Mead v. Burns

• Decision Date: 20 May 1986
• Citation: 199 Conn. 651,509 A.2d 11
• Court: Connecticut Supreme Court
• Parties: Brian S. MEAD v. J. William BURNS, Commissioner of Transportation, et al.

Page 11

509 A.2d 11

199 Conn. 651

Brian S. MEAD v. J. William BURNS, Commissioner of Transportation, et al.

Supreme Court of Connecticut.

Argued April 1, 1986.

Decided May 20, 1986.

James C. Mulholland, Glastonbury, for appellant (plaintiff).

Louis B. Blumenfeld, with whom was Lorinda S. Coon, Hartford, for appellee (defendant Aetna Life and Cas. Co.).

Joseph I. Lieberman, Atty. Gen., and Robert M. Langer, Asst. Atty. Gen., filed a brief as amici curiae.

Before PETERS, C.J., and ARTHUR H. HEALEY, DANNEHY, SANTANIELLO and CALLAHAN, JJ.

PETERS, Chief Justice.

The dispositive issue on this appeal is the scope of an insurance company's statutory liability for alleged failure to conduct a reasonable investigation of a property damage claim against its insured. The plaintiff, Brian S. Mead, brought an action under General Statutes § 13a-144 ¹ against the named defendant, J William Burns commissioner of transportation of the state of Connecticut, to recover compensatory damages because the plaintiff's truck was damaged when it slid and overturned on an ice covered highway. The plaintiff joined with this cause of action two counts against the defendant Aetna Life and Casualty Company (hereinafter the insurer), which had undertaken to insure the state of Connecticut for claims brought under § 13a-144. The plaintiff alleged that the defendant insurer had knowingly and in bad faith refused to pay the plaintiff's claim without conducting a reasonable investigation based upon all the available information. In count two of his complaint, the plaintiff claimed that this alleged conduct violated the Connecticut Unfair Insurance Practices Act (hereinafter CUIPA); General Statutes §§ 38-60 and 38-61(6)(d); ² and that this violation entitled him to recover both compensatory and punitive damages. In count three of his complaint, the plaintiff claimed that this alleged conduct also violated the Connecticut Unfair Trade Practices Act (hereinafter CUTPA); General Statutes § 42-110b, ³ and that this violation entitled him to recover compensatory damages, punitive damages and attorney's fees. The trial court, Corrigan, J., granted the motion of the defendant insurer to strike counts two and three of the plaintiff's complaint. After a separate hearing, the trial court, Allen, J., found for the plaintiff on the first count of his complaint and adjudged that the defendant commissioner pay him $1700 in compensatory damages. On the motion of the plaintiff, in order to allow the filing of an appeal, the trial court, Kelly, J., thereafter rendered a judgment on the second and third counts of the plaintiff's complaint in favor of the defendant insurer. The plaintiff has appealed only from the judgment on the motion to strike these latter counts of his complaint. We find no error.

It is well settled that "[w]here an appeal is taken from a judgment following the granting of a motion to strike, we take the facts to be those alleged in the amended complaint construed in a manner most favorable to the pleader. Sheets v. Teddy's Frosted Foods, Inc., 179 Conn. 471, 472, 427 A.2d 385 [1980]; Stradmore Development Corporation v. Commissioners, 164 Conn. 548, 550-51, 324 A.2d 919 [1973]; Senior v. Hope, 156 Conn. 92, 97, 239 A.2d 486 [1968]; Rossingol v. Danbury School of Aeronautics, Inc., 154 Conn. 549, 557, 227 A.2d 418 [1967]. For purposes of appeal, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted. DeMello v. Plainville, 170 Conn. 675, 677, 368 A.2d 71 [1976]; McAnerney v. McAnerney, 165 Conn. 277, 282, 334 A.2d 437 [1973]. See Practice Book, 1978, § 151." Amodio v. Cunningham, 182 Conn. 80, 82-83, 438 A.2d 6 (1980). In the plaintiff's amended complaint, he alleged that the defendant insurer had knowingly and in bad faith refused to pay his claim against the insured, but he did not allege that the insurer's conduct constituted a general practice of refusal to pay claims without a reasonable investigation. The trial court concluded that these allegations did not suffice to establish a violation of either CUIPA or CUTPA and accordingly granted the motion to strike filed by the defendant insurer.

The plaintiff maintains that, in striking the second and third counts of his complaint that contained these averments, the trial court erred: (1) in construing CUIPA to require a litigant to prove more than a single violation of § 38-61(d); and (2) in construing CUTPA to require a litigant to prove a violation of CUIPA. The defendant insurer claims, as alternate grounds upon which to sustain the action of the trial court; see Practice Book § 3012(a); ⁴ that: (1) CUIPA does not authorize a private cause of action; (2) neither CUIPA nor CUTPA authorizes a private cause of action by a third party claimant; and (3) neither CUIPA nor CUTPA authorizes a private cause of action against an insurer before the underlying action against the insured has been resolved. Because we agree with the trial court's construction of CUIPA and CUTPA, we need not reach the issues raised by the defendant's § 3012(a) papers.

I

The first issue that we must address is the scope of liability imposed by CUIPA on the insurance industry. That issue raises two questions: (1) what kind of conduct is proscribed by CUIPA? and (2) who is authorized to enforce violations of CUIPA? The latter question would come into play only if we were to conclude, contrary to the view of the trial court, that the plaintiff's complaint had alleged conduct that constituted a violation of CUIPA. ⁵

The provisions of CUIPA which the plaintiff invoked in the second count of his complaint are §§ 38-60 and 38-61(6)(d). CUIPA, in § 38-60, forbids any person engaged in the business of insurance in this state from engaging "in any unfair method of competition or in any unfair or deceptive act or practice prohibited by sections 38-60 to 38-64, inclusive." The plaintiff does not maintain that § 38-60 by itself affords him a remedy, but relies instead on the § 38-61(6) prohibition of "unfair claim settlement practices." Among the "unfair claim settlement practices" that the latter section proscribes are: "[c]ommitting or performing with such frequency as to indicate a general business practice any of the following ... (d) refusing to pay claims without conducting a reasonable investigation based upon all available information...." The plaintiff argues that § 38-61(6)(d) applies to his case, despite his conceded failure to allege a general business pattern of dereliction in investigation. The plaintiff advances two reasons in support of his argument. One of these is a linguistic analysis of the text of § 38-61(6)(d), while the other relies on the relationship between federal and state regulation of insurance. Like the trial court, we find neither of these reasons persuasive.

The plaintiff's linguistic analysis focuses on the placement and the punctuation of the clause "with such frequency as to indicate a general business practice" in § 38-61(6). According to the plaintiff, this clause modifies only the word "performing" and not the word "committing." Although neither "committing" nor "performing" is defined in CUIPA, the plaintiff urges us to assign a separate meaning to each word in order to avoid disregarding one of them as surplusage. He suggests that because "committing" has a volitional element not found in "performing," it was plausible for the legislature to have attached stricter conditions to liability for mere "performing" than to liability for "committing." The propriety of this reading of the statute is reinforced, he maintains, by the absence of punctuation setting off the modifying clause.

While the text of § 38-61(6)(d) could indubitably be clearer, we believe the fairer reading of the governing language is to construe the "general business practice" clause as a modifier of both "performing" and "committing." A narrow construction of this provision is appropriate because CUIPA authorizes the imposition of criminal penalties for the commission of the conduct it proscribes. See General Statutes § 38-62(b). ⁶ We have repeatedly held that ambiguity in penal statutes requires a construction limiting rather than expanding civil liability. Caldor's, Inc. v. Bedding Barn, Inc., 177 Conn. 304, 316-18, 417 A.2d 343 (1979); Nowak v. Nowak, 175 Conn. 112, 124-25, 394 A.2d 716 (1978). This principle of statutory construction outweighs inferences derived from punctuation and duplicatory verbiage. Looking to the statute as a whole, we believe that claims of unfair settlement practices under CUIPA require a showing of more than a single act of insurance misconduct.

As a second reason for a contrary construction, the plaintiff asserts that a broad reading of CUIPA is required in order to implement legislative intent to preempt federal regulation. After the decision of the United States Supreme Court in United States v. South-Eastern Underwriters Assn., 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440, reh. denied, 323 U.S. 811, 65 S.Ct. 26, 89 L.Ed. 646 (1944), holding that Congress had the authority under the commerce clause to regulate interstate insurance transactions, it became likely that insurance practices would come under the regulatory umbrella of the federal trade commission. As a result, Congress enacted the McCarran-Ferguson Act, 15 U.S.C. § 1012(b), which authorized federal regulation of insurance only "to the extent that such business is not regulated by State Law." In response, the National Association of Insurance Commissioners in 1947 promulgated a model insurance trade practices act to assure continued state supervision of the insurance industry. That model act was the basis for this state's enactment of CUIPA in 1955, and the legislative history at that time demonstrates that the legislature intended to preserve state regulation of insurance practices. See 6 S.Proc., Pt. 6, 1955 Sess., pp. 2001-2002; 6 H.R.Proc., Pt. 2, 1955...