Poirier v. Farmers Ins. Group, No. 95-4-10 Oscv (Morris, J., Aug. 18, 2010)

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                                                       STATE OF VERMONT

SUPERIOR COURT                                                                                         CIVIL DIVISION
Orleans Unit                                                                                           Docket No. 95-4-10 Oscv


Denis Poirier
       Plaintiff

           v.

Farmers Insurance Group,
Mid-Century Insurance Company,
and Poulos Insurance, Inc.
      Defendants


                                      DECISION AND ORDER RE: DISMISSAL

       The case is before the court on Defendant Poulos Insurance, Inc.’s motion to dismiss.
Poulos Insurance, Inc. is represented by Glen Yates, Esq. Plaintiff Denis Poirier opposes
dismissal, and he is represented by William Neylon, Esq. For the reasons below, the motion to
dismiss is GRANTED in part and DENIED in part.

                                                                    FACTS

        According to the allegations in the complaint, which the court assumes are true for
present purposes, Plaintiff Denis Poirier raised horses as a hobby out of his Barton barn for the
past eight years. This hobby is not Poirier’s profession, and he experiences a financial loss in
most years from this activity.

       Eight years ago, Poirier purchased a homeowner’s premier policy from the Farmers
Insurance Group (Farmers). This policy was sold through Defendant Poulos Insurance, Inc.
(Poulos). Poulos acted as an agent for Farmers and Mid-Century Insurance Company for the
duration of the policy.

        According to Poirier, he fully disclosed the uses of his barn to Poulos at the time he
obtained the policy. He also kept Poulos informed of his continuing use of the barn throughout
the eight years he held the policy. Poirier was repeatedly given assurance by Poulos that his
property was fully covered against loss by fire.

        On August 8, 2009, a fire destroyed Poirier’s horse barn and all the personal property
within. Poirier then promptly filed a claim with Farmers and Poulos, and Farmers sent a claims
adjuster to assess the damages. Later, Farmers sent Poirier a $2,500 check for some of the losses
Poirier suffered. However, Farmers denied Poirier’s claims related to the loss of the barn.
Farmers explained that these losses were not covered under the “business exception” to the
homeowner’s policy.

         After receiving the denial, Poirier repeatedly attempted to contact Poulos to no avail.
When the Vermont Department of Banking and Insurance investigated the matter, Poulos falsely
told the department that it had talked to Poirier following the fire. As a result of Defendants’
failure to honor the insurance policy, Poirier has had to board his horses in another barn at an
additional cost.

                                   STANDARD OF REVIEW

        Poulos has filed a motion to dismiss the complaint pursuant to V.R.C.P. 12(b)(6). As
counsel are well aware, “Motions to dismiss for lack of a cognizable legal claim are not favored
and are rarely granted.” Wentworth v. Crawford & Co., 174 Vt. 118, 120 (2002). The purpose
of a motion pursuant to V.R.C.P. 12(b)(6) is “to test the law of the claim, not the facts which
support it.” Powers v. Office of Child Support, 173 Vt. 390, 395 (2002). “To sustain dismissal,
the court must have no doubt that the alleged facts, if proven, would not entitle the plaintiff to
relief under any legal theory.” Brigham v. State, 2005 VT 105, ¶ 11, 179 Vt. 525 (mem.). In
assessing the legal sufficiency of the plaintiff’s pleadings, the court will “assume[] that all well
pleaded factual allegations in the complaint are true, as well as all reasonable inferences that may
be derived therefrom.” Bethel v. Mount Anthony Union High Sch. Dist., 173 Vt. 633, 634 (2002)
(mem.) (citing Richards v. Town of Norwich, 169 Vt. 44, 48 (1999)).

                                          DISCUSSION

       Poirier alleges fives causes of action against Poulos: (1) consumer fraud; (2) unfair
insurance trade practices; (3) breach of contract; (4) breach of covenant of good faith; and (5)
negligence. Each theory is analyzed below.

       A.      Consumer Fraud

        Poirier first alleges that Poulos engaged in consumer fraud when it knew of Poirier’s use
of his barn, gave assurances that the barn was covered by insurance, and denied that the barn was
covered when Poirier made a claim. Under Vermont’s Consumer Fraud Act, “[u]nfair methods
of competition in commerce, and unfair or deceptive acts or practices in commerce, are hereby
declared unlawful.” 9 V.S.A. § 2453(a). The Act provides for a private right of action against
those alleged to have violated section 2453(a). See id. § 2461(b). It is unclear whether
Vermont’s Consumer Fraud Act applies to insurers. See Greene v. Stevens Gas Service, 2004
VT 67, ¶ 10, 177 Vt. 90. However, the instant motion is not the procedural vehicle by which to
argue this matter. See LeClair v. Reed ex rel. Reed, 2007 VT 89, ¶ 6, 182 Vt. 594 (mem.) (courts
should be especially reluctant to dismiss a cause of action on the basis of pleadings when the
asserted theory of liability is novel or extreme).

       The [consumer fraud] statute prohibits deceptive acts and practices in commerce,
       which a complainant must establish with proof of three elements: (1) the
       representation or omission at issue was likely to mislead consumers; (2) the



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       consumer’s interpretation of the representation was reasonable under the
       circumstances; and (3) the misleading representation was material in that it
       affected the consumer’s purchasing decision.

Jordan v. Nissan N. Am., Inc., 2004 VT 27, ¶ 5, 176 Vt. 465.

        In this case, Poirier alleges that Poulos knew that Poirier’s barn was not used for business
purposes. Knowing this, Poulos represented that Poirier’s barn was insured against fire. Based
on this representation, it was reasonable for Poirier to believe that, in the event of a barn fire,
Poulos would compensate him for his loss as long as the barn was not used for business
purposes. It is reasonable to infer that Poulos’s continued assurances about coverage, prompted
by Poirier’s continued disclosure about the use of his barn to Poulos, materially affected Poirier’s
decision to purchase and maintain the homeowner’s policy at issue. Assuming from the facts
alleged that Poirier’s use of the barn had not changed, i.e., the barn was not used for business
purposes, then Poulos’s assurance that the barn would be covered against loss caused by fire was
misleading because Poirier was not compensated for his loss after the 2009 barn fire. If, as
Poirier asserts, his non-business use of the barn had not changed, then his claim should have
been paid, and Poulos may have deceived Poirier by stating that his barn was insured against fire
when it was not. Poirier’s complaint adequately states a claim alleging consumer fraud, and
Poulos’s motion to dismiss Count I is DENIED.

       B.      Unfair Insurance Trade Practices

       Poirier next alleges that Poulos engaged in unfair insurance trade practices in violation of
8 V.S.A. § 4723. Section 4723 prohibits insurers from engaging in an unfair method of
competition or an unfair or deceptive act or practice in the business of insurance. Section 4724
defines unfair methods of competition or unfair or deceptive acts or practices.

       The following are hereby defined as unfair methods of competition or unfair or
       deceptive acts or practices in the business of insurance:

              (1) Misrepresentations and false advertising of insurance policies.
       Making, issuing, circulating, or causing to be made, issued or circulated, any
       estimate, illustration, circular, statement, sales presentation, omission, or
       comparison which:

               (A) misrepresents or fails to adequately disclose the benefits, advantages,
               conditions, exclusions, limitations or terms of any insurance policy . . . .

8 V.S.A. § 4724(1)(A).

        Although Poirier has adequately alleged that Poulos misrepresented the policy to him, it
is well established in Vermont that the Insurance Trade Practices Act does not create a private
right of action. See Wilder v. Aetna Life & Cas. Ins. Co., 140 Vt. 16, 19 (1981). “Although the
Insurance Trade Practices Act, 8 V.S.A. §§ 4721-4726, provides administrative sanctions for
unfair and deceptive acts within the insurance industry, . . . the Act does not create a private right



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of action.” Larocque v. State Farm Ins. Co., 163 Vt. 617, 618 (1995) (mem.). Therefore, Poirier
cannot recover from Poulos under 8 V.S.A. §§ 4721-4726, and Poulos’s motion to dismiss Count
II is GRANTED.

       C.      Breach of Contract

        Poirier further alleges that Poulos breached the insurance policy when it failed to
compensate Poirier for the loss of his barn. “To make out a viable claim for breach of contract a
complaint need only allege (1) the existence of an agreement, (2) adequate performance of the
contract by the plaintiff, (3) breach of contract by the defendant, and (4) damages.” Eternity
Global Master Fund Ltd. v. Morgan Guar. Trust Co., 375 F.3d 168, 177 (2d Cir. 2004)
(quotation omitted).

        In this case, a contract exists between the parties in the form of an insurance policy. The
insurance policy provided that Poulos would pay Poirier damages to his barn resulting from fire
as long as the barn was not used for a business purpose. Poirier adequately performed his
obligation under the contract by paying the insurance premiums. It is alleged that Poulos
breached the policy by failing to pay Poirier’s claim after his barn was destroyed. According to
Poirier, the barn was not used for business purposes, and therefore, Poulos had no legitimate
reason to deny his claim. As a result of this denial, Poirier suffered damages because he has had
to pay money to stable his horse in another barn.

        Poulos appears to counter that the denial of the claim was warranted because the barn
was used for business purposes, and therefore no breach occurred when Poulos denied the claim
under the policy’s “business exception.” This assertion that Poirier used his barn for business
purposes is a disputed issue of fact. No evidence was presented with Poulos’s motion, and the
court must assume that the facts alleged in the complaint are true. Poirier alleges that he “raised
horses as a hobby out of the barn.” (Compl. ¶ 5.) Therefore, Poirier has adequately alleged a
viable claim for breach of contract, and Poulos’s motion to dismiss Count III is DENIED.

       D.      Breach of Covenant of Good Faith

         Poirier also alleges that Poulos breached the implied covenant of good faith and fair
dealing when “Defendants unreasonably erred in denying coverage to Plaintiff.” (Compl. ¶ 39.)
In Vermont, the covenant of good faith and fair dealing is implied in every contract. See
Carmichael v. Adirondack Bottled Gas Corp., 161 Vt. 200, 208 (1993). Its underlying principle
“is that each party promises not to do anything to undermine or destroy the other’s rights to
receive the benefits of the agreement.” Id. The covenant “exists to ensure that parties to a
contract act with ‘faithfulness to an agreed common purpose and consistency with the justified
expectations of the other party.’” Id. (quoting Restatement (Second) of Contracts § 205 cmt. a
(1981)). “[L]ittle can be said in general as to what constitutes a breach of the covenant,” and
“[i]n the end, good faith is ordinarily a question of fact, one particularly well-suited for juries to
decide.” Id. at 208, 209.

      The parties have not adequately briefed the court on whether the allegations in the
complaint constitute a breach of the covenant. According to the complaint, Poirier alleges that



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“[i]mmediately following the denial of coverage, Plaintiff . . . made repeated attempts to contact
agents at Poulos.” (Compl. ¶ 18.) However, Poulos “refused to discuss the case with Plaintiff
and . . . further refused to allow Plaintiff to discuss the matter with the Agent of Record.” Id. ¶
19. Poulos then “made false statements to the State of Vermont Department of Banking and
Insurance during its investigation of the matter. [Poulos] claimed, in writing, to have spoken to
Plaintiff following the fire. The conversation never took place.” Id. ¶ 20.

        “Not every breach of contract . . . is a breach of the implied covenant of good faith and
fair dealing.” Nagel v. Provident Mut. Life Ins. Co, 749 N.E.2d 710, 715 (Mass. App. Ct. 2001).
Although it is not entirely clear to the court that Poulos’s alleged actions are a breach of the
covenant, the court is reluctant to dismiss the claim because a reasonable jury may differ. The
New Hampshire Supreme Court has noted that “‘[f]air dealing’ may include giving the opposing
party fair notice and an opportunity to cure any significant objections before being held liable.”
Barrows v. Boles, 687 A.2d 979, 986 (N.H. 1996). In the instant case, Poirier was not given an
opportunity to cure, i.e., challenge, Poulos’s conclusion that Poirier was using his barn for a
business purpose before he was denied coverage. Although he tried to discuss the matter with
Poulos repeatedly, Poulos would not talk to him about it. A reasonable jury might find that this
behavior was unjustified and undermined Poirier’s right to receive the benefits of the insurance
policy by showing that the barn was not used for business purposes. Therefore, Poulos’s motion
to dismiss Count IV is DENIED.

       E.      Negligence

        Finally, Poirier alleges that Poulos acted negligently when if failed “to protect Plaintiff
and Plaintiff’s property from loss by writing an appropriate insurance policy.” (Compl. ¶ 42.)
“An action on an insurance policy and an action for negligence and breach of contract for failure
to procure such a policy are not inconsistent causes of actions. While not inconsistent, however,
they are not identical.” Hill v. Grandey, 132 Vt. 460, 464 (1974). “To prevail in a common law
negligence action, a plaintiff must demonstrate that the defendant owed a legal duty to the
plaintiff, the duty was breached, the breach constituted the proximate cause of plaintiff’s harm,
and plaintiff suffered actual loss or damage as a result.” Rubin v. Town of Poultney, 168 Vt. 624,
625 (1998) (mem.).

       “The duty of an insurance agent is to use reasonable care and diligence to procure
insurance that will meet the needs and wishes of the prospective insured, as stated by the
insured.” Rocque v. Coop. Fire Ins. Ass’n, 140 Vt. 321, 326 (1981) (citing Hill, 132 Vt. at 460).
“The agent’s task is to be generally fair and truthful in explaining the nature of a policy, not to
warn the insured about the impact of necessarily complex contract language on every
eventuality.” Booska v. Hubbard Ins. Agency, Inc., 160 Vt. 305, 310 (1993). “Once a policy is
procured as requested and is consistent with the applicable standard of care, no further duty is
owed to the insured by the agent with respect to this insurance.” Id. (citing Rocque, 140 Vt. at
326-27).

        In this case, Poirier asked Poulos to procure an insurance policy that would cover his barn
where he “raised horses as a hobby.” (Compl. ¶ 5.) Since “[r]aising and selling horses [was] not
Plaintiff’s profession,” (Compl. ¶ 6) Poulos procured a policy that met Poirier’s needs and



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wishes, as stated by Poirier: a policy that insured Poirier’s barn against fire so long as he did not
use it for business purposes. Poirier “fully disclosed the uses of his barn property to Poulos at
the time the policy was written and kept Poulos fully informed as to the use of the property
during the entire eight (8) years that Poulos had written policies for Plaintiff.” (Compl. ¶ 10.)
There is no indication that Poirier put Poulos on notice that he would be using his barn for
business purposes and that the policy Poulos sold (excluding business activity) would not meet
his needs.

        There is no allegation that Poulos was not fair and truthful in explaining the nature of the
policy. Presumably, the policy itself is clear: the barn would not be insured against loss if Poirier
used it for business. Poulos was under no duty to explain to Poirier that using the barn for
business activity was not covered under the policy because Poirier made clear that he was using
the barn for hobby purposes only. Once Poulos issued the policy as Poirier requested, Poulos
owed no further duty to Poirier. The fact that Poulos did not pay the claim, in violation of the
terms of the policy, may give rise to a cause of action for breach of the policy, but it is not
negligent sale of insurance.

      In support of his argument that his negligence claim should not be dismissed, Poirier cites
Dodge v. Aetna Casualty & Surety Co., 127 Vt. 409 (1969). In Dodge, the Court held:

       In an action on a contract of insurance, the insurance company is generally
       considered estopped to deny liability on any matter arising out of the fraud,
       misconduct, or negligence of an agent of the company. If either party must suffer
       from an insurance agent’s mistake, it must be the insurance company, his
       principal.

Id. at 412 (quotation omitted). The Dodge Court ruled in favor of the insured after the record
showed a mistake on the part of the agent as to the extent of coverage afforded by the policy in
question. See id. at 411. The Court also found that the agent was negligent in not having
determined that the policy issued did not conform to the insured’s request that he desired
“insurance for all I need—everything.” Id.

        By contrast, Poirier does not allege any fraud, misconduct, or negligence by Poulos at the
time he obtained the policy. There is no allegation that Poulos mistook Poirier’s insurance
needs; Poirier asked Poulos to cover his barn for non-business purposes, and it did. Poulos
adequately determined that the policy issued conformed to Poirier’s request that the barn—used
only for hobby horses—be insured against fire. Unlike the plaintiff in Dodge, there is no
indication that Poirier told Poulos that he wanted insurance against “everything,” including
business activity. The plaintiff in Dodge informed his agent of his new venture and told him that
“he wanted all the insurance he needed for that type of business.” Id. at 410. By contrast,
Poirier did not tell Poulos that he would be using the barn for business purposes, and Poulos was
under no duty to ask after Poirier made clear that the barn was used for hobby purposes only.

        Again, the dispositive issue in this case is not whether the policy covered Poirier’s barn.
The issue is whether Poirier’s stated use of the barn, as contemplated in the policy, conformed to
his actual use the barn. If so, then the policy should cover the barn; Poirier got what he



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bargained for, and Poirier was not negligent. If the stated use did not conform to the actual use,
then it was Poirier’s failure to inform and not Poulos’s failure to inquire that resulted in the claim
denial. Since it appears that Poulos sold Poirier a policy that conformed to Poirier’s stated needs,
Poulos is no longer liable to Poirier in tort. The facts stated in the complaint do not allege that
Poulos breached a duty owed to Poirier. Consequently, Poulos’s motion to dismiss Count V is
GRANTED, and Poirier’s negligence claim is dismissed.

                                              ORDER

        For the reasons above, Poulos’s motion to dismiss is GRANTED in part and DENIED in
part. The motion is GRANTED with regard to Counts II and V of the complaint. The motion is
DENIED with regard to the remainder of the complaint. Count II (unfair insurance trade
practices) and Count V (negligence) are hereby dismissed, and Counts I, III, and IV remain.

       Dated at Newport, Vermont, this ____ day of August, 2010.


                                                      __________________________________
                                                      Walter M. Morris, Jr.
                                                      Presiding Judge




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