AMERICAN PROGRESSIVE LIFE & HEALTH INSURANCE COMPANY et al. v. BETTER BENEFITS et al., SC 17940

Judicial District of Waterbury

     Contracts; Standard for Granting Summary Judgment; Whether the Economic Loss Doctrine Should be Applied to Contracts Not Governed by the UCC.  The plaintiff, American Progressive Life & Health Insurance Company (American), brought this action, alleging that Better Benefits, LLC, and its individual owners breached contracts to sell American insurance policies.  The defendants counterclaimed, alleging, inter alia, that American breached its contracts with the defendants by failing to pay commissions under the contracts.  They also asserted a claim under the Connecticut Unfair Trade Practices Act (CUTPA) (count two), and a claim of tortious violation of an implied covenant of good faith and fair dealing (count four).  American moved for summary judgment on counts two and four, arguing that it was entitled to judgment as a matter of law based on the economic loss doctrine, which bars recovery in tort where the relationship between the parties is a contractual one and the only losses alleged are economic.  The Supreme Court, in Flagg Energy Development Corp. v. General Motors Corp., 244 Conn. 126 (1998), applied the economic loss doctrine to a Uniform Commercial Code (UCC) sale of goods case.  Here, the trial court determined that the economic loss doctrine is not limited to sale of goods cases, but extends to cases where both of the parties are sophisticated and the cause of action is essentially based on the breach of a contract.  The court next concluded, despite the defendants' arguments to the contrary, that the counterclaim contained no allegation that American engaged in conduct that fell outside the scope of the contract.  Thereafter, the court, applying the economic loss doctrine, granted summary judgment for American on the breach of the implied covenant of good faith and fair dealing claim, stating that allowing a sophisticated party such as Better Benefits to proceed on a tort claim where there is only economic loss would only serve to weaken the autonomy of the parties in a bargained for exchange.  The court also granted summary judgment for American on the CUTPA count on the ground that a CUTPA claim cannot be based on a simple breach of contract claim.  On appeal, the defendants argue that the summary judgment motion in effect challenged the legal insufficiency of counts two and four.  Therefore, they argue that the trial court, in granting summary judgment, improperly construed the counts too narrowly, and thereby failed to consider their allegation that American had made misrepresentations that damaged the defendants' reputation, good will, and relationship with their clients.  The defendants specifically maintain that because this conduct by American fell outside the scope of the contract, the economic loss doctrine was not applicable to their breach of the implied covenant of good faith and fair dealing claim.  Additionally, the defendants contend that the economic loss doctrine should not have been extended to non-UCC contracts, noting that the doctrine is based on the rationale that tort law should not encroach on cases governed by the specialized provisions of the UCC concerning the sale of goods.