A Connecticut trial court recently held that the “general business practice” element of an unfair settlement practice claim under the Connecticut Unfair Insurance Practices Act, Conn. Gen. Stat. §38a-816(6) (“CUIPA”) requires that a plaintiff prove multiple unfair practices by an insurer against more than one insured. Dynamic Electrical Contractors, Inc. v. Southport Contracting, Inc. et al., No. CV-07-5006557, 48 Conn. L. Rptr. No. 17, 600 (September 22, 2009).
This lawsuit results from an underlying dispute between the plaintiff (a subcontractor), and a general contractor, for work completed by the plaintiff but not paid for in full by the general contractor. The court summarized the plaintiff’s complaint as alleging that the defendant insurer was the issuer of a performance bond and a surety bond to the general contractor, as well as various payment bonds insuring payment to subcontractors of the general contractor for payment of labor, materials and equipment furnished for use in the performance of the parties’ construction contract. After the general contractor did not render full payment to the plaintiff, the plaintiff, who claims to be a third-party beneficiary under those policies, made a single demand to the insurer for payments due for its several claims under the various policies. Thereafter the plaintiff brought this lawsuit against the insurer alleging, among other things, a violation of CUIPA as a result of the insurer’s alleged unfair settlement practices.
The insurer moved to strike plaintiff’s CUIPA count on the basis that the plaintiff did not satisfy the statutory requirement that the alleged unfair claim settlement practices be committed or performed “with such frequency as to indicate a general business practice.” In response, the plaintiff argued that it had alleged facts sufficient to satisfy the “general business practice” element of CUIPA because the complaint alleged facts involving four insurance policies and claims submitted under each policy.
The court agreed with the insurer and struck the plaintiff’s CUIPA count. The court reasoned that, “[i]n requiring proof that the insurer has engaged in unfair claim settlement practices ‘with such frequency as to indicate a general business practice,’ the legislature has manifested a clear intent to exempt from coverage under CUIPA isolated instances of insurer misconduct.” The court continued that the plaintiff’s allegations were limited to how the insurer treated the plaintiff’s claims. Despite the fact that the plaintiff alleged claims against four insurance policies, which factual scenario the court noted was different from cases where a plaintiff alleges that an insurer committed several unfair settlement practices against a plaintiff under only one policy of insurance, the court nevertheless held that “the very notion of a ‘general business practice’ would seem to imply that wrongs against more insureds than a particular plaintiff need be proven.” Accordingly, the court struck the CUIPA count because “appropriate factual allegations have not been alleged as to claims involving insureds other than the plaintiff.”