PETERS, C. J.
The dispositive issue on this appeal is the scope of an insurance company's statutory liability for alleged failure to conduct a reasonable investigation of a property damage claim against its insured. The plaintiff, Brian S. Mead, brought an action under General Statutes § 13a-144
It is well settled that "[w]here an appeal is taken from a judgment following the granting of a motion to strike, we take the facts to be those alleged in the amended complaint construed in a manner most favorable to the pleader. Sheets v. Teddy's Frosted Foods, Inc., 179 Conn. 471, 472, 427 A.2d 385 ; Stradmore Development Corporation v. Commissioners, 164 Conn. 548, 550-51, 324 A.2d 919 ; Senior v. Hope, 156 Conn. 92, 97, 239 A.2d 486 ; Rossignol v. Danbury School of Aeronautics, Inc., 154 Conn. 549, 557, 227 A.2d 418 . For purposes of appeal, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted. DeMello v. Plainville, 170 Conn. 675, 677, 368 A.2d 71 ; McAnerney v. McAnerney, 165 Conn. 277, 282, 334 A.2d 437 . See Practice Book, 1978, § 151." Amodio v. Cunningham, 182 Conn. 80, 82-83, 438 A.2d 6 (1980). In the plaintiff's amended complaint, he alleged that the defendant insurer had knowingly and in bad faith refused to pay his claim against the insured, but he did not allege that the insurer's conduct constituted a general practice of refusal to pay claims without a reasonable investigation. The trial court concluded
The plaintiff maintains that, in striking the second and third counts of his complaint that contained these averments, the trial court erred: (1) in construing CUIPA to require a litigant to prove more than a single violation of § 38-61 (6) (d); and (2) in construing CUTPA to require a litigant to prove a violation of CUIPA. The defendant insurer claims, as alternate grounds upon which to sustain the action of the trial court; see Practice Book § 3012 (a);
The first issue that we must address is the scope of liability imposed by CUIPA on the insurance industry. That issue raises two questions: (1) what kind of conduct is proscribed by CUIPA? and (2) who is authorized
The provisions of CUIPA which the plaintiff invoked in the second count of his complaint are §§ 38-60 and 38-61 (6) (d). CUIPA, in § 38-60, forbids any person engaged in the business of insurance in this state from engaging "in any unfair method of competition or in any unfair or deceptive act or practice prohibited by sections 38-60 to 38-64, inclusive." The plaintiff does not maintain that § 38-60 by itself affords him a remedy, but relies instead on the § 38-61 (6) prohibition of "unfair claim settlement practices." Among the "unfair claim settlement practices" that the latter section proscribes are: "[c]ommitting or performing with such frequency as to indicate a general business practice any of the following ... (d) refusing to pay claims without conducting a reasonable investigation based upon all available information...." The plaintiff argues that § 38-61 (6) (d) applies to his case, despite his conceded failure to allege a general business pattern of dereliction in investigation. The plaintiff advances two reasons in support of his argument. One of these is a linguistic analysis of the text of § 38-61 (6) (d), while the other relies on the relationship between federal and state regulation of insurance. Like the trial court, we find neither of these reasons persuasive.
The plaintiff's linguistic analysis focuses on the placement and the punctuation of the clause "with such frequency as to indicate a general business practice" in § 38-61 (6). According to the plaintiff, this clause modifies only the word "performing" and not the word
While the text of § 38-61 (6) (d) could indubitably be clearer, we believe the fairer reading of the governing language is to construe the "general business practice" clause as a modifier of both "performing" and "committing." A narrow construction of this provision is appropriate because CUIPA authorizes the imposition of criminal penalties for the commission of the conduct it proscribes. See General Statutes § 38-62 (b).
As a second reason for a contrary construction, the plaintiff asserts that a broad reading of CUIPA is required in order to implement legislative intent to preempt federal regulation. After the decision of the United States Supreme Court in United States v. South-Eastern Underwriters Assn., 322 U.S. 533, 64 S.Ct. 1162, 88 L. Ed. 1440, reh. denied, 323 U.S. 811, 65 S.Ct. 26, 89 L. Ed. 646 (1944), holding that Congress had the authority under the commerce clause to regulate interstate insurance transactions, it became likely that insurance practices would come under the regulatory umbrella of the federal trade commission. As a result, Congress enacted the McCarran-Ferguson Act, 15 U.S.C. § 1012 (b), which authorized federal regulation of insurance only "to the extent that such business is not regulated by State Law." In response, the National Association of Insurance Commissioners in 1947 promulgated a model insurance trade practices act to assure continued state supervision of the insurance industry. That model act was the basis for this state's enactment of CUIPA in 1955, and the legislative history at that time demonstrates that the legislature intended to preserve state regulation of insurance practices. See 6 S. Proc., Pt. 6, 1955 Sess., pp. 2001-2002; 6 H. R. Proc., Pt. 2, 1955 Sess., pp. 1036-37. The model act was amended in 1971 to include a section regulating unfair claim settlement practices, and this state enacted these new provisions in 1973. According to the plaintiff, a state legislative concern to avoid federal
The plaintiff's argument finds little support in the existing authorities under the model act. The National Association of Insurance Commissioners, in its model regulations, interprets the model act as proscribing unfair claims settlements only if the insurer "performs any of the acts or practices ... with such frequency as to indicate a general business practice." Houser, "Unfair Claims Settlement Practices Act—How the Courts Have Interpreted the Act," 15 The Forum 336, 347 (1979). Courts in other jurisdictions that have enacted the model act have construed its prohibitions to preclude liability for isolated instances of insurer misconduct. Klaudt v. Rink, 202 Mont. 247, 253-54, 658 P.2d 1065 (1983); Hubbell v. Trans World Life Ins. Co., 50 N.Y.2d 899, 901, 408 N.E.2d 918, 430 N.Y.S.2d 589 (1980); Jenkins v. J. C. Penney Casualty Ins. Co., 280 S.E.2d 252, 259-60 (W. Va. 1981); contra Royal Globe Ins. Co. v. Superior Court, 23 Cal.3d 880, 890-91, 592 P.2d 329, 153 Cal.Rptr. 842 (1979); and see Swanson v. Bankers Life Co., 389 Mass. 345, 349, 450 N.E.2d 577 (1983) (issue expressly left unresolved). Although these opinions have not expressly addressed the issue of state preclusion of federal regulation, we may presume that the courts were familiar with the history and the origin of the model act. Furthermore, a leading treatise on the law of insurance takes the position that state legislation will comply with the opting-out provisions of the McCarran Act so long as the state statute undertakes general regulation of the insurance industry in that state. "It is not necessary that every possible problem which could possibly arise be regulated." 16A Appleman, Insurance Law and Practice (1981) § 8886, pp. 487-89.
The second issue that we must address is the scope of the liability imposed by CUTPA on the insurance industry. That issue also has two subparts: (1) is the insurance industry entirely exempt from CUTPA because that industry is regulated by CUIPA? and (2) if the insurance industry is not exempt from CUTPA regulation, may conduct that does not violate CUIPA constitute an unfair act or practice under CUTPA?
The plaintiff, supported by the attorney general as amicus curiae, urges us to hold that our statutes do not grant the insurance commissioner exclusive jurisdiction to regulate the conduct of the insurance industry. For the argument that the jurisdiction of the insurance commissioner under CUIPA is concurrent with that of the commissioner of consumer protection, the attorney general and private litigants under CUTPA, the plaintiff relies on statutory provisions in both of the governing statutes. In CUIPA, § 38-62 (d) states: "No order of the commissioner under sections 38-60 to 38-64, inclusive, shall relieve or absolve any person affected by such order from any liability under any other laws of this state." (Emphasis added.) In CUTPA, § 42-110b (a) provides that "[n]o person shall engage
The defendant's argument to the contrary calls to our attention the fact that the legislature enacted CUTPA at the same session at which it enacted amendments to CUIPA covering unfair settlement practices. According to the defendant, this simultaneity of enactment, coupled with the greater specificity of CUIPA, is evidence of legislative intent that the two statutes be assigned to separate rather than to overlapping spheres. The defendant's position is consistent with the CUTPA exemption provision as enacted in that year. In 1973, § 42-110c (a) expressly excluded "[t]ransactions or actions otherwise permitted or administered by any regulatory board." (Emphasis added.) In 1976, however, the legislature amended the CUTPA exemption section to substitute "under law as administered" for "or administered," and this is the language presently before us. Public Acts 1976, No. 76-303, § 1. This statutory history lends more strength to the argument of the plaintiff than of the defendant.
Although this court has not explicitly addressed the question of overlapping CUTPA and CUIPA jurisdiction, a recent case lends further support to the position of the plaintiff on this issue. Griswold v. Union
The determination that it is possible to state a cause of action under CUTPA for a violation of CUIPA requires us to address the second question arising under count three of the plaintiff's complaint: Under what circumstances, if any, may conduct that does not violate CUIPA constitute an unfair act or practice under CUTPA? Despite our conclusion, in part I of this decision, that a single failure to conduct a reasonable investigation
The plaintiff cites our recent decision in Conaway v. Prestia, 191 Conn. 484, 464 A.2d 847 (1983), in support of his argument that conduct not specifically prohibited by CUIPA may nonetheless offend the public policy of that statute and therefore may be actionable under CUTPA. In Conaway, we noted that CUTPA directs us to the "` "interpretations given by the Federal Trade Commission and the federal courts to Section 5 (a) (1) of the Federal Trade Commission Act (15 U.S.C. § 45 (a) (1)) ... as from time to time amended." § 42a-110b (b).'" Conaway v. Prestia, supra, 492; Ivey, Barnum & O'Mara v. Indian Harbor Properties, Inc., 190 Conn. 528, 533, 461 A.2d 1369 (1983). In order to provide guidance for CUTPA's general proscription of unfair or deceptive acts or practices, we adopted the standard of FTC v. Sperry & Hutchinson Co., 405 U.S. 233, 92 S.Ct. 898, 31 L. Ed. 2d 170 (1972). Conaway v. Prestia, supra, 492-93; and see Sportsmen's Boating Corporation v. Hensley, 192 Conn. 747, 756-57, 474 A.2d 780 (1984); McLaughlin Ford, Inc. v. Ford Motor Co., 192 Conn. 558, 568, 473 A.2d 1185 (1984). Under that standard, the federal trade commission looks to a number of factors in deciding whether an action or practice is unfair: "`(1) whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise—whether, in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury
The plaintiff and the attorney general, as amicus curiae, argue that, under Conaway v. Prestia and the federal standard that it incorporates, this plaintiff may rely on a general public policy against unfair insurance practices that transcends the specific prohibitions of § 38-61 (6) (d). The plaintiff maintains that CUIPA's list of unfair settlement practices in § 38-61 (6) embodies a "concept of fairness" for insurance settlements that is enforceable under CUTPA, whether or not such acts or practices occur as part of a general business practice. Because, in the view of the plaintiff, the requirement of establishing a general business practice relates only to the issue of a technical violation of CUIPA, the underlying public policy established by CUIPA will be affirmed by permitting a CUTPA cause of action even when there is no violation of CUIPA.
The plaintiff's argument misconstrues the holdings of Conaway v. Prestia, supra, and of Griswold v. Union Labor Life Ins. Co., supra. Although Conaway holds that CUTPA may authorize a cause of action that builds upon the public policy embodied in specific statutory provisions, such a CUTPA claim must be consistent with the regulatory principles established by the underlying statutes. In Griswold, we held that a litigant complaining of unfair insurance practices was entitled to maintain a private right of action under CUTPA "for
We recognize that the Federal District Court in Doyle v. St. Paul Fire & Marine Ins. Co., 583 F. Sup. 554, 557 (D. Conn. 1984), drew a contrary inference from our decision, in Griswold, that CUTPA authorized private causes of action to enforce a claim derived from CUIPA. The Doyle court concluded that it was implicit in the authorization of a private cause of action that an individual claimant should be permitted to seek redress without proof of a general course of conduct. In our view, it would be more anomalous to permit a CUTPA claim to override a CUIPA regulatory pattern than to require a private litigant, using modern discovery techniques or enlisting others in a class action, to comply with the statutory requirements of § 38-61.
We conclude, therefore, that the trial court correctly granted the motion of the defendant insurer to strike count three of the defendant's complaint. The court properly rendered judgment for the defendant on this count.
There is no error.
In this opinion the other judges concurred.
General Statutes § 38-61 (6) (d) lists as an unfair claim settlement practice: "Committing or performing with such frequency as to indicate a general business practice any of the following ... (d) refusing to pay claims without conducting a reasonable investigation based upon all available information."
"(b) It is the intent of the legislature that in construing subsection (a) of this section, the commissioner and the courts of this state shall be guided by interpretations given by the Federal Trade Commission and the federal courts to Section 5 (a) (1) of the Federal Trade Commission Act (15 U.S.C. 45 (a) (1)), as from time to time amended.
"(c) The commissioner may, in accordance with chapter 54, establish by regulation acts, practices or methods which shall be deemed to be unfair or deceptive in violation of subsection (a) of this section. Such regulations shall not be inconsistent with the rules, regulations and decisions of the federal trade commission and the federal courts in interpreting the provisions of the Federal Trade Commission Act.
"(d) It is the intention of the legislature that this chapter be remedial and be so construed."
"(a) A preliminary statement of the issues intended for presentation on appeal. If the appellee wishes to present for review alternate grounds upon which the judgment may be affirmed, or if he wishes to present for review adverse rulings or decisions of the court which should be considered on appeal in the event the appellant is awarded a new trial, or if he wishes to claim that a new trial rather than a directed judgment should be ordered if the appellant is successful on the appeal, he may file a preliminary statement of issues within fourteen days from the filing of the appeal."