Kim et al v. State Farm Fire & Casualty Co
Filing
27
ORDER granting Defendant's 17 Motion to Dismiss. For the reasons stated in the attached memorandum of decision, Counts II and III of the Complaint are DISMISSED. Count I is the sole live count remaining in the Complaint. Signed by Judge Vanessa L. Bryant on 10/30/2015. (Nadler, S.)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
GUENG-HO KIM AND JAE KIM
Plaintiffs,
:
:
:
v.
:
:
STATE FARM FIRE AND CASUALTY :
COMPANY
:
Defendant.
:
CIVIL ACTION NO.
3:15-cv-879 (VLB)
October 30, 2015
MEMORANDUM OF DECISION GRANTING DEFENDANT STATE FARM CASUALTY
COMPANY’S MOTION TO DISMISS [Dkt. #17]
Plaintiffs Gueng-Ho Kim and Jae Kim bring claims for breach of contract,
breach of the implied covenant of good faith and fair dealing, and claims under
CUTPA , through CUIPA, against Defendant State Farm Fire and Casualty
Company (“State Farm”). For the reasons that follow, State Farm’s Motion to
Dismiss Counts II and III of the Complaint is GRANTED.
I.
Background
In July 2004, Plaintiffs purchased a residence located at 121 Windshire
Drive, South Windsor, Connecticut. [Dkt. #1, Compl. at ¶ 4]. The home was built
in 1984. [Id.]. In late June of 2014, a prospective buyer of the home noticed a
series of horizontal and vertical cracks throughout the basement walls. [Id. at ¶
8]. Upon learning of this, Plaintiffs hired a local engineer, who determined that
the basement walls suffered from “pattern cracking” due to a chemical
compound contained in a particular brand of concrete used in the late 1980’s and
early 1990’s. [Id. at ¶ 10]. Plaintiffs contend that this cracking is irreversible, and
that it is “only a question of time until the basement walls . . . will fall in due to the
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exterior pressure from the surrounding soil.” [Id. at ¶ 14]. When this occurs, the
entire home will fall into the basement. [Id. at ¶ 15].
At the time of the purchase, and at all times thereafter, Plaintiffs held a
homeowners insurance policy issued by Defendant State Farm. [Id. at ¶ 5]. The
policy was automatically renewed by State Farm each year. [Id. at ¶ 6]. On or
about July 7, 2014, Plaintiffs submitted to State Farm a claim for coverage. [Id. at
¶ 24].1 Plaintiffs have attached to their Complaint the relevant policy, covering
the period of 2013-14 (the “Policy”). See [Dkt. #1-1, Ex. A to Compl.].
The Policy defines an “occurrence” as “an accident, including exposure to
conditions, which results in . . . property damage during the policy period.” [Id. at
2, ¶ 7]. “[P]roperty damage” is defined as “physical damage to or destruction of
tangible property, including loss of use of th[e] property.” [Id. at ¶ 8]. Section I of
the Policy contains a list of exclusions of coverage for damage to the insured
“dwelling.” See [id. at 9]. In this section, the Policy explains that State Farm
does “not insure for any loss . . . which consists of, or is directly and immediately
caused by . . . freezing, thawing, pressure, or weight of water or ice . . . wear, tear,
marring, scratching, deterioration, inherent vice, latent defect or mechanical
breakdown . . . settling, cracking, shrinking, bulging, or expansion of pavements,
patios, foundation, walls, floors, roofs, or ceilings . . . regardless of whether the
loss occurs suddenly or gradually, [or] involves isolated or widespread damage .
. . .” [Id. at ¶¶ 1, 1.c.,g.l.]. The Policy further excludes losses caused “directly or
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Although the Complaint states that the claim was submitted on or about “July 7,
2015,” given that the Complaint was filed on June 9, 2015, and it was State
Farm’s denial of the claim which prompted this suit, the Court assumes for
purposes of this motion that the claim was submitted on July 7, 2014. [Dkt. #1,
Compl. at ¶¶ 18, 24].
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indirectly” by defect, weakness, inadequacy, fault or unsoundness in . . .
planning, zoning, development, surveying, siting . . . design, specifications,
workmanship, construction, grading, [and] compaction.” [Id. at 10-11, ¶¶ 3,
3.b.(1)-(2)]. Finally, the Policy imposes a duty on the insured to “give immediate
notice” after a loss, and provides that it “applies only to loss . . . which occurs
during the period this policy is in effect.” [Id. at 13, ¶ 2.a., 19, ¶ 1].
On March 16, 2015, State Farm sent Plaintiffs a letter denying their claim.
See [Dkt. #1-2, Ex. B]. The letter began by quoting several sections of the Policy.
See [id. at 1-10]. The letter then gave six reasons for the denial of the claim.
First, the letter stated that, “upon State Farm’s investigation, it has confirmed that
you are seeking coverage for settling, cracking, bulging or expansion of the
foundation and/or walls of the Premises.” [Id. at 10]. It then paraphrased several
exclusions which were quoted earlier to support State Farm’s contention that
such losses are “expressly exclude[d]” from coverage. [Id. at 11]. Second, the
letter informed Plaintiff that the damage “arose from inherent defects in the
concrete and not the result of an extraneous or external cause,” and the Policy
does not cover losses “caused by wear and tear, latent defect or breakdown, and
settling and resultant cracking.” [Id.]. Third, the letter stated that the losses
themselves consisted of or were “directly and immediately caused by wear, tear,
marring, scratching, deterioration, inherent vice, latent defect, or mechanical
breakdown,” all conditions which were expressly excluded under the Policy. [Id.].
Fourth, State Farm contended that the damage claim accrued “prior to the
inception of coverage with State Farm,” and thus, the damage was not covered.
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[Id.]. State Farm reached this conclusion by pointing to testimony from one of
the Plaintiffs, who allegedly stated that he “was aware of the cracking . . . prior to
the purchase of the Premises” and thus, “outside the policy period.” [Id.].2 Fifth,
and relatedly, State Farm asserted that Plaintiffs had failed to satisfy their duty to
“give immediate notice to State Farm” regarding the loss. [Id.]. Finally, State
Farm quoted language from two earlier policies, which held that any “action must
be started within one year after the date of loss or damage.” [Id. at 11-12]. State
Farm further explained that “[t]he referenced policies contain other provisions for
limiting or precluding coverage which may become implicated for reasons not
now foreseen or because of the discovery of information not currently known to
State Farm,” and State Farm expressly “reserve[]d the right to supplement or
amend the basis for its decision regarding coverage.” [Id. at 12].
II.
Legal Standard
“To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to state a claim to relief that is plausible on its
face.” Sarmiento v. U.S., 678 F.3d 147, 152 (2d Cir. 2012)(quoting Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009)). While Rule 8 does not require detailed factual
allegations, “[a] pleading that offers ‘labels and conclusions’ or ‘formulaic
recitation of the elements of a cause of action will not do.’ Nor does a complaint
suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’”
Iqbal, 556 U.S. 662, 678 (2009) (citations omitted). “Where a complaint pleads
facts that are ‘merely consistent with’ a defendant's liability, it stops short of the
2
The letter does not identify the proceeding or context in which “Mr. Kim
testified, under oath.” [Dkt. #1-2, Ex. B at 12].
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line between possibility and plausibility of ‘entitlement to relief.’” Id. (quoting Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007)). “A claim has facial plausibility
when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Id.
(internal citations omitted).
In general, the Court’s review on a motion to dismiss pursuant to Rule
12(b)(6) “is limited to the facts as asserted within the four corners of the
complaint, the documents attached to the complaint as exhibits, and any
documents incorporated by reference.” McCarthy v. Dun & Bradstreet Corp., 482
F.3d 184, 191 (2d Cir. 2007).
III.
Analysis
A.
Count II Fails to State a Claim
State Farm moves to dismiss Count II of the Complaint, which brings a
claim for breach of the covenant of good faith and fair dealing, because the
allegations in the Complaint, which include the Policy and denial letter State Farm
sent Plaintiffs, do not adequately allege that the Defendant acted in bad faith.
[Dkt. #5, Def.’s Memo. of Law in Supp. of Mot. to Dismiss at 5]. The Court agrees.
“The implied covenant of good faith and fair dealing has been applied . . . in
a variety of contractual relationships, including . . . insurance contracts.”
Verrastro v. Middlesex Ins. Co., 207 Conn. 179, 190, 540 A.2d 693, 699 (Conn.
1988) (citations and quotations omitted). “The concept of good faith and fair
dealing is . . . a rule of construction designed to fulfill the reasonable
expectations of the contracting parties as they presumably intended.” Id. To set
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forth a claim for breach of the implied duty of good faith and fair dealing,
Plaintiffs must plead that: (1) they and the Defendant were parties to a contract
under which they reasonably expected to receive certain benefits; (2) that the
Defendant engaged in conduct that injured the Plaintiffs’ right to receive some or
all of those benefits; and (3) that when committing the injurious acts, the
Defendant was acting in bad faith. Jazlowiecki v. Nationwide Ins. Co. of Am., No.
CV 126036618S, 2014 WL 279600, at *2 (Conn. Super. Ct. Jan. 3, 2014); see also
De La Concha of Hartford, Inc. v. Aetna Life Ins. Co., 269 Conn. 424, 433, 849 A.2d
382, 388 (Conn. 2004) (“To constitute a breach of the implied covenant of good
faith and fair dealing, the acts by which a defendant allegedly impedes the
plaintiff’s right . . . must have been taken in bad faith.”) (citations and quotations
omitted). “Bad faith in general implies both actual or constructive fraud, or a
design to mislead or deceive another, or a neglect or refusal to fulfill some duty
or some contractual obligation, not prompted by an honest mistake as to one’s
rights or duties, but by some interested or sinister motive . . . Bad faith means
more than mere negligence; it involves a dishonest purpose.” De La Concha, 269
Conn. at 433, 849 A.2d at 388 (quoting Habetz v. Condon, 224 Conn. 231, 237, 618
A.2d 501 (Conn. 1992)).
In support of their claim, Plaintiffs allege that “State Farm intentionally
cited policy exclusions wholly inapplicable to the Kims’ claim for coverage” with
the intent “to mislead the Kims and convince them that the damage suffered to
their home was not covered.” [Dkt. #1, Compl. at ¶¶ 26-27]. Plaintiffs’ claim fails
for at least two reasons.
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First, the provisions of the Policy cited by the Defendants in the denial
letter to support their denial of coverage are not “wholly inapplicable,” as
Plaintiffs contend. [Id. at ¶ 25]. To the contrary, the letter quoted and applied
language from several sections of the Policy which appears to be directly
applicable to the Plaintiffs’ claim for “pattern cracking” in their basement walls
due to a chemical compound in the concrete used to construct them. [Dkt. #1,
Compl. at ¶¶ 10-11]. The cited provisions include: (i) exclusions as to “wear, tear,
marring, scratching, deterioration, inherent vice, latent defect or mechanical
breakdown . . . settling, cracking, shrinking, bulging, or expansion of pavements,
patios, foundation, walls, floors, roofs, or ceilings,” (emphasis added) [Dkt. #1-1,
Ex. A to Compl. at 9, ¶¶ 1, 1 g., l. (emphasis added)]; (ii) exclusions of losses
caused “directly or indirectly” by defect, weakness, inadequacy, fault or
unsoundness in . . . planning, zoning, development, surveying, siting . . . design,
specifications, workmanship, construction, grading, [and] compaction,”
(emphasis added) [id. at 10-11, ¶¶ 3, 3.b.(1)-(2) (emphasis added)]; (iii) noncoverage for failure to comply with the Policy’s notice requirement, [id. at 13, ¶
2.a.]; and (iv) non-coverage for losses that occurred outside the stated time
period of the Policy. [Id. at 19, ¶ 1].
Not only did the letter quote these provisions, but it specifically explained
why State Farm believed that they were applicable to Plaintiffs’ claim. See [Dkt.
#1-2, Ex. B at 10-12]. State Farm explained that the type, cause, and timing of the
damage precluded coverage under the Policy. [Id. at 10-11]. It also contended
that Plaintiffs failed to comply with their duty to timely notify State Farm and file
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their claim. [Id. at 11-12]. The explanations provided in the letter are facially
plausible, in light of the terms of the Policy, and the Complaint offers no
explanation or support for Plaintiffs’ contention otherwise. Moreover, while the
letter also quoted other portions of the Policy without applying them to Plaintiffs’
claim, this does not, in itself, mean that such provisions are inapplicable. Indeed,
some of the portions quoted and not relied upon in the letter would appear to be
directly relevant to Plaintiffs’ claim. Compare [Dkt. #1-2, Ex. B at 2 (quoting
language stating that the Policy covers only the “entire collapse of a building or
any part of a building” and that “[c]ollapse means actually fallen down or fallen
into pieces. It does not include settling, cracking, shrinking, bulging, expansion
sagging or bowing”); 4 (quoting language stating that losses “directly or
indirectly cause[d]” by “material used in construction” are not covered)
(emphasis added)] with [Dkt. #1, Compl. at ¶¶ 10-11, 14-15 (stating that basement
walls are presently suffering from “pattern cracking” due to “a chemical
compound” present in concrete used to build them and alleging that it “is only a
question of time” when the walls “will fall into the basement”) (emphasis added)].
In the letter, State Farm expressly stated that, in providing its six bases for denial,
State Farm was not limiting itself to these grounds, and instead, “reserve[]d the
right to supplement or amend the basis for its decision regarding coverage.”
[Dkt. #1-2, Ex. B at 12].
Second, there was nothing misleading about State Farm’s letter. The letter
quoted and applied several sections of the policy in a clear and straightforward
manner, while raising other apparently applicable sections which State Farm
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might choose to rely upon at a later point. That Plaintiffs disagree with
Defendant’s belief that these provisions of the Policy bar coverage does not
evince bad faith sufficient to support a breach of the implied duty of good faith
and fair dealing, or to otherwise suggest that the Defendant acted in “an arbitrary
and unfounded” manner. [Dkt. #20, Pl.’s Opp. at 5]; see also Uberti v. Lincoln
Nat’l Life Ins. Co., 144 F. Supp. 2d 90, 103 (D. Conn. 2001) (“[E]vidence of a mere
coverage dispute . . . will not demonstrate a breach of good faith and fair
dealing.”). Accordingly, Count II of the Complaint is DISMISSED.
B.
Count III Fails to State a Claim
Count III brings claims under CUTPA, through CUIPA, based on the failure
of the Defendant “to effectuate prompt, fair and equitable settlement of the Kims’
claim by failing to provide coverage despite the lack of an applicable policy
exclusion.” [Dkt. #1 Compl. at ¶ 34]. Plaintiffs further contend that “it is the
general business practice of State Farm to wrongfully deny coverage by relying
upon inapplicable policy exclusions.” [Id. at ¶ 35]. Together, Plaintiffs assert that
these allegations make out a claim under § 38a-816(g)(F) of CUIPA through
CUTPA. Plaintiffs are incorrect.
A plaintiff may bring “a private cause of action under CUTPA to enforce
alleged CUIPA violations.” Mead v. Burns, 199 Conn. 651, 663, 509 A.2d 11, 18
(Conn. 1986). CUIPA identifies and prohibits a number of “unfair methods of
competition and unfair and deceptive acts or practices in the business of
insurance.” Conn. Gen. Stat. § 38a-316. Among these are “[u]nfair claim
settlement practices” such as “not attempting in good faith to effectuate prompt,
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fair and equitable settlements of claims in which liability has become reasonably
clear.” Id. at § 38a-316(6)(F). In order to bring a claim under this portion of
CUIPA, Plaintiffs must allege facts showing “that the unfair settlement practice
was committed or performed with such frequency as to indicate a general
business practice.” McCulloch v. Hartford Life & Acc. Ins. Co., 363 F. Supp. 2d
169, 182 (D. Conn. 2005). Moreover, “[u]nder CU[TP]A as under CUIPA, ‘isolated
instances of unfair insurance settlement practices’ are not cognizable.” Craig v.
Colonial Penn Ins. Co., 335 F. Supp. 2d 296, 308 (D. Conn. 2004) (quoting Mead,
199 Conn. at 666).
While Plaintiffs recognize the need to plead a general business practice,
they contend that “the issue of the frequency with which the defendants engaged
in the insurance practices complained of is a more appropriate area for discovery
than pleading” and that “conclusory allegations of [a] ‘general business
practice’” suffice “for purposes of permitting discovery.” [Dkt. #20 Pls.’ Opp. at
8-9].
Plaintiffs are correct that information regarding a company’s general
business practices is “peculiarly within the possession and control of the
[company],” such that they may plead facts on the basis of information and
belief. Artisa Records LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir. 2010). However,
they still must plead enough facts to permit for the reasonable inference that “the
unfair insurance practice occurred with enough frequency for it to be deemed a
‘general business practice.’” Alqamus v. Pac. Specialty Ins. Co., No. 3:14-cv00550 (VAB), 2015 WL 5722722, at *3 (D. Conn. Sept. 29, 2015) (quoting Bacewicz
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v. NGM Ins. Co., No. 3:08-cv-1530, 2009 WL 1929098, at *2 (D. Conn. Jun. 30,
2009); see also Ensign Yachts, Inc. v. Arrigoni, No. 3:09-cv-209 (VLB), 2010 WL
918107, at *7 (D. Conn. Mar. 11, 2010) (“[U]nder the Iqbal pleading standard, a
mere assertion of general business practice without anything more is insufficient
to sustain [plaintiff’s] ‘CUIPA through CUTPA’ claims against [defendants] for
violation of Conn. Gen. Stat. § 38a-816(6).”).
Here, Plaintiffs rely on one instance of wrongful conduct, the denial of their
claim at issue in this litigation. They fail to allege any pattern of wrongful
conduct, either with respect to their claim or those of others. Cf. Guillory v.
Allstate Ins. Co., 476 F. Supp. 2d 171, 175 (D. Conn. 2007) (pre-Twombly/Iqbal pro
se complaint alleging multiple instances of delay, including that insurer gave
plaintiff “no notice of his hearing” and failed to respond to multiple phone calls
from plaintiff); Karas v. Liberty Ins. Corp., 33 F. Supp. 3d 110, 117 (D. Conn. 2014)
(finding complaint plausibly alleged a general business practice where it alleged
that insurer “refused to provide coverage in at least three separate instances
involving other homeowners experiencing the same damages caused by the
same mechanism and involving policy language identical to that in the [plaintiffs’]
policy”).
Equally inapposite are the two Connecticut cases to which Plaintiffs cite.
The first, Active Ventilation Prods., Inc. v. Prop. & Cas. Ins. Co. of Hartford, No.
CV 085203757, 2009 WL 2506360, (Conn. Super. Ct. Jul. 15, 2009), is
distinguishable on its facts. Id. at *1 (finding allegations that plaintiff timely
submitted multiple claims, “for losses due to [] fire” and for “thefts of equipment,
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materials, and product discovered in the course of cleanup and salvage
operation” and defendant failed to take a position on any of them stated a CUTPA
through CUIPA claim). The second case, Jones v. Standard Fire Ins. Co., No. CV
116004270S, 2013 WL 541015 (Conn. Super. Ct. Jan. 11, 2013), while very similar
to the present matter, has been distinguished by other courts in this District
because it “applied the Connecticut pleading standard, rather than the standard
announced in Iqbal and Twombly, which requires more than the bare conclusory
allegations accepted by the state court[] . . . .” Panciera v. Kemper Independence
Ins. Co., No. 3:13-cv-1009 (JBA), 2014 WL 1690387, at *5 (D. Conn. Apr. 29, 2014).
Plaintiffs’ bare allegation of a general business practice is insufficient to
state a claim, and accordingly, Count III of the Complaint is DISMISSED.
IV.
Conclusion
For the foregoing reasons, Defendant State Farm’s Motion to Dismiss is
GRANTED. Count I is the sole live count remaining in the Complaint.
IT IS SO ORDERED, ADJUDGED AND DECREED, this 30th day of October
2015, Hartford, Connecticut
_________/s/______________
Vanessa L. Bryant,
United States District Judge
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