Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—Conn. Sup. Ct.: Consumer protection claim against insurance company could not stand absent state insurance law violation, (Aug 22, 2013)

By Jody Coultas, J.D.

A trial court erred in holding that insurance broker Acordia, Inc. violated the Connecticut Unfair Trade Practices Act (UTPA) by failing to uphold its fiduciary duties, according to the Connecticut Supreme Court (State of Connecticut v. Acordia, Inc., August 27, 2013, Vertefeuille, C.).

The State of Connecticut alleged that Acordia, an independent insurance broker, failed to disclose to its clients certain contingent commission agreements that it had entered into with insurance companies in violation of the UTPA. Acordia allegedly entered into an agreement in which insurers who chose to participate agreed to pay on a quarterly basis 1 percent of the total value of the premiums that Acordia placed with that company, in addition to any commission already paid in exchange for Acordia giving “priority status.”

A trial court found in favor of the State, holding that Acordia violated the UTPA and the Connecticut Unfair Insurance Practices Act (CUIPA). Specifically, the court concluded that Acordia owed a fiduciary duty to its clients and breached that duty by failing to disclose the existence of the program to its clients. On appeal, Acordia argued that the CUIPA claim must fail and that the UTPA claim was predicated on the CUIPA claim.

First, the court held that the trial court improperly incorporated the concept of fiduciary duty into its CUIPA analysis. Therefore, the CUIPA claim was dismissed.

A common-law breach of fiduciary duty arising in the insurance context that did not violate CUIPA could not provide the basis for a UTPA claim, according to the court. Acordia argued that an insurance company’s conduct may only constitute a UTPA violation if the conduct also violates the CUIPA. The State countered that the claims were not premised on a CUIPA violation, but on the breach of the public policy requiring the company to adhere to its fiduciary duties. Connecticut courts had previously held that if a plaintiff brings a claim pursuant to CUIPA alleging an unfair insurance practice, and the plaintiff further claims that the CUIPA violation constituted a UTPA violation, the failure of the CUIPA claim is fatal to the UTPA claim. However, trial courts have split on the issue of whether a plaintiff is barred from bringing a UTPA claim alleging an unfair insurance practice unless the practice violates CUIPA. Because CUIPA provides the exclusive and comprehensive source of public policy with respect to general insurance practices, the court held that unless an insurance related practice violated the CUIPA it cannot be found to violate any public policy and, therefore, it cannot be found to violate UTPA.

The case is No. SC 18756.

Attorneys: Alan L. Kildow (DLA Piper LLP) for Acordia, Inc. Matthew J. Budzik (Office of the Attorney General) for the State of Connecticut.

Companies: Acordia, Inc.

Cases: StateUnfairTradePractices ConnecticutNews