actions on policy because they are a "transparent attempt to recover on the policy"); Lawrence v. Western Mutual Ins. Co., 204 Cal.App.3d 565, 251 Cal.Rptr. 319 (2d Dist. 1988) (if allegation of tortious bad faith relates to claim on underlying policy rather than to conduct or event subsequent to loss, action is on the policy).
Contrary to the defendant's assertion, however, the plaintiff has alleged acts of misconduct by the defendant occurring after the loss that are unrelated to the policy proceeds. Specifically, the plaintiff has alleged that the defendant failed to deny or confirm coverage of her claim within a reasonable time after the proof of loss statements were completed in violation of General Statutes (Rev. to 1981) 38-61 (6)(e). The plaintiff has also alleged that the defendant failed to provide any explanation as to why the defendant denied the plaintiff's claim in violation of 38-61 (6)(n).
The trial court, by denying the defendant's motion to strike the plaintiff's CUIPA and CUTPA claims, determined that the plaintiff had alleged valid CUIPA and CUTPA violations. If the plaintiff ultimately prevails on her CUIPA or CUTPA claim, the defendant may then appeal and secure appellate review of the trial court's decision on the motion to strike. If the plaintiff proves that the defendant's conduct violated CUIPA, CUTPA, or both, we see no reason to deny relief simply because 38-98 would bar an action on the insurance policy. To accept the defendant's argument would be inconsistent with the recognition of CUIPA and CUTPA claims as independent actions based on factual inquiries and sources of duty separate from actions on the policy.
The defendant attempts to raise an alternative ground on which to affirm the Appellate Court's decision. It claims that, because the trial court determined that the plaintiff was unable to establish the existence of an issue of material fact with respect to a claim of estoppel that the plaintiff raised in response to the motion for summary judgment, the plaintiff likewise has failed to establish the existence of an issue of material fact with respect to her CUIPA and CUTPA claims. We decline to consider this claim. The defendant is essentially asking us to determine whether the plaintiff has alleged valid CUIPA and CUTPA claims. As previously noted; see footnote 4, supra; we declined to consider in this appeal whether the trial court was correct in concluding that the plaintiff's CUIPA and CUTPA counts alleged valid causes of action.