Conn. Supreme Court Reverses Trial Court Ruling, Says Acordia Didn’t Breach CUIPA

August 28, 2013

The Connecticut Supreme Court issued a ruling in favor of Acordia insurance brokerage Monday.

The Connecticut Supreme Court, the state’s highest court, reversed a lower trial court’s 2010 ruling that previously found Acordia — now called Wells Fargo Insurance — breached the Connecticut Unfair Insurance Practices Act (CUIPA) and the Connecticut Unfair Trade Practices Act (CUTPA).

In this latest ruling, the Connecticut Supreme Court said the state’s Superior Court had erred by relying on the common-law principle of fiduciary duty.

The suit against the brokerage was first filed in 2006 by then-Connecticut Attorney General Richard Blumenthal, who is now serving as a U.S. senator.

In 2010, the state’s Superior Court rendered judgment in favor of the plaintiff and ordered that the brokerage “account for non-disclosed [program] based commissions for products purchased by consumers in the state of Connecticut.” However, the lower court denied the plaintiff’s request for injunctive relief.

In its ruling this week, the Connecticut Supreme Court stated, “We agree with the defendant that the court improperly relied on the concept of fiduciary duty in concluding that the defendant violated CUIPA. We further conclude that, in the absence of a valid CUIPA claim in the present case, the plaintiff’s CUTPA claim must fail.”

The Connecticut Supreme Court stated that the state Superior Court’s previous judgment is now reversed. The case is remanded back to the trial court with direction to render judgment for the defendant.

‘Millennium Partnership Program’

The case involved “Millennium Partnership Program” which was set up by Acordia in 1999. The brokerage proposed a three-year program to 20 insurance carriers with which it placed the most business. Insurers who chose to participate in the program agreed to pay, on a quarterly basis, 1 percent of the total value of the premiums that the brokerage placed with that carrier — in addition to any commission already paid to the defendant, according to court documents.

In exchange for this payment, the brokerage’s chief marketing officer represented to prospective participants that participating insurers would be given “priority status” and would “have the opportunity under the [program] to quote more business through [the defendant] to [the defendant’s] clients and sell more insurance,” the court documents showed.

Prospective participants were also told that Acordia’s producers at local offices would be informed of their priority status. Five insurers agreed to participate in the program — The Travelers Indemnity Company, The Hartford Fire Insurance Company, Chubb Group of Insurance Companies, Atlantic Mutual Insurance Company and Royal & Sun Alliance Insurance Company, according to the court papers. The brokerage’s clients were not informed of the program, according to the court.

However, the Connecticut Supreme Court said that the plaintiff failed to prove at trial that Acordia’s producers in fact had been informed of the program. Of the four producers who testified at trial, three had never heard of the program or of the contingent commissions, and the fourth testified only that he “may have heard about it,” the Connecticut Supreme Court said.

Additionally, the high court stated that the plaintiff failed to prove that any of the producers steered their clients toward participating insurers or did anything other than act in the clients’ best interests in assisting them to obtain insurance.

Moreover, the high court stated that the plaintiff failed to prove that any clients suffered any individual monetary harm from the failure to disclose the program, and instead found that clients paid the same insurance premiums that they would have paid if the program had not existed.

The Connecticut Supreme Court stated, “we conclude that the common-law principle of fiduciary duty cannot provide the foundation for a CUIPA violation.”

“[CUIPA] Section 38a–816 specifically enumerates, in its 22 subdivisions, those practices that are defined as unfair insurance practices in this state,” the Connecticut Supreme Court stated in its ruling.

“None of those subdivisions identifies breach of fiduciary duty as an unfair insurance practice, or otherwise suggests that a breach of fiduciary duty can give rise to an unfair insurance practice,” according to the Connecticut Supreme Court. “Because there is no statutory basis for concluding that breach of fiduciary duty constitutes a violation of CUIPA, we conclude that the trial court improperly incorporated this common-law concept into its CUIPA analysis by relying on its determination that the defendant had violated the fiduciary duty it owed to its clients to conclude that the defendant violated CUIPA.”

“We agree with the defendant that the court improperly relied on the concept of fiduciary duty in concluding that the defendant violated CUIPA. We further conclude that, in the absence of a valid CUIPA claim in the present case, the plaintiff’s CUTPA claim must fail,” according to the ruling by the Connecticut Supreme Court.

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