Welch and Troisi Obtain Pre-Answer Dismissal of Coverage Suit Against an Insurance Company

Rivkin Radler attorneys Mike Welch and Mike Troisi, together with local counsel Reid & Riege, obtained a pre-answer dismissal of a coverage suit brought against our insurance company client in the District Court of Connecticut. Plaintiff, a used car dealership, submitted a claim for a fire loss to its leased property, which occurred on June 8, 2019, including a claim for business interruption. The insurer accepted coverage and issued various payments to the Plaintiff. Plaintiff, however, filed suit against our client believing that it was entitled to additional coverage under the policy. Plaintiff’s suit included causes of action for breach of contract, breach of the covenant of good faith and fair dealing, “bad faith denial of an insurance claim,” and violations of the Connecticut Unfair Trade Practices Act (“CUPTA”) and the Connecticut Unfair Insurance Practices Act (“CUIPA”).

Plaintiff commenced suit against our client on June 17, 2022. We moved pre-answer to dismiss the breach of contract cause of action on the basis that it was time barred by the policy’s two-year suit limitation provision, which required that any action against the insurer be commended within 2 years after the date on which the direct physical loss or damaged occurred. Similarly, we argued that because the breach of the covenant of good faith and fair dealing and “bad faith denial” claims arose under the policy they, too, were time-barred by the two-year suit limitation provision. Additionally, we argued that Plaintiff’s CUPTA/CUIPA cause of action failed to allege, among other things, a general business practice, because Plaintiff merely cited to two unrelated cases where our client had been sued in the past as evidence of a general practice of unfair claim settlement.

District Court Judge Michael Shea agreed with our arguments and dismissed the complaint in its entirety as against our client. Judge Shea held that the policy’s two-year suit limitation provision was unambiguous and applied to Plaintiff’s first party property damage claim. The court rejected Plaintiff’s argument that because other policy coverages contained different suit limitation provisions (one coverage with no time limit and one with a three-year limit), the policy was ambiguous, or the longer limit applied. Importantly, Judge Shea also confirmed prior court rulings, which held that executive tolling orders put in place during the Covid-19 pandemic only applied to statutory and not contractual time limitations. Judge Shea confirmed that contractual suit limitation provisions do not operate as statutes of limitation. The time by which Plaintiff was required to bring suit under the policy was not tolled by the executive orders, and its breach of contract claim was dismissed.

The court’s dismissal of the CUPTA/CUIPA claims is also notable. To plead a CUPTA/CUIPA claim, Plaintiff must allege that the insurer engaged in unfair claim settlement with such frequency as to indicate a general business practice. In its complaint, Plaintiff pointed to two cases in which our client had been sued for coverage denials as evidence of such frequency. Agreeing with our arguments, however, Judge Shea found that one of the cases was too dissimilar to the case at bar to support a general business practice of improper claim denials, because it did not involve unfair settlement practices at all. Although the court found Plaintiff’s second cited case to be “closer to this one,” it, too, did not involve unfair claim settlement practices and the court held, even if it did, the conduct in that case occurred over eleven years prior, which was far too remote “to support a finding that [our client] engaged in unfair settlement practices” ‘with such frequency as to constitute a general business practice.’” While there is no bright line temporal element to unfair claim settlement practices, courts will require plaintiffs to allege unfair practices from similar claims, under similar polices, and which are not too remote in time. Citing cases where the same insurer had also denied coverage will not be enough.

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