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Liston-Smith v. CSAA Fire & Casualty Insurance Co.

United States District Court, D. Connecticut

October 25, 2016

LYNEE LISTON-SMITH, et al. Plaintiff,
v.
CSAA FIRE & CASUALTY INSURANCE COMPANY Defendants.

          RULING RE: MOTION TO DISMISS (DOC. NO. 12)

          Janet C. Hall United States District Judge

         I. INTRODUCTION

         The plaintiffs, Lynne Liston-Smith and John Smith (collectively “the plaintiffs”), filed this action against their homeowner's insurance provider, defendant CSAA Fire & Casualty Insurance Company (“CSAA”), because CSAA failed to pay for damage to the plaintiffs' basement walls that they allege is covered under their homeowner's insurance policy. The Complaint (Doc. No. 1-1) contains three counts. The First Count alleges breach of contract; the Second Count alleges a breach of the implied covenant of good faith and fair dealing; and the Third Count alleges that CSAA's claim settlement practices violate the Connecticut Unfair Insurance Practices Act, section 816 of title 38A of the Connecticut General Statutes (“CUIPA”), and the Connecticut Unfair Trade Practices Act, section 110b of title 42 of the Connecticut General Statutes (“CUTPA”).

         On May 4, 2016, CSAA filed a Motion to Dismiss (Doc. No. 12) Counts Two and Three of the Complaint, arguing that those two counts are legally insufficient and fail to state a claim. More specifically, with regard to Count Two, CSAA argues that the dispute over whether the claim is covered does not, by itself, demonstrate that it acted in bad faith, and that the correspondence, subsequently withdrawn, threatening to cancel the insurance was unrelated to the claim dispute. Defs. Mot. At 1-2. CSAA argues that Count Three fails because the plaintiffs have not alleged sufficient conduct to show a general business practice of unfairly settling claims. Id. at 2.

         For the following reasons, the court GRANTS in part and DENIES in part CSAA's Motion to Dismiss.

         II. FACTUAL ALLEGATIONS

         When considering a motion to dismiss, the court must accept all of the allegations contained within the Complaint as true and make all reasonable inferences in favor of the non-moving party. In re NYSE Specialists Sec. Litig., 503 F.3d 89, 95 (2d Cir. 2007).

         The plaintiffs Lynne Liston-Smith and John Smith own and reside at their home in Toland, Ct. Compl. at ¶ 1. The plaintiffs have at all relevant times insured their home through CSAA. Id. at ¶ 3. Over time, they noticed cracks in the concrete walls of their basement and decided to hire a structural engineer to inspect those cracks. Id. at ¶¶ 5-6. The engineer informed them that the cracks were due to a chemical reaction in the concrete that would ultimately render the walls unstable and recommended that the concrete be replaced. Id. at ¶ 7.

         On September 5, 2015, the plaintiffs made a claim to CSAA for coverage of the damages caused by the chemical reaction based on the report made by the structural engineer. Id. at ¶ 8. The claim was based on the terms of the insurance coverage, which specifically stated that one of the “Perils Insured Against” was the “risk of direct physical loss to property.” Id. at ¶ 9. Additionally, the homeowner's insurance policy covers “collapse, ” which the plaintiffs contend includes progressive deterioration of the concrete in the basement walls. Id. at ¶ 11. CSAA disagreed with the plaintiffs, citing contrary policy provisions to deny the claim on October 12, 2015. Id. at ¶¶ 12-13.

         On October 26, 2015, CSAA informed the plaintiffs that it was planning on cancelling their insurance coverage if the plaintiffs did not repair their foundation by February 15, 2016. Id. at ¶ 17. CSAA sent this letter despite an order from the Commissioner of the Department of Insurance specifically prohibiting policy cancellations due to the deterioration of concrete in houses like the plaintiffs. Id. at ¶ 18. Ultimately, after counsel and public officials applied pressure, CSAA reversed its position and withdrew its plan to cancel the plaintiffs insurance. Id. at ¶ 19.

         Finally, the plaintiffs claim that CSAA violated CUTPA and CUIPA through its participation in an insurance data aggregation organization. Id. at ¶¶ 22, 28-29. CSAA is a member of the Insurance Services Office, Inc. (“ISO”), an organization that collects and shares policy language and claim data between most insurance companies. Id. at ¶ 22. The plaintiffs claim that CSAA, through ISO, has a general business practice of denying claims like the plaintiffs' despite a lack of justifying language in their policy. Id. at ¶¶ 25-27.

         III. LEGAL STANDARD

         To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the plaintiff must plead a legally cognizable claim through allegations that, if true, would entitle the plaintiff to relief. See Bell Atlantic v. Twombly, 550 U.S. 544, 557 (2007). When considering a motion to dismiss pursuant to Rule 12(b)(6), the court takes the factual allegations made within the Complaint as true, Hemi Grp., LLC v. City of New York, 559 U.S. 1, 5 (2010), and draws all reasonable inferences in the plaintiff's favor, Fulton v. Goord, 591 F.3d 37, 43 (2d Cir. 2009). However, the court's acceptance of the allegations in a complaint is limited to allegations of facts; the court is “not bound to accept as true a legal conclusion couched as a factual allegation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555).

         Thus, the court must determine whether the plaintiff has pled sufficient “factual content [to] allow the court to draw the reasonable inference that the defendant is liable for the misconduct caused.” Id. The notice pleading standard adopted in Rule 8 does not require the Complaint to contain “detailed factual allegations, ” but it must have more than ...


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