INSURANCE LAW – District Court denies summary judgment as to Unfair Insurance Practices Act claim brought by plaintiff against tortfeasor’s insurer

5/18/2016 | Joseph M. Busher Jr.
jmbusher@jacksonokeefe.com

Category: Insurance

Joseph M. Busher Jr.

The plaintiff brought a coverage and Connecticut Unfair Insurance Practices Act claim against her employer’s insurers.  The plaintiff previously obtained a $4 million judgment against her former employer as a result of an allegedly unlawful discharge.  The plaintiff then brought suit against her employer’s insurer.  The District Court previously granted summary judgment for the insurers as to all counts except the plaintiff’s count sounding in violation of the Connecticut Unfair Insurances Practices Act (CUIPA).  The plaintiff alleged that the insurers failed to properly investigate the facts surrounding her claim, failed to conduct a timely or thorough investigation of the facts, failed to make any coverage determination for more than four years, only after an adverse jury verdict against the insured and refused to participate in alternative dispute resolution procedures specified in the policy.  The plaintiff pursued claims pursuant to subsections B, C, D, E, G and N of §38a-816(6) of CUIPA.  The District Court denies in part and grants in part the insurer’s motions for summary judgment. 

The court begins by noting that as a subrogee to the insured, the plaintiff stands in the shoes of the insured and has all of the insured’s rights against the insurers, but no more.  The court further notes that although the court had found that there was no coverage under the insurance policies, that conclusion did not end the analysis with regard to CUIPA, since Connecticut law holds that CUIPA liability is distinct from contractual liability.  With regard to the investigation of the claims, the court finds an issue of fact and denies summary judgment.  “There remain genuine issues of material fact regarding whether defendants engaged in unfair business practices with respect to the investigation and processing of Tucker’s claim under the 2004 policy under subsections (C) and (D) of Conn. Gen. Stat. §38a-816.  Even if Tucker ultimately had no contractual rights thereunder due to the claims-first-made provision, CUIPA requires insurance companies to process claims without the use of unfair business practices.  The exact steps defendants took, if any, and the policies they followed to process Tucker’s claim in June 2004 are murky and disputed.  Plaintiff claims no investigation was taken; defendants allege that prior to reserving its rights, the National Union claims handler that received Journal Register’s notice of plaintiff’s claim with CCHRO reviewed the claim, read the relevant policy, and then made an initial determination upon its investigation as to whether a claim had been made as defined in the policy.”  “Even if, as it turned out, Tucker’s claim was not properly covered by the claims-first-made policy, and thus defendants were correct in ultimately denying coverage in August of 2008, the question remains whether defendant’s investigation of the claim prior to that determination was reasonable – sufficient and/or properly conducted – so that a CUIPA violation did not occur.  Specifically, did defendants ‘adopt and implement reasonable standards for the prompt investigation of claims arising under the insurance policy’ at issue? Conn. Gen. Stat. §38a-816(6)(C). Exactly how and when did defendants investigate Tucker’s claims and were the steps they took, if any, ‘reasonable’ and/or ‘based upon all available information’? Conn. Gen. Stat. §38a-816(6)(C)-(D).”  “On the other hand, with respect to CUIPA subsections (B), (E), (G) and (N), §38a-816(6), the court grants summary judgment for the defendants.  As to (B), defendants did not fail to acknowledge and act with reasonable promptness upon communications with respect to claims arising under the policy at issue…. Similarly, as to subsection (E), defendants did not fail to affirm or deny coverage of claims within a reasonable time after proof of law statements had been completed…. As to subsection (G), violation of that subsection was not included in the allegations of the plaintiff’s Amended Complaint, so that Tucker may not pursue such a claim simply in opposition to defendants’ motion for summary judgment.  However, even were she allowed to pursue this claim, the court would grant summary judgment on (G).  There is no evidence that defendants compelled either Journal Register or plaintiff to institute litigation to recover amounts due under an insurance policy by offering substantially less than amounts Journal Register or Tucker ultimately recovered in actions brought by such insureds…. Finally, with respect to Subsection (N), defendants did not fail to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for the denial of the claim.  On August 18, 2004, after being informed of the Tucker I trial, defendants denied coverage of Tucker’s claim with a reasonable explanation, application of Clause 8 in the policy.” 

The court also finds that the plaintiff presented sufficient evidence to create a genuine issue of material fact with regard to whether the defendant had an actual business practice of engaging in similar wrongful acts.  “I conclude that at least four cases presented offer such evidence of an adjudicated wrongful business practice by defendants that resembles the allegedly wrongful practices in the present case.”  Id. at *17. 

With regard to damages, the court finds an issue of fact as well.  The court summarizes its analysis with regard to damages as follows: “To succeed on her present CUIPA/CUTPA claim, plaintiff must prove that she actually incurred damages (e.g. attorney’s fees, costs of litigation) as the result of defendants’ unfair business practices (failure to properly investigate).  Whether or not defendants performed a reasonable investigation of plaintiff’s claim, they denied coverage in August of 2008.  Both before and after that denial, plaintiff vigorously litigated, initially against Journal Register and then against defendants, to recover her losses stemming from her wrongful termination by Journal Register.  She thus faces the challenge of proving that her attorney’s fees and litigation costs were created by defendants’ alleged CUIPA/CUTPA violations.”  Tucker v. American International Group, Inc., 2016 WL 1367725 (D.Conn. 4/5/16)

Jackson O’Keefe, LLP, has several attorneys who routinely focus on insurance law issues.  If you have an insurance question or litigation matter involving a GL, E&O, D&O, homeowners,  or auto policy, contact us for assistance at 860-278-4040.

Jackson O’Keefe has been practicing in the insurance field since the 1950s. The firm was co-founded by a former Insurance Commissioner for the State of Connecticut.  The firm is pleased to have received the highest Martindale-Hubbell rating of “AV.”  It is recognized in A.M. Best’s Directory of Recommended Insurance Attorneys.  It is also recognized in the Bar Register of Preeminent Attorneys.  Additionally, several of our partners have been peer-reviewed by Thomson Reuters as “Super Lawyers” qualifying as among the top five percent of practicing attorneys in Connecticut.  We are active participants in the Claims and Litigation Management (CLM) Alliance. 

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