Elizabeth O. Hoff, Associate, and Melicent B. Thompson, Partner, at Gfeller Laurie, LLP.
Claims for breach of the covenant of good faith and fair dealing ("common law bad faith") have been appearing more frequently in Connecticut complaints for uninsured/underinsured motorist coverage. Connecticut courts generally have not been receptive, often striking such claims at the pleading stage, especially where they merely describe a dispute over coverage. This is noteworthy given that more recently, some Connecticut courts also have begun applying a less stringent standard for pleading bad faith. Here we discuss this trend and Connecticut courts' treatment of these claims at the pleading stage, demonstrating that carriers are best positioned to avoid common law bad faith claims in the uninsured/underinsured motorist context by employing procedures that ensure timely and thorough investigation and documentation of claims and timely, clear and direct communication with claimants regarding the bases for the insurer's coverage position.
In Connecticut, bad faith requires actual or constructive fraud, a design to mislead or deceive, or a neglect or refusal to fulfill some duty or contractual obligation, not prompted by an honest mistake but by interested or sinister motive. See De La Concha of Hartford, Inc. v. Aetna Life Ins. Co., 269 Conn. 424, 433 (2004). A bad faith claimant must plead three essential elements: (1) plaintiff and defendant were parties to a contract under which plaintiff reasonably expected to receive certain benefits; (2) defendant engaged in conduct that injured plaintiff's right to receive some or all of those benefits; and (3) defendant acted in bad faith. See Tarabek v. Hartford Ins. Co., No. 561153, 2002 WL 31172957, at *2 (Conn. Super. Ct. Aug. 26, 2002).
A split of authority exists at the Connecticut trial court level as to factual allegations sufficient to state the third Tarabek element. The majority view requires specific allegations of dishonest purpose or malice but a growing minority holds that facts from which bad faith may be reasonably inferred suffice. See Hill v. State Farm Mut. Automobile Ins. Co., No. CV176074575S, 2019 WL 3546422 at *3 (Conn. Super. Ct. July 8, 2019); Kowalchuk v. Travelers Pers. Sec. Ins. Co., No. CV116012608, 2014 WL 3397940, at *4 (Conn. Super. Ct. June 4, 2014)(less stringent standard is "more consistent with the… rule that 'bad faith' includes both actual and constructive fraud"). Even under the less stringent standard, a claimant must allege an insurer acted purposefully, not negligently. See Hill at *3; Lherisson v. Progressive Casualty Ins., No. CV190685705, 2020 WL 3485714 at *2 (Conn. Super. Ct. June 5, 2020).
Hill illustrates the described trend and contains useful signposts for carriers seeking to avoid such claims. In Hill, the Court granted State Farm's motion to strike a common law bad faith claim in an underinsured motorist coverage complaint. Hill alleged that State Farm "refused and/or failed despite several repeated requests to make payment in accordance with [the policy]," and that it "acted unreasonably and in bad faith and/or in violation of general business practices in refusing to make a reasonable offer of settlement under the underinsured motorist portion of the Plaintiff's policy." Id. at *1. The Court recognized that claims for common law bad faith increasingly are pled in conjunction with uninsured/underinsured motorist claims and the split of authority regarding how to sufficiently plead the third Tarabek element. The Court concluded that Hill's allegations failed to state a claim for common law bad faith under either pleading standard because Hill did not specifically allege that State Farm acted with a dishonest purpose, that it engaged in a pattern of misconduct rising to the level of bad faith, or other facts from which bad faith could be reasonably inferred. Thus, the Court concluded that "a reasonable inference of sinister motive or dishonest purpose would be attenuated." Id. at *5-6.
Most common law bad faith claims are asserted in underinsured, not uninsured motorist cases, reflecting the dearth of uninsured motorist claim cases generally, likely due to Connecticut's compulsory motor vehicle insurance laws. Courts may be disinclined to strike bad faith claims in the uninsured motorist context because of the complete lack of tortfeasor coverage, in contrast to a mere disagreement over the extent to which underinsured coverage should respond to close a gap in coverage. See, e.g. Mckoy v. LM Ins. Corp., No. NNHCV156054766S, 2015 WL 7269766, at *2 (Conn. Super. Ct. Oct. 21, 2015) (viable bad faith claim as to uninsured motorist benefits where defendant allegedly refused to pay benefits in an effort to evade its obligations, which "if proven, is sufficient to establish a refusal prompted by. . . some interested or sinister motive").
Courts strike common law bad faith claims raised with underinsured motorist claims under the less stringent pleading standard where the claims were based on the insurer's alleged mishandling of the claim, including valuation of it. See Beckstein v. Allstate Ins. Co., No. CV106005267, 2010 WL 5646063, at *3 (Conn. Super. Ct. Dec. 30, 2010) (allegations of insurer's failure to diligently review and process the claim, adopt and implement reasonable standards to promptly investigate and resolve claims and pay or offer policy limits insufficient); Cristache v. Geico Gen. Ins. Co., No. HHDCV156062434, 2016 WL 7134956, at *1 (Conn. Super. Ct. Oct. 25, 2016) (allegations that insurer failed over a period of months to respond to demand for underinsured motorist benefits not enough to allow reasonable inference of bad faith).
In contrast, common law bad faith claims are more likely to survive a motion to strike where they describe, with particularity, a pattern of misconduct, including an insurer's refusal to consider presented information. See Vincoli v. Hartford Underwriters Ins. Co., No. FSTCV095009591S, 2009 WL 4845768, at *3 (Conn. Super. Ct. Sept. 24, 2009) (viable claim for bad faith stated through allegations that defendant "failed to conduct a reasonable investigation, failed to consider evidence, inappropriately accused the plaintiff of negligent conduct and refused to credit information from the plaintiff and the police as to the cause of the accident in question"); Kowalchuk at *5 (denying motion to strike, applying less stringent standard, finding "allegations regarding [the insurer's] failure appropriately to value [plaintiff's] medical records and bills and to give due consideration to all the opinions of the treating physicians are enough to imply a sinister motive on the defendant's part").
Carriers can reduce the risk of bad faith claims being asserted by ensuring that their investigations into uninsured/underinsured motorist coverage claims are completed promptly and are well-documented, including consideration of all information presented. Timely and detailed communication to the claimant regarding the carrier's position is critical, including recitation of the facts on which the insurer relied and the policy language bases for any denial of coverage.
Editors Note: Stay tuned for Part II, discussing increasing bad faith claims in other states across the country.
Melicent Thompson is a partner with the law firm of Gfeller Laurie, LLP. She has broad litigation experience in state and federal courts spanning close to 25 years. Her insurance coverage law practice encompasses all areas of coverage advice in both the first- and third- party contexts and related litigation services, including declaratory judgment actions, defense of bad faith claims and reinsurance matters. She may be reached at: [email protected].
Elizabeth O. Hoff is an associate with Gfeller Laurie, LLP. She has extensive experience as a litigator and counselor to insurers and broad insurance coverage experience, which includes counseling clients in first- and third-party contexts as well as all associated litigation, including declaratory judgment actions and defense of bad faith claims. She may be reached at: [email protected].