Ensign Yachts, Inc v. Arrigoni et al

Filing 110

ORDER granting 36 Defendant Arrigoni's Motion to Dismiss; granting in part and denying in part 32 Defendant Saperstein Agency's Motion to Dismiss; granting in part and denying in part 34 Defendant Lloyds of London's Motion to Dismiss. See the attached Memorandum of Decision. Signed by Judge Vanessa L. Bryant on 3/11/10. (Engel, J.)

UNITED STATES DISTRICT COURT D IS T R IC T OF CONNECTICUT

E N S IG N YACHTS, INC, P la in t if f , v. J O N ARRIGONI ET AL., D e fe n d a n ts .

: : : : : : :

C IV IL ACTION NO. 3 : 0 9 -c v -2 0 9 (VLB) M a rc h 11, 2010

M E M O R AN D U M OF DECISION AND ORDER GRANTING DEFENDANT J O N ARRIGONI'S MOTION TO DISMISS [Doc. #36] AND GRANTING IN PART AN D DENYING IN PART DEFENDANTS LLOYDS OF LONDON'S AN D SAPERSTEIN AGENCY'S MOTIONS TO DISMISS [Doc. ##32, 34] T h e Plaintiff, Ensign Yachts, Inc. ("Plaintiff" or "Ensign") brings this action fo r damages against the Defendants, Jon Arrigoni ("Arrigoni"), Arrigoni's u n d e rw rite r Lloyds of London ("Lloyds"), and Lloyds' purported agent the S a p e rs te in Agency, Inc. ("Saperstein"). This case involves the transit of the P la in tiff's 2008 55' Cigarette Super Yacht from New Jersey to Florida in December 2 0 0 7 . The Plaintiff alleges that the vessel was damaged during transit while in the c u s to d y of Arrigoni as a result of Arrigoni's negligence. Ensign asserts claims a g a in s t three parties. First, it asserts claims against Arrigoni for breach of c o n tra c t, violation of the Carmack Amendment to the Interstate Commerce Act (49 U .S .C . § 14706), breach of implied contract, negligence, breach of the covenant of g o o d faith and fair dealing, loss of sale, and breach of the Connecticut Unfair Trade P ra c tic e s Act ("CUTPA") (Conn. Gen. Stat. § 42-110b et seq.). Second, Ensign a s s e rts claims against Saperstein for breach of contract, breach of the covenant of g o o d faith and fair dealing, bad faith, fraud, breach of the Connecticut Unfair In s u ra n c e Practices Act ("CUIPA") (Conn. Gen. Stat. § 38a-815 et seq.), tortious

interference, breach of CUTPA, and loss of sale. Finally, Ensign asserts claims a g a in s t Lloyds for breach of contract, bad faith, breach of the covenant of good fa ith and fair dealing, fraud, breach of CUIPA, breach of CUTPA, and loss of sale. Presently pending before the Court are three separate motions to dismiss file d by Arrigoni [Doc. #36], Lloyds [Doc. #34], and Saperstein [Doc. #32]. For the re a s o n s stated below, Arrigoni's motion to dismiss is GRANTED. Lloyds' and S a p e rs te in 's motions to dismiss are GRANTED IN PART and DENIED IN PART. I. FACTUAL AND PROCEDURAL BACKGROUND T h e Plaintiff's Amended Complaint alleges the following facts relevant to the p e n d in g motions to dismiss. Ensign entered into various agreements with C ig a re tte Super Yachts, which led to a joint venture under the name Cigarette R a c in g Team ("Cigarette"). The purpose of the joint venture was to market and sell a 2008 Model Year, 55' Cigarette Super Yacht (the "Yacht"). Sometime thereafter, C ig a re tte assigned and/or transferred all of its rights in the Yacht to Ensign. In O c to b e r 2007, Ensign entered into a brokerage agreement with Xtreme Games W a te rs p o rts ("Xtreme") for the purpose of selling the Yacht. In December 2007, M a s te rs k i Pilou Agency ("Masterski"), a client of Xtreme, agreed to purchase the Y a c h t for a price of $1,200,000. In furtherance of the sales agreement with Masterski, Ensign arranged for th e Yacht to be transported from Jersey City, New Jersey to Miami, Florida. Upon its arrival in Miami, Ensign planned to deliver the Yacht to Masterski in St. B a rth e le m y, French West Indies. Ensign contacted Jon Arrigoni of Arrigoni Marine M o v e rs to transport the Yacht. Arrigoni indicated that he had the requisite skills

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and experience to do the job. Ensign advised Arrigoni that the fair market value of th e Yacht was in excess of $1,000,000, and requested that Arrigoni obtain in s u ra n c e to be issued in Ensign's name. Arrigoni contacted Lloyds, which issued a n insurance policy for the sum of $1,000,000. Subsequently, Arrigoni acquired a C e rtific a te of Liability Insurance from Saperstein identifying Cigarette as the c e rtific a te holder. During transit by Arrigoni, the Yacht became dislodged from the trailer that Arrig o n i was using to transport it and was dragged along the highway, causing s u b s ta n tia l damage to the Yacht's hull and equipment and diminishing its value. Prior to September 15, 2008, Ensign advised the defendants, including Lloyds' a g e n ts Lloyds of America and Penobscot Group, of its claim for damages to the Y a c h t, as well as other potential losses related to the sale of the Yacht. This was d o n e so that the Yacht could be quickly repaired at the expense of Lloyds, as E n s ig n not have sufficient funds to pay for the initial repairs, estimated to cost $ 1 0 0 ,0 0 0 , and so that Masterski would not cancel its agreement to purchase the Y a c h t. Ensign contracted with Norseman Shipbuilding Corporation ("Norseman") to repair the Yacht. Masterski nevertheless cancelled the purchase agreement. Norseman completed its repairs of the Yacht on April 3, 2008. Defendants Lloyds a n d Saperstein and their agent Penobscot Group refused to deal with the public a d ju s te r that Ensign had retained to speed along adjustment of the claim, and fa ile d to contact Ensign to deal with it personally. According to Ensign, Lloyds and S a p e rs te in and their agents entirely refused to cooperate in the claims process and a d ju s t the claim, and ultimately denied the claim without providing a reason for the

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denial to Ensign. Ensign alleges that Lloyds or its agent Lloyds of America employed S a p e rs te in as their agent/broker for the purpose of soliciting insurance policies to b e issued by Lloyds and to handle claims submitted by their insureds. Ensign fu rth e r alleges that Lloyds and Saperstein are not authorized to do business in C o n n e c tic u t, but that they nonetheless conducted the business of insurance within C o n n e c tic u t. Specifically, Ensign claims that these Defendants issued a Certificate o f Liability Insurance dated December 17, 2007, binding insurance covering E n s ig n , but they were not authorized to conduct the business of insurance in C o n n e c tic u t or to solicit or sell policies of insurance to individuals or entities in C o n n e c tic u t. Ensign asserts that Lloyds and Saperstein knew or should have k n o w n that they were not authorized to engage in the business of insurance in C o n n e c tic u t, and therefore they were in violation of Connecticut law when they is s u e d insurance to Arrigoni and Ensign. Because Ensign did not have sufficient funds to pay Norseman, and because L lo yd s and Saperstein refused to adjust and pay Ensign's claim, on July 23, 2008, N o rs e m a n filed a complaint in the Federal District Court for the Southern District of F lo rid a (Docket No. 08-22073) to have the Yacht arrested in order to protect and s e c u re its maritime lien. Ensign borrowed money to pay Norseman for its services, a n d the Yacht was released from arrest by Court Order on August 8, 2008. Afte r the Yacht was released from arrest, Ensign again marketed it for sale. However, the market for vessels of this type had deteriorated substantially and the Y a c h t suffered additional damages that further diminished its value. The Yacht

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was eventually sold in December 2008 for the sum of $750,000. Ensign brought suit in this Court on February 4, 2009. Ensign filed an Am e n d e d Complaint on March 16, 2009. Saperstein filed its motion to dismiss for la c k of jurisdiction and failure to state a claim on April 16, 2009. Lloyds and Arrig o n i separately filed motions to dismiss for failure to state a claim on April 17, 2 0 0 9 . Ensign filed a joint objection to all three motions on June 11, 2009. Following a prejudgment remedy hearing, by Order dated November 19, 2009, the C o u rt granted a prejudgment remedy of attachment and garnishment against Arrig o n i only in the amount of $728,726.72. See Doc. #97. II. DISCUSSION A. Standard of Review T h e Supreme Court clarified the standard governing a motion to dismiss for fa ilu re to state a claim in Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), stating that, " [u ]n d e r Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a `short a n d plain statement of the claim showing that the pleader is entitled to relief.'" Id. a t 1949. While Rule 8 does not require detailed factual allegations, "[a] pleading th a t offers labels and conclusions or a formulaic recitation of the elements of a c a u s e of action will not do. Nor does a complaint suffice if it tenders `naked a s s e rtio n [s ]' devoid of `further factual enhancement.' To survive a motion to d is m is s , a complaint must contain sufficient factual matter, accepted as true, to `s ta te a claim to relief that is plausible on its face.' A claim has facial plausibility w h e n the plaintiff pleads factual content that allows the court to draw the re a s o n a b le inference that the defendant is liable for the misconduct alleged." Id.

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(internal citations omitted). B. Carmack Preemption 1 . Arrigoni Arrig o n i moves to dismiss all state statutory and common law claims a s s e rte d against him on the basis that these claims are preempted by the Carmack Am e n d m e n t because they arise from interstate transportation services. "It is well e s ta b lis h e d that the Carmack Amendment preempts state law claims arising from th e shipment of goods in interstate commerce."1 Design X Mfg., Inc. v. ABF Freight S ys te m s , Inc., 584 F. Supp. 2d 464, 467 (D. Conn. 2008). As the Second Circuit has e x p la i n e d : In enacting [the Carmack Amendment], Congress intended to provide in te rs ta te carriers with reasonable certainty and uniformity in assessing th e ir risks and predicting their potential liability. The Carmack Am e n d m e n t did this both by establishing a single uniform regime for re c o v e ry by shippers directly from [the] interstate common carrier in w h o s e care their [items] are damaged, and by preempting [the] shipper's s ta te and common law claims against a carrier for loss or damage to g o o d s during shipment. P ro je c t Hope v. M/V Ibn Sina, 250 F.3d 67, 74 n.6 (2d Cir. 2001) (internal citations

The Carmack Amendment provides, in relevant part: "A common carrier . . . subject to the jurisdiction of the Interstate Commerce Commission . . . shall issue a receipt or a bill of lading for property it receives for transportation . . . That carrier . . . and any other common carrier that delivers the property and is providing transportation or service subject to the jurisdiction of the Commission . . . are liable to the person entitled to recover under the receipt or bill of lading. The liability imposed under this paragraph is for the actual loss or injury to the property caused by (1) the receiving carrier, (2) the delivering carrier, or (3) another carrier over whose line or route the property is transported in the United States." 49 U.S.C. § 14706(a)(1). A "carrier" under the Carmack Amendment specifically includes a "motor carrier," which is defined as "a person providing motor vehicle transportation for compensation." 49 U.S.C. § 13102(3) and (14). 6

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and quotation marks omitted); see also Cleveland v. Beltman North American Co., In c ., 30 F.3d 373, 374 (2d Cir. 1994) (holding that claims by a shipper for damage to g o o d s in interstate commerce is an "area of interstate commerce law that has been fu lly occupied by Congress' passage of a statute delineating what remedies are a v a ila b le , leaving no room for additional state or federal common law causes of a c t io n " ). Ensign argues that its state law claims against Arrigoni are not preempted b e c a u s e , in addition to entering an agreement with Arrigoni to transport the vessel, it also entered into a second agreement with Arrigoni to procure proper insurance b y having Ensign named as an additional insured. According to Ensign, its claims b a s e d upon Arrigoni's failure to procure the agreed-upon insurance coverage, fa ilu re to prosecute his rights against Lloyds and Saperstein, and failure to c o m m e n c e suit or file a third-party complaint against Lloyds and Saperstein in o rd e r to enforce the rights he agreed to obtain on behalf of Ensign are not p re e m p te d by the Carmack Amendment. In making this argument, Ensign relies primarily upon the Seventh Circuit's d e c is io n in Gordon v. United Van Lines, Inc., 130 F.3d 282 (7th Cir. 1997). There, th e Seventh Circuit held that "the Carmack Amendment does not preempt those s ta te law claims that allege liability on a ground that is separate and distinct from th e loss of, or the damage to, goods that were shipped in interstate commerce." Id. a t 289. The plaintiff in Gordon was an elderly woman in failing physical health. Id. a t 284. Her vision and hearing were impaired, and she could no longer write due to a rth ritis . Id. The plaintiff contacted a United Van Lines agency in Florida for the

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purpose of arranging delivery of some of her belongings to her new apartment in C h ic a g o , and other of her belongings to her daughter's home. Id. She met with a U n ite d Van Lines agent, who was aware of her physical impairments, and she in s tru c te d him regarding delivery. Id. The agent never obtained the plaintiff's a g re e m e n t regarding insurance against the loss of her possessions, and instead w ro te in the bill of lading that the plaintiff released United from liability for loss or d a m a g e to the goods exceeding $1,000. Id. United never delivered any of the g o o d s destined for her daughter's home. Id. Instead, the items were inadvertently d is c a rd e d and incinerated. Id. at 285. Rather than acknowledging their error, for a p e rio d of several months United represented to the plaintiff and her daughter that th e items were in their warehouse and would be safely delivered. Id. Based upon these facts, the Seventh Circuit reversed the district court's d is m is s a l of the plaintiff's claim for intentional infliction of emotional distress, fin d in g that this claim alleged a harm to the plaintiff that was independent from the lo s s or damage to her goods and therefore was not preempted by the Carmack Am e n d m e n t. Id. at 289. However, the Seventh Circuit upheld the district court's d is m is s a l of the plaintiff's claims for breach of contract, willful and wanton m is c o n d u c t, violation of the Illinois Consumer Fraud and Deceptive Business P ra c tic e s Act, and common law fraud. The Seventh Circuit found that claims " re la tin g to the making of the contract for carriage, and the measure of damages fo r such claims are so likely to be the loss or damage to the goods, that they are . . . preempted by the Carmack Amendment." Id. In addition, the Seventh Circuit fo u n d that claims asserting fraud in the claims handling process were also

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preempted by the Carmack Amendment because "the claims process is directly re la te d to the loss or damage to the goods that were shipped. Indeed, people w o u ld not be involved in the process unless either loss or damage had occurred." Id. at 290. Numerous district courts have reached the same conclusion as the Seventh C irc u it in Gordon, holding that the Carmack Amendment preempts statutory and c o m m o n law claims against carriers arising from the claims process, including c la im s of fraud relating to insurance coverage. See, e.g., Design X Mfg., 584 F. S u p p . 2d at 467 (holding that breach of contract, negligence, and CUTPA claims a g a in s t carrier asserting damages to business or reputation were preempted by th e Carmack Amendment because the alleged damages "flowed directly from the d a m a g e to the goods shipped in interstate commerce and the subsequent claims p ro c e s s " ); Shabani v. Classic Design Servs., Inc., 2010 WL 446084, at *2 (C.D. Cal. F e b . 8, 2010) (acknowledging that "the preemptive effect of the Carmack Am e n d m e n t applies equally to claims of fraud relating to insurance coverage, and h o ld in g that claim alleging that carrier "intentionally and fraudulently m is re p re s e n te d " that it had procured insurance for damaged item was preempted); N ic h o ls v. Mayflower Transit, LLC, 368 F. Supp. 2d 1104, 1108-09 (D. Nev. 2003) (d is m is s in g claims asserting that carrier sold "insurance" and acted in bad faith w h e n refusing to pay plaintiff's claim); Hanlon v. United Parcel Serv., 132 F. Supp. 2 d 503, 505-06 (N.D. Tex. 2001) (holding that the Carmack Amendment preempted p la in tiff's claims against carrier for deceit for fraudulent insurance fee collection, u n a u th o riz e d operation as an insurance company, and violations of the Texas

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Insurance Code). Here, all of the state law claims that Ensign asserts against Arrigoni in its Am e n d e d Complaint seek to recover damages arising from the shipment of its Y a c h t in interstate commerce. Although Ensign attempts to characterize these c la im s as alleging liability on a ground that is separate and distinct from the d a m a g e to its Yacht, the very authority it cites supports the dismissal of these c la im s . Ensign complains that Arrigoni misrepresented that he had procured a d e q u a te insurance to cover the risks associated with the interstate transport of th e Yacht. Ensign further complains that Arrigoni failed to prosecute his rights a g a in s t Lloyds and Saperstein, and failed to commence suit or file a third-party c o m p la in t against Lloyds and Saperstein in order to enforce the rights he agreed to o b ta in on behalf of Ensign. However, claims against carriers for m is re p re s e n ta tio n s relating to insurance coverage and misrepresentations made in c o n n e c tio n with the claims handling process are directly related to the damage to th e shipped goods, and are therefore preempted by the Carmack Amendment. See G o rd o n , 130 F.3d at 290; see also Rini v. United Van Lines, Inc., 104 F.3d 502, 506 (1 s t Cir. 1997) ("Preempted sate law claims . . . include all liability stemming from d a m a g e or loss of goods, liability stemming from the claims process, and liability re la te d to the payment of claims."). Accordingly, since the Carmack Amendment p re e m p ts each of Ensign's state statutory and common law claims against Arrig o n i, these claims are dismissed.2

Ensign also suggests that dismissal of these claims is inappropriate because Arrigoni has not provided proof that he is a carrier within the meaning of 10

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2. Lloyds L lo yd s also argues that Ensign's state law claims against it are preempted b y the Carmack Amendment. Unlike Arrigoni, Lloyds is not alleged to be a C a rm a c k carrier, but instead is an insurance company. As discussed above, the p u rp o s e of the Carmack Amendment was "to provide interstate carriers with re a s o n a b le certainty and uniformity in assessing their risks and predicting their p o te n tia l liability." Project Hope, 250 F.3d at 74 n.6 (emphasis added); see also M is s o u ri Pac. R. Co. v. Elmore and Stahl, 377 U.S. 134, 137 (1964) (stating that the C a rm a c k Amendment "codifies the common-law rule that a carrier, though not an a b s o lu te insurer, is liable for damages to goods transported by it unless it can s h o w that the damage was caused by `(a) the act of God; (b) the public enemy; (c) the act of the shipper himself; (d) public authority; (e) or the inherent vice or nature o f the goods'") (emphasis added). Lloyds points to nothing in the text of the C a rm a c k Amendment or the statute's legislative history which suggests that by its e n a c tm e n t Congress intended to preempt a shipper's state law claims against an in s u ra n c e company which allegedly had assumed a direct contractual obligation to in s u re the risk of loss during transport of the shipper's goods. Nor does Lloyds c ite any cases establishing that a shipper's claims against an insurer of the carrier

the Carmack Amendment. However, Ensign expressly admits that Arrigoni is a carrier, alleging in its Amended Complaint that "Arrigoni was at all material times engaged in the business of a motor carrier and was a receiving, delivering, transporting, and/or other carrier within the meaning of the Carmack Amendment." Am. Compl. ¶ 51. Indeed, Ensign expressly rests its assertion of this Court's subject matter jurisdiction on Arrigoni's status as a carrier under the Carmack Amendment. Id. ¶ 1. Ensign cannot defeat Arrigoni's motion to dismiss by contradicting express allegations made in its Amended Complaint. 11

are preempted by the Carmack Amendment where that insurer allegedly assumed a d ire c t contractual obligation to the shipper. Indeed, other district courts have held that, because the Carmack Am e n d m e n t is concerned predominately with the liability of carriers, it does not p re e m p t actions against non-carrier entities arising out of the interstate shipment o f goods. See Commercial Union Ins. Co. v. Forward Air, Inc., 50 F. Supp. 2d 255, 2 5 7 -5 9 (S.D.N.Y. 1999) (holding that a property broker, which arranged for shipping b u t did not act as a carrier, could be held liable under state or federal common law g iv e n the existence of a savings clause in the Carmack Amendment and the focus o f precedent on carrier liability); Taylor v. Allied Van Lines, No. CV-08-1218-PHXG M S , 2008 WL 5225809, at *3-*4 (D. Ariz. Dec. 15, 2008) (holding that "the Carmack Am e n d m e n t was not intended to preempt all actions against non-carrier entities a ris in g out of the interstate shipment of goods simply because a statutory cause of a c tio n is also available against the carrier"); Custom Cartage, Inc. v. Motorola, Inc., N o . 98-C-5182, 1999 WL 89653, at *3 (N.D. Ill. Feb. 16, 1999) (stating that the C a rm a c k Amendment's silence as to the liability of non-carrier entities "does not m e a n that the Carmack Amendment grants entities which arrange for the tra n s p o rta tio n of goods absolute immunity for breach of contract or tort actions a ris in g out of the interstate shipment of goods"). Further, because Ensign asserts CUIPA claims against Lloyds and S a p e rs te in , a holding that the Carmack Amendment preempts all of Ensign's state la w claims against these Defendants would arguably run afoul of the McCarranF e rg u s o n Act, which provides that "[n]o Act of Congress shall be construed to

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invalidate, impair, or supersede any law enacted by any State for the purpose of re g u la tin g the business of insurance . . . unless such Act specifically relates to the b u s in e s s of insurance." 15 U.S.C. § 1012(b); see generally Couch on Insurance 3d § 2:4. Accordingly, the Court holds that Ensign's state law claims against Lloyds a re not preempted by the Carmack Amendment.3 C . Subject Matter Jurisdiction Saperstein first argues that all of Ensign's claims against it must be d is m is s e d for lack of subject matter jurisdiction. According to Saperstein, the C o u rt lacks subject matter jurisdiction over Ensign's claims against it because b o th Ensign and Saperstein are incorporated in New York, and therefore there is a la c k of complete diversity of citizenship pursuant to 28 U.S.C. § 1332(a). The Court firs t notes that complete diversity exists under § 1332 only where all plaintiffs are c itiz e n s of different states than all defendants. See Exxon Mobil Corp. v. Allapattah S e rv ic e s , Inc., 545 U.S. 546, 553 (2005) (citing Strawbridge v. Curtiss, 3 Cranch 267, 2 L.Ed. 435 (1806)). Here, the Amended Complaint invokes the Court's jurisdiction on multiple g ro u n d s . Although Saperstein correctly contends that "diversity jurisdiction is a v a ila b le only when all adverse parties to a litigation are completely diverse in their c itiz e n s h ip s ," Herrick Co., Inc. v. SCS Communications, Inc., 251 F.3d 315, 322 (2d C ir. 2001), the lack of complete diversity in this case would not end the Court's

Saperstein does not assert a Carmack preemption defense. Nevertheless, the Court notes that the foregoing analysis applies equally to Saperstein. 13

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inquiry, nor need the Court address the diversity argument because Ensign asserts a lte rn a tiv e bases for jurisdiction. A federal court's jurisdiction is not limited only to cases in which there is diversity of citizenship. As a general matter, the term " ju ris d ic tio n " means those cases falling within the Court's adjudicative authority. See Kontrick v. Ryan, 540 U.S. 443, 455 (2004). Federal courts are tribunals of lim ite d jurisdiction whose adjudicative authority is limited to cases the a d ju d ic a tio n of which is authorized by the Constitution and Congress. See K o k k o k e n v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994); Finley v. U n ite d States, 490 U.S. 545, 547-58 (1989). Federal courts are presumptively w ith o u t jurisdiction and the burden of proving that the Court has jurisdiction is on th e party seeking to invoke the Court's jurisdiction. Kokkoken, 511 U.S. at 377. Congress has conferred jurisdiction upon federal district courts pursuant to 28 U .S .C . § 1330 et seq. Section 1331 confers district courts with general federal q u e s tio n jurisdiction, which includes jurisdiction over cases "arising under the C o n s titu tio n , laws, or treaties of the United States." 28 U.S.C. § 1331; U.S. Const., a rt. III, §2. T h e Amended Complaint asserts that this Court has federal question ju ris d ic tio n over Ensign's Carmack claim under 28 U.S.C. § 1331, and supplemental ju ris d ic tio n over its state law claims pursuant to 28 U.S.C. § 1367. Federal q u e s tio n jurisdiction is invoked through Ensign's Carmack Amendment claim b ro u g h t under 49 U.S.C. § 14706. Respecting supplemental jurisdiction, § 1367(a) s ta te s : E x c e p t as provided in subsections (b) and (c) or as expressly provided

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otherwise by Federal Statute, in any civil action of which the district c o u rts have original jurisdiction, the district courts shall have s u p p le m e n t a l jurisdiction over all other claims that are so related to c la im s in the action within such original jurisdiction that they form part o f the same case or controversy under Article III of the United States C o n s titu tio n . Such supplemental jurisdiction shall include claims that in v o lv e the joinder or intervention of additional parties. Thus, even when no independent basis for federal jurisdiction exists, a d is tric t court may exercise subject matter jurisdiction over state law claims when th o s e claims are part of the same "case or controversy" that includes a federal c la im . The Second Circuit has held that "disputes are part of the same case or c o n tro v e rs y within § 1367 when they derive from a common nucleus of operative fa c t." Achtman v. Kirby McInerney & Squire, LLP, 464 F.3d 328, 335 (2d Cir. 2006) (in te rn a l quotation marks omitted). To determine whether claims arise from a " c o m m o n nucleus of operative fact," the appropriate inquiry is whether " the facts u n d e rlyin g the federal and state claims substantially overlapped . . . [or] the federal c la im necessarily brought the facts underlying the state claim before the court." Id. "This is so even if the state law claim is asserted against a party different from th e one named in the federal claim." Id. Here, it is clear that Ensign's claims against Saperstein, and all of its state la w claims for that matter, arise from the same nucleus of operative fact as the C a rm a c k claim against Arrigoni. The Carmack claim involves the interstate tra n s p o rt of Ensign's Yacht and the damage to the Yacht that resulted during that tra n s p o rt. Each of Ensign's state law claims directly relate to the transport of or d a m a g e to the Yacht in that they allege either wrongs related to the procurement of in s u ra n c e for transport of the Yacht, or defects in the claims handling process

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after the Yacht was damaged. A court has subject matter jurisdiction over state law claims arising from the s a m e nucleus of operative fact as the plaintiff's federal claim unless that ju ris d ic tio n is limited by 28 U.S.C. § 1367(b). Section 1367(b) provides that "where d is tric t courts have original jurisdiction founded solely on [diversity jurisdiction u n d e r] section 1332 of this title, the district courts shall not have supplemental ju ris d ic tio n . . . over claims by plaintiffs . . . when exercising supplemental ju ris d ic tio n over such claims would be inconsistent with the jurisdictional re q u ire m e n ts of section 1332." Saperstein argues that § 1367(b) deprives this C o u rt of jurisdiction over Ensign's state law claims against it. Contrary to Saperstein's argument, § 1367(b) is clearly inapplicable in this c a s e . By its terms, § 1367(b) limits a district court's exercise of supplemental ju ris d ic tio n only in cases that invoke nothing but diversity jurisdiction. The p re s e n t case invokes the Court's federal question jurisdiction. See 13B Wright, M ille r & Cooper, Federal Practice and Procedure: Jurisdiction 2d § 3567.2 ("Thus, § 1 3 6 7 (b ) does not apply in cases that invoke federal jurisdiction on any nond iv e rs ity basis, such as federal question jurisdiction. In a case invoking a nond iv e rs ity basis of jurisdiction, if supplemental jurisdiction is granted by § 1367(a), th e re is no § 1367(b) analysis whatever."); see also Rotter v. Leahy, 93 F. Supp. 2d 4 8 7 , 497 n.3 (S.D.N.Y. 2000) ("Section 1367(b) does not apply in this case, since ju ris d ic tio n is not predicated solely on diversity, but also on federal question (§ 1 3 3 1 ) jurisdiction."); Estate of Bruce v. City of Middletown, 781 F. Supp. 1013, 1017 n .2 (S.D.N.Y. 1992) ("Since federal question jurisdiction in this case does not rest

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upon diversity but a federal claim under § 1983, the exceptions to supplemental ju ris d ic tio n incorporated within § 1367(b) do not apply."). Accordingly, because E n s ig n invokes the Court's federal question and concomitant supplemental ju ris d ic tio n under the Carmack Amendment, a federal statute, § 1367(b) is irre le v a n t and Saperstein's argument for dismissal on the basis of § 1367(b) is m e rit le s s . D. Breach of Contract E n s ig n asserts breach of contract claims against Lloyds and Saperstein. The purported factual basis for these claims is that Ensign and/or its predecessor C ig a re tte requested that Arrigoni obtain insurance to cover transport of the Yacht to be issued in the name of Ensign and/or Cigarette. According to Ensign, Arrigoni a c q u ire d , through Saperstein, a Certificate of Liability Insurance (the "Certificate") w h ic h named Cigarette as the Certificate holder. Lloyds allegedly issued Policy N o s . R704230/112 and R704390/0010 in favor of Cigarette to insure against any lo s s e s during the loading, transit, and discharge of the Yacht. See Am. Compl. ¶¶ 1 8 -2 0 . Although the parties do not make a choice-of-law argument, Ensign relies u p o n New York law in its opposition to support its breach of contract claims, while L lo yd s and Saperstein cite Connecticut law in their motions to dismiss. Therefore, th e Court will briefly address choice-of-law principles. In a federal question action w h e re a district court's subject matter jurisdiction over non-federal claims is based o n supplemental jurisdiction, the district court applies the choice-of-law rules of th e forum state, which is Connecticut in this case. See Rogers v. Grimaldi, 875

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F.2d 994, 1002 (2d Cir. 1989). The Connecticut Supreme Court has adopted the a p p ro a c h for analyzing choice-of-law issues enunciated in the Restatement (S e c o n d ) of Conflict of Law, § 188, pursuant to which the law of the state that has th e "most significant relationship" to the transaction and parties at issue is applied in contract cases. See Reichold Chemicals, Inc. v. Hartford Accident & Indemnity C o ., 243 Conn. 401, 413-14 (2000). Based upon the allegations in the Amended C o m p la in t, it is clear that Connecticut has the most significant relationship to the tra n s a c tio n and parties at issue in this case. Arrigoni's place of business is lo c a te d in Connecticut, and he negotiated insurance coverage for transport of the Y a c h t with Saperstein, which is incorporated in New York but also transacts b u s in e s s in Connecticut. Ensign is incorporated in New York as well, but its o ffic e s are located in Connecticut. Thus, the insurance contract at issue was n e g o tia te d in Connecticut by a Connecticut resident, and covered the interstate tra n s p o rt of the Yacht by a Connecticut resident for a business whose offices are lo c a te d in Connecticut. Accordingly, choice-of-law principles dictate that this C o u rt apply Connecticut law to Ensign's claims. Under Connecticut law, "[t]he elements of a breach of contract action are the fo rm a tio n of an agreement, performance by one party, breach of the agreement by th e other party and damages." Rosato v. Mascardo, 82 Conn. App. 396, 411 (2004) (c ita tio n s and quotation marks omitted). Lloyds and Saperstein argue that Ensign c a n n o t satisfy any of these elements because it had no contract with them. In m a k in g this argument, they rely upon the Certificate, attached to Ensign's original c o m p la in t as Exhibit 1, which expressly provides:

18

THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AN D CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS C E R T IF IC AT E DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AF F O R D E D BY THE POLICIES BELOW.4 O n ly Arrigoni is listed as an insured on the Certificate. Based upon this fact in c o n ju n c tio n with the above-quoted language, it is clear that the Certificate itself d o e s not constitute a contract between Ensign and Lloyds/Saperstein. However, Ensign argues in response that it was a third party beneficiary of th e insurance agreement between Arrigoni and Lloyds/Saperstein. "A third party b e n e fic ia ry may enforce a contractual obligation without being in privity with the a c tu a l parties to the contract. Therefore, a third party beneficiary who is not a n a m e d obligee in a given contract may sue the obligor for breach." Gateway Co. v. D iN o ia , 232 Conn. 223, 230-31 (1995) (internal citation omitted). Thus, the essential q u e s tio n in this case is whether Ensign was a third party beneficiary. T h e Connecticut Supreme Court has explained that "the ultimate test to be a p p lie d [in determining whether a person has a right of action as a third party b e n e fic ia ry] is whether the [mutual] intent of the parties to the contract was that th e promisor should assume a direct obligation to the third party [beneficiary] and . . . that intent is to be determined from the terms of the contract read in the light of th e circumstances attending its making . . ." Pelletier v. Sordoni/Skanska C o n s tru c tio n Co., 264 Conn. 509, 531 (2003) (quoting Grigerik v. Sharpe, 247 Conn. 2 9 3 , 311-12 (1998)). "Although it is not in all instances necessary that there be

The Court may properly consider exhibits attached to a complaint in deciding a motion to dismiss. See Samuels v. Air Transport Local 504, 992 F.2d 12, 15 (2d Cir. 1993). 19

4

express language in the contract creating a direct obligation to the claimed third p a rty beneficiary . . . the only way a contract could create a direct obligation b e tw e e n a promisor and a third party beneficiary would have to be . . . because the p a rtie s to the contract so intended." Gazo v. City of Stamford, 255 Conn. 245, 261 (2 0 0 1 ). "The mere fact that a contract of liability insurance exists between the to rtfe a s o r and insurance company does not somehow make the injured party a th ird -p a rty beneficiary to the contract." Alexander v. W.F. Shuck Petroleum Co., N o . HHBCV085010050, 2009 WL 2783587, at *4 (Conn. Super. Ct. Aug. 3, 2009). The Court finds that Ensign has sufficiently pleaded a third party beneficiary c a u s e of action for breach of contract against Lloyds and Saperstein. Ensign a lle g e s that Arrigoni acquired, through Saperstein, two insurance policies issued b y Lloyds to cover the risk of loss during transport of the Yacht. Although Ensign w a s not named as an insured on the Certificate, Ensign claims that it was an in te n d e d beneficiary of the policies. Lloyds and Saperstein argue that Ensign's c la im is contradicted by the Certificate, which expressly states that it confers no rig h ts upon Cigarette as the Certificate holder. However, this is not dispositive at th e motion to dismiss stage, because the test for determining whether Ensign is a th ird party beneficiary of the agreement between Arrigoni and Lloyds/Saperstein re q u ire s the Court to discern the intent of these parties based upon the terms of th e insurance policies themselves read in light of the circumstances attending th e ir making. See Pelletier, 264 Conn. at 531. Since the policies have not been a tta c h e d to the pleadings, the Court has not yet had the opportunity to review the p o lic ie s and determine, based upon their terms read in the light of the

20

circumstances attending their making, whether Arrigoni and Lloyds/Saperstein in te n d e d that Lloyds/Saperstein would assume a direct obligation to Ensign. See R a p a p o rt and Benedict, P.C. v. City of Stamford, 39 Conn. App. 492, 498 (1995) (o b s e rv in g that "ordinarily the question of contractual intent presents a question of fa c t for the ultimate fact finder"). Accordingly, dismissal of Ensign's breach of c o n tra c t claims at this stage would be premature. S a p e rs te in makes the additional argument that, under the law of agency, it c a n n o t be held liable for the contracts of a disclosed principal, namely Lloyds. Under Connecticut law, an "agent is not liable where, acting within the scope of his a u th o rity, he contracts with a third party for a known principal." Schribner v. O 'B rie n , Inc., 169 Conn. 389, 405 (1975); see also Behlman v. Universal Travel Ag e n c y, Inc., 4 Conn. App. 688, 690 (1985) ("An agent, by making a contract only on b e h a lf of a competent disclosed principal whom he has the power to bind, does not th e re b y become liable for its nonperformance.") (citing Restatement (Second) A g e n c y , § 328). "To avoid personal liability, it is the duty of the agent to disclose b o th the fact that he is acting in a representative capacity and the identity of his p rin c ip a l." Behlman, 4 Conn. App. at 690. While it appears from the pleadings that S a p e rs te in acted at least in part on behalf of Lloyds, Ensign also alleges that S a p e rs te in was acting as a broker for the purpose of insuring Ensign and that S a p e rs te in itself made misrepresentations related to insurance coverage for tra n s p o rt of the Yacht. See Restatement (Second) Agency, § 388 comment b (n o tin g that, if an agent misrepresents "circumstances affecting the probability of p e rfo rm a n c e [of a contract], the failure of the principal to perform may subject [the

21

agent] to liability for damages so caused"). Therefore, the Court will not dismiss E n s ig n 's breach of contract claim against Saperstein on the basis of agency law. E. Breach of the Covenant of Good Faith and Fair Dealing E n s ig n alleges that Lloyds and Saperstein breached the covenant of good faith and fair dealing by refusing to timely and properly adjust or process Ensign's c la im for damages sustained to its Yacht. The requirements for pleading a breach of the covenant of good faith and fa ir dealing under Connecticut law are well-established. "[E]very contract carries a n implied duty requiring that neither party do anything that will injure the right of th e other to receive the benefits of the agreement . . . The covenant of good faith a n d fair dealing presupposes that the terms and purpose of the contract are agreed u p o n by the parties and that what is in dispute is a party's discretionary application o r interpretation of a contract term . . . To constitute a breach of [the implied c o v e n a n t of good faith and fair dealing], the acts by which a defendant allegedly im p e d e s the plaintiff's right to receive benefits that he or she reasonably expected to receive under the contract must have been taken in bad faith." Renaissance M a n a g e m e n t Co., Inc. v. Connecticut Housing Finance Authority, 281 Conn. 227, 2 4 0 (2007). "[T]he existence of a contract between the parties is a necessary a n te c e d e n t to any claim of breach of the duty of good faith and fair dealing." Macomber v. Travelers Property and Casualty Corp., 261 Conn. 620, 638 (2002). As the Connecticut Supreme Court has explained, "[g]ood faith and fair d e a lin g means an attitude or state of mind denoting honesty of purpose, freedom fro m intention to defraud and generally speaking means faithful[ness] to one's

22

duty or obligation . . . [B]ad faith is defined as the opposite of good faith, generally im p lyin g a design to mislead or to deceive another, or a neglect or refusal to fulfill s o m e duty or some contractual obligation not prompted by an honest mistake as to o n e 's rights or duties . . . [B]ad faith is not simply bad judgment or negligence, but ra th e r it implies the conscious doing of a wrong because of dishonest purpose or m o ra l obliquity[;] . . . it contemplates a state of mind affirmatively operating with fu rtiv e design or ill will." Buckman v. People Express, Inc., 205 Conn. 166, 171 (1 9 8 7 ). L lo yd s and Saperstein first argue that Ensign's claims for breach of the c o v e n a n t of good faith and fair dealing must be dismissed because they had no c o n tra c t with Ensign, which is a prerequisite to such a claim. However, as d is c u s s e d above, Ensign has alleged that it is a third party beneficiary of Arrigoni's in s u ra n c e policies with Lloyds/Saperstein. If a plaintiff adequately pleads third p a rty beneficiary status under a contract, it may assert a claim for breach of the c o v e n a n t of good faith and fair dealing. See, e.g., 701 Main Street, LLC v. RLS D e s ig n Build LLC, No. FBTCV085016969S, 2008 WL 5220689, at *2 (Conn. Super. Ct. N o v . 20, 2008) ("So long as a plaintiff has adequately alleged third party beneficiary s ta tu s under the . . . contract [the] breach of implied covenant of good faith and fair d e a lin g . . . [claim is] legally sufficient.") (citation omitted; internal quotation marks o m itte d ); DiNuzzo v. Bute, No. CV020469411S, 2004 WL 2943293, at *2 (Nov. 15, 2 0 0 4 ) ("[C]onstruing the plaintiff to be a third-party beneficiary of the . . . insurance c o n tra c t provides . . . the contractual basis for the alleged breach of the covenant

23

of good faith and fair dealing[.]").5 S a p e rs te in further argues that Ensign's Amended Complaint fails to plead fa c ts supporting its claim that Saperstein's actions were taken in bad faith. While C o n n e c tic u t appellate courts have not addressed what allegations are required to p le a d bad faith in cases where an insurer denies coverage under an insurance p o lic y, a majority of Superior Court cases have held that the plaintiff "must plead fa c ts that go beyond a simple breach of contract claim and enter into a realm of to rtio u s conduct which is motivated by a dishonest or sinister purpose." Agency o n Aging for South Central Connecticut v. Executive Risk Specialty Insurance, No. C V 0 9 5 0 2 7 3 9 9 , 2009 WL 5698248, at *4 (Conn. Super. Ct. Dec. 21, 2009). Thus, the p la in tiff must plead additional factual allegations beyond the facts supporting a b re a c h of contract claim in order to state a claim for breach of the covenant of g o o d faith and fair dealing. See id. at *5. Here, Ensign alleges that Lloyds and Saperstein refused to process Ensign's c la im and denied the claim without providing any reason for the denial, which is e s s e n tia lly the basis of Ensign's breach of contract claims. However, Ensign fu rth e r alleges that Lloyds and Saperstein were not properly licensed to conduct

Lloyds also argues that Ensign's claim that Lloyds was not properly licensed in Connecticut is patently untrue, because, at all times relevant to this case, Lloyds was duly listed as an insurer in the records of Connecticut's Insurance Department. See Lloyds' Motion to Dismiss, Ex. A. However, the records attached by Lloyds are effective as of January 13, 2009. Lloyds does not attach records demonstrating that it was licensed in Connecticut during the time of the events giving rise to this action. Since the Court must accept the allegations in Ensign's Amended Complaint as true for purposes of a motion to dismiss, the Court cannot dismiss Ensign's claims on this basis. 24

5

the business of insurance in Connecticut, and that they intentionally concealed th is fact from Ensign. These additional allegations amount to more than a mere d e n ia l of the claim. If proven true, they may support an inference that Lloyds and S a p e rs te in were motivated by a dishonest purpose to conceal the fact that they w e re issuing insurance policies in Connecticut without obtaining the proper lic e n s e s . See e.g., Bates v. Utica Mutual Insurance Co., No. CV020088925S, 2003 W L 21327656, at *2 (Conn. Super. Ct. May 29, 2003) (denying motion to strike b re a c h of the covenant of good faith and fair dealing claim where plaintiff alleged th a t insurance company refused to issue voluntary agreements and failed to make p a ym e n ts after acknowledging in writing that plaintiff's claims were compensable a n d agreeing at a hearing to make the payments). Therefore, the Court will not d is m is s Ensign's claims against Lloyds and Saperstein for breach of the covenant o f good faith and fair dealing. F. Bad Faith E n s ig n also asserts bad faith claims against Lloyds and Saperstein. In s u p p o rt of these claims, Ensign alleges that Lloyds and Saperstein intentionally c o n c e a le d from Ensign that they were not duly authorized to conduct the business o f insurance in Connecticut and that they would not honor claims presented under th e insurance policies obtained by Arrigoni to cover transport of the Yacht. As an initial matter, the Court notes that Ensign's bad faith claims are s im ila r, but distinct from, its claims alleging breach of the covenant of good faith a n d fair dealing. See Michalek v. Allstate Ins. Co., No. CV075008280, 2008 WL 2 8 3 9 4 5 , at *4 (Conn. Super. Ct. Jan. 18, 2008). As discussed above, bad faith "is a

25

necessary, but insufficient condition for a breach of the covenant of good faith and fa ir dealing." Id. Bad faith is also separately recognized as a tort claim in C o n n e c tic u t. See Bergen v. Standard Fire Ins. Co., No. CV 93044099S, 1997 WL 8 0 9 9 5 7 , at *15 (Conn. Super. Ct. Dec. 31, 1997). Where, as here, the plaintiff alleges unreasonable withholding of payment on a n insurance policy, in order to prove bad faith the plaintiff must show "a reckless in d iffe re n c e to the rights of the insured[;] egregious conduct is required." Id. "[A] fin d in g of bad faith cannot be based on a simple breach of contract." Id. Instead, th e plaintiff "must show that there is no reasonable basis to have denied the claim a n d that the insurer knew this to be the case[.]" Id. The reason for this re q u ire m e n t is that insurers "have the right to fairly dispute a claim made under the p o lic y." Id. Here, Ensign alleges that Lloyds and Saperstein refused to process Ensign's c la im and denied the claim without providing any reason for the denial. Ensign fu rth e r alleges that Lloyds and Saperstein were not licensed insurance companies in Connecticut, and that they intentionally concealed this fact from Ensign. If p ro v e n , these allegations may support an inference that Lloyds and Saperstein d e n ie d Ensign's claim because they were not authorized to conduct the business o f insurance in Connecticut, and not because they had a reasonable basis for d e n yin g Ensign's claim under the policies. While Lloyds and Saperstein may well h a v e had a reasonable basis for denying Ensign's claim, the pleadings do not c o n ta in any facts elucidating the reason for the denial, and therefore Ensign's bad fa ith claims must survive the motions to dismiss.

26

G. Fraud E n s ig n next asserts fraud claims against Lloyds and Saperstein, alleging th a t these Defendants fraudulently concealed from Ensign that they were not p ro p e rly licensed to conduct the business of insurance in Connecticut and that th e y would not honor insurance claims presented to them. Lloyds and Saperstein m o ve to dismiss these claims on the basis that Ensign has failed to plead fraud w ith particularity as required by Fed. R. Civ. P. 9. T h e elements of a cause of action for fraud are: "(1) a false representation w a s made as a statement of fact; (2) the statement was untrue and known to be so b y its maker; (3) the statement was made with the intent of inducing reliance th e re o n ; and (4) the party relied on the statement to his detriment." Muller v. M u lle r, 43 Conn. App. 327, 337-38 (1996). "Usually, mere nondisclosure does not a m o u n t to fraud . . . Nondisclosure may, however, amount to fraud when there is a fa ilu re to disclose known facts under circumstances that impose a duty to speak . . ." Dockter v. Slowik, 91 Conn. App. 448, 458 (2005). Pursuant to Fed. R. Civ. P. 9(b), "In alleging fraud or mistake, a party must s ta te with particularity the circumstances constituting fraud or mistake." "To s a tis fy this requirement, a plaintiff should specify the time, place, speaker, and c o n te n t of the alleged misrepresentations. In addition, the complaint should e x p la in how the misrepresentations were fraudulent and plead those events which g iv e rise to a strong inference that the defendant had an intent to defraud, k n o w le d g e of the falsity, or a reckless disregard for the truth." Caputo v. Pfizer, In c ., 267 F.3d 181, 191 (2d Cir. 2001) (citations omitted).

27

The Court concludes that Ensign has failed to plead fraud with the p a rtic u la rity required by Fed. R. Civ. P. 9(b). Ensign merely alleges in conclusory fa s h io n that Lloyds and Saperstein fraudulently concealed from Ensign the fact th a t they were not properly licensed to conduct the business of insurance in C o n n e c tic u t and that they would not honor insurance claims presented to them. The Amended Complaint fails to specify the time, place, speaker and content of any a lle g e d misrepresentations made by Lloyds or Saperstein, and neglects to explain h o w the alleged misrepresentations were fraudulent. Nor does the Amended C o m p la in t allege a single specific instance in which Lloyds or Saperstein had a d u ty to disclose any information to Ensign, but failed to do so. Ensign's o p p o s itio n to the motions to dismiss is similarly devoid of any explanation as to h o w it has satisfied the requirements of Fed. R. Civ. P. 9(b). Consequently, E n s ig n 's fraud claims against Lloyds and Saperstein are dismissed. See Eternity G lo b a l Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168, 187 (2d C ir. 2004) (dismissing fraud claim because plaintiff's complaint lacked " p a rtic u la riz e d facts to support the inference that the defendants acted recklessly o r with fraudulent intent," and explaining that "conclusory allegations do not s a tis fy Rule 9(b)"). H. CUIPA and CUTPA E n s ig n also asserts claims against Lloyds and Saperstein for breach of C U IP A and CUTPA. With respect to the CUIPA claims, Lloyds and Saperstein c o rre c tly argue that CUIPA does not provide a private right of action. See Lander v. H a rtfo rd Life & Ann. Ins. Co., 251 F.3d 101, 118 (2d Cir. 2001) ("Although not yet

28

conclusively decided by the Connecticut Supreme Court, most federal and C o n n e c tic u t state courts have determined that [CUIPA] does not provide a private rig h t of action."). However, the Connecticut Supreme Court has recognized "the e x is te n c e of a private cause of action under CUTPA to enforce alleged CUIPA v io la tio n s ," a so-called "CUIPA through CUTPA" claim. See Mead v. Burns, 199 C o n n . 651, 662-63 (1986). Ensign alleges that Lloyds and Saperstein violated two sections of CUIPA. First, Ensign claims that Lloyds and Saperstein violated Conn. Gen. Stat. § 38a8 1 6 (1 ), which prohibits "misrepresentations and false advertising of insurance p o lic ie s ." In order to succeed on a "CUIPA through CUTPA" claim under this s e c tio n , "the plaintiff must allege and prove the four established elements of a n e g lig e n t misrepresentation claim: (1) the defendant made a misrepresentation of fa c t; (2) which the defendant knew or should have known was untrue; (3) the p la in tiff reasonably relied on the misrepresentation; and (4) the plaintiff suffered p e c u n ia ry harm as a result of the misrepresentation." See Active Ventilation P ro d u c ts , Inc. v. Property & Casualty Ins. Co. of Hartford, No. X09CV085023757, 2 0 0 9 WL 2506360, at *2 (Conn. Super. Ct. July 15, 2009). Second, Ensign claims that Lloyds and Saperstein violated Conn. Gen. Stat. § 38a-816(6), which prohibits "unfair claim settlement practices" that are performed " w ith such frequency as to indicate a general business practice[.]" In order to e s ta b lis h a "CUIPA through CUTPA" claim under this section, the plaintiff must s h o w "more than a single act of insurance misconduct." Mead, 199 Conn. at 659. "[A] CUTPA claim based on an alleged unfair claim settlement practice prohibited

29

by § 38a-816(6) require[s] proof, as under CUIPA, that the unfair settlement practice h a [s ] been committed or performed by the defendant with such frequency as to in d ic a te a general business practice." Lees v. Middlesex Ins. Co., 229 Conn. 842, 8 5 0 (1994) (internal quotation marks omitted). "In requiring proof that the insurer h a s engaged in unfair claim settlement practices `with such frequency as to in d ic a te a general business practice,' the legislature has manifested a clear intent to exempt from coverage under CUIPA isolated instances of insurer misconduct." Id. at 849. Lloyds argues that a "CUIPA through CUTPA" claim cannot be brought by " th ird parties" to an insurance contract such as Ensign. However, Ensign alleges th a t it is a third party beneficiary to the insurance agreement between Arrigoni and L lo yd s /S a p e rs te in , not merely a third party claimant. As discussed above, "[a] third p a rty beneficiary may enforce a contractual obligation without being in privity with th e actual parties to the contract." Gateway, 232 Conn. at 230-31. This is because b o th parties to the contract intended that the promisor "would assume a direct o b lig a tio n to the third party [beneficiary]." Pelletier, 264 Conn. At 531. In addition, th e promisor owes a duty of good faith and fair dealing to a third party beneficiary. See DiNuzzo, 2004 WL 2943293, at *2. Where, as here, it is plausibly alleged that the p la in tiff is a third party beneficiary to an insurance contract and thus that the in s u re r has assumed a direct obligation to the plaintiff, the Court believes that the p la in tiff should be able to assert a CUIPA through CUTPA claim against the insurer fo r unfair settlement practices. See, e.g., Cirrito v. Crawford & Co., No. C V 0 1 0 4 5 6 0 5 2 S , 2002 WL 31939119, at *6-*7 (Conn. Super. Ct. Dec. 24, 2002)

30

(denying motion to strike CUIPA through CUTPA claim brought by third-party b e n e fic ia ry to insurance contract). The Connecticut Appellate Court case cited by L lo yd s , Carford v. Empire Fire and Marine Ins. Co., 94 Conn. App. 41 (2005), is in a p p o s ite because the plaintiff in that case was not a third party beneficiary of the in s u ra n c e contract at issue. See id. at 52 (holding that plaintiff injured in an a u to m o b ile accident could not assert CUIPA through CUTPA claim against insurer o f other driver absent subrogation or a judicial determination in plaintiff's favor a g a in s t the insured). Saperstein presents three additional reasons why Ensign's CUIPA and C U T P A claims should be dismissed: first, the claims simply assert "professional n e g lig e n c e ; " second, Ensign fails to plead facts sufficient to demonstrate corrupt, im m o ra l and/or unscrupulous behavior on the part of Saperstein; and third, Ensign h a s not pleaded that the unfair claim settlement practices alleged rise to the level of a general business practice. The Court is unpersuaded by Saperstein's first two arguments. Ensign a lle g e s that Lloyds and Saperstein engaged in misrepresentation under Conn. Gen. S ta t. § 38a-816(1) by "misrepresenting the benefits, advantages, conditions and te rm s of the policy." Ensign further alleges that Lloyds and Saperstein conducted u n fa ir settlement practices in violation of Conn. Gen. Stat. § 38a-816(6) by, inter a lia ," m is re p re s e n tin g coverage provisions in the policy;" "failing to acknowledge a n d act with reasonable promptness upon [Ensign's] claims under the policy and fa ilin g to pay [Ensign's] claim promptly;" "failing to adopt and implement re a s o n a b le standards for the prompt investigation of" Ensign's claim; "refusing to

31

pay [Ensign's] claim promptly;" "failing to affirm or deny coverage of [Ensign's] c la im within a reasonable time after proof of loss" was provided; "failing to e ffe c tu a te a prompt, fair and equitable settlement of [Ensign's] claim in good faith;" " fo rc in g [Ensign] to institute litigation to recover amounts due under the policy by fa ilin g to offer compensation;" "misrepresenting that they were authorized to issue in s u ra n c e policies to entities in Connecticut and/or in any jurisdiction;" and " in s tru c tin g defendant Arrigoni not to cooperate and/or assist in the submission a n d adjustment of [Ensign's] claim." Am. Compl. ¶¶ 92, 102. The factual allegations in the Amended Complaint suggest that Lloyds and Saperstein falsely represented to Ensign that it was sufficiently insured for the risk of damage to the Yacht during tra n s p o rt by Arrigoni, and that these Defendants subsequently stonewalled Ensign w h e n it submitted its claim by refusing to deal with the public adjuster it had re ta in e d and denying its claim without providing any reason for the denial. If p ro ve n true, these allegations would rise beyond the level of "professional n e g lig e n c e ," and could in fact constitute a violation of CUIPA.6

Conn. Gen. Stat. § 38a-816(1) prohibits "misrepresentations and false advertising of insurance policies," including, inter alia, misrepresentations regarding "the benefits, advantages, conditions or terms of any insurance policy[.]" Conn. Gen. Stat. § 38a-816(6) prohibits "unfair claim settlement practices," including, inter alia, "misrepresenting pertinent facts or insurance policy provisions relating to coverages at issues;" "failing to acknowledge and act with reasonable promptness upon communications with respect to claims arising under insurance policies;" "failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;" "refusing to pay claims without conducting a reasonable investigation based upon all available information;" "not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear;" and "compelling insureds to institute litigation to recover amounts due under an insurance policy." 32

6

With respect to Saperstein's third argument, the Court notes as an initial m a tte r that this argument applies only to Ensign's claims for unfair settlement p ra c tic e s under Conn. Gen. Stat. § 38a-816(6), which require proof that the unfair s e ttle m e n t practices alleged were committed with "such frequency as to indicate an a general business practice." Conn. Gen. Stat. § 38a-816(6); see also Lees, 229 C o n n . at 850. This argument does not apply to Ensign's claims for m is re p re s e n ta tio n of insurance policies under Conn. Gen. Stat. § 38a-816(1), which d o not require a showing that the misrepresentations alleged rose to the level of a g e n e ra l business practice. Ensign has alleged that the above-described unfair claim settlement p ra c tic e s were committed by Lloyds and Saperstein as part of their general b u s in e s s practice in that they sold similar or identical insurance policies to other C o n n e c tic u t residents with the intention of avoiding coverage on similar grounds. See Am. Compl. ¶¶ 93, 103. However, the Amended Complaint asserts facts relating o n ly to Ensign's insurance claim against Lloyds and Saperstein, and does not id e n tify any other specific instances in which these Defendants purportedly e n g a g e d in violations of CUIPA or any other claimants who suffered from similar u n fa ir claim settlement practices. The Court recognizes that there is a split among Connecticut Superior Courts o n the issue of whether an allegation that a complained-of practice constitutes an in s u re r's "general business practice," without specific examples of other instances in which the insurer has engaged in the same practice, is sufficient to state a cause o f action for violation of § 38a-816(6). See Active Ventilation, 2009 WL 2506360, at

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*3-*4. Given the remedial nature of CUTPA and CUIPA, the Court would be inclined to agree with those courts which have held that the allegation of a general business p ra c tic e , unsupported by specific instances of insurer misconduct in other cases, is s u ffic ie n t to withstand a motion to dismiss. However, the applicable pleading s ta n d a rd for this forum requires a complaint to "contain sufficient factual matter, a c c e p te d as true, to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iq b a l, 129 S. Ct. 1937, 1949 (2009). "A pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not do. Nor does a c o m p la in t suffice if it tenders `naked assertion[s]' devoid of `further factual e n h a n c e m e n t.'" Id. Thus, under the Iqbal pleading standard, a mere assertion of a g e n e ra l business practice without anything more is insufficient to sustain Ensign's " C U IP A through CUTPA" claims against Lloyds and Saperstein for violation of C o n n . Gen. Stat. § 38a-816(6). Accordingly, the Court dismisses these claims. Ensign's "CUIPA through CUTPA" claims against Lloyds and Saperstein for m is re p re s e n ta tio n under Conn. Gen. Stat. § 38a-816(1) shall go forward, as Ensign h a s pleaded facts sufficient to state a cause of action for negligent m is re p re s e n ta tio n .7 See Active Ventilation, 2009 WL 2506360, at *2 (explaining that a plaintiff must plead and prove the elements of a negligent misrepresentation claim to succeed on a cause of action under § 38a-816(1)).

The Court notes that the heightened pleading standard set forth in Fed. R. Civ. P. 9(b) does not apply to claims for negligent misrepresentation under Connecticut law. See DeNuzzo v. Yale New Haven Hospital, 465 F. Supp. 2d 148, 154 n.2 (D. Conn. 2006); IM Partners v. Debit Direct Ltd., 394 F. Supp. 2d 503, 521 n.12 (D. Conn. 2005). 34

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I. Tortious Interference with Contract E n s ig n next asserts a claim for tortious interference with contract against Saperstein. In support of this claim, Ensign alleges that Saperstein interfered with E n s ig n 's agreement with Arrigoni by instructing Arrigoni not to cooperate with E n s ig n until Ensign paid Arrigoni the remaining money due for transport of the Y a c h t. "A claim for intentional interference with contractual relations requires the p la in tiff to establish: (1) the existence of a contractual or beneficial relationship; (2) th e defendant's knowledge of that relationship; (3) the defendant's intent to in te rfe re with that relationship; (4) that the interference was tortious; and (5) a loss s u ffe re d by the plaintiff which was caused by the defendant's tortious conduct." The Court concludes that Ensign has stated a cause of action for tortious in te rfe re n c e with contract. Ensign alleges that it had a contract with Arrigoni re q u irin g Arrigoni to obtain proper insurance and thereafter, if necessary, to assist in submitting any insurance claims that may arise. Ensign further claims that S a p e rs te in advised Arrigoni not to cooperate with the submission of Ensign's claim fo r damages to the Yacht until Ensign paid Arrigoni in full for the Yacht's transport. Ensign alleges that, as a result of Saperstein's interference, Ensign sustained d a m a g e s in the amount of $700,000. Saperstein contends that this claim must be dismissed because Ensign fails to explain how Saperstein's conduct was tortious. However, Ensign's Amended C o m p la in t describes a course of conduct by Saperstein to conceal from Ensign that it was not properly licensed to issue insurance policies in Connecticut and to deny E n s ig n 's claim without justification. Saperstein's instruction to Arrigoni advising

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him not to cooperate with