Nautilus Ins. Co. v. Loomis, No. 194-9-10 Oecv (Eaton, J., Feb. 29, 2012)

[The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original. The accuracy of the text and the
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                                                       STATE OF VERMONT

SUPERIOR COURT                                                                                         CIVIL DIVISION
Orange Unit                                                                                            Docket No. 194-9-10 Oecv

                                                                         │
Nautilus Insurance Company                                               │
 Plaintiff                                                               │
                                                                         │
 v.                                                                      │
                                                                         │
Jason Loomis                                                             │
 Defendant                                                               │
                                                                         │
 v.                                                                      │
                                                                         │
The Clerkin Agency                                                       │
 Third Party Defendant                                                   │
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                                           DECISION ON MOTION TO DISMISS

         The Clerkin Agency, as third party defendant, has filed a motion to dismiss the claims
asserted against it by defendant, Jason Loomis, alleging that his third party complaint does not
state a cause of action against it. Mr. Loomis has opposed the motion.

                                                         Factual Background

        Plaintiff Nautilus Insurance Co. brought this action against Loomis for unpaid premiums
which it claims are due to them as a result of an audit conducted in connection with a
commercial liability policy issued by Nautilus to Loomis. Proceeding pro se, Loomis has
asserted a third party claim against the Clerkin Agency, his insurance agent who procured the
commercial liability policy. Mr. Loomis alleges various acts by Clerkin violated the Insurance
Trade Practices Act, 8 V.S.A. § § 4721 et seq., and also Vermont’s Consumer Fraud Act, 9
V.S.A. § § 2451 et seq. The Clerkin Agency asserts that neither statute provides defendant with a
cause of action.

                                                               Discussion

        Motions to dismiss are not favored, and are rarely granted. Gilman v. Maine Mutual Fire
Ins. Co., 2003 VT 55, ¶ 14, 175 Vt. 554 (mem.). The purpose of a motion to dismiss is to test
the law of the case, not the facts which underlie the complaint. Kane v. Lamothe, 2007 VT 91,
¶ 14, 182 Vt. 241. In considering a motion to dismiss, the court assumes all factual allegations in
the complaint to be true and gives the benefit of all reasonable inferences to the non-moving
party. Richards v. Town of Norwich, 169 Vt. 44, 48 (1999). A motion to dismiss should not be
granted unless it is beyond doubt that there exist no facts or circumstances which would entitle
the plaintiff to relief. Assoc. of Haystack Property Owners, Inc. v. Sprague, 145 Vt. 443, 446–47
(1985).

                         Claims under the Insurance Trade Practices Act

        Defendant asserts that Clerkin violated the Insurance Trade Practices Act (ITPA), 8
V.S.A. § 4721 et seq. Defendant further asserts that because a private right of action exists
against insurance finance companies under 8 V.S.A. § 7009, a private right of action should exist
under 8 V.S.A. § 4721 et seq. as well.

        It is not alleged that the Clerkin Agency is an insurance financing company. As a result, 8
V.S.A. § 7009 does not apply in this instance. Defendant’s assertion that a private cause of action
should exist under the ITPA, as it does against insurance finance companies, is inconsistent with
well established Vermont law.

        In 1981, the Vermont Supreme Court held that no private cause of action existed under
the ITPA. Wilder v. Aetna Life & Casualty Insurance Co., 140 Vt. 16 (1981). The ITPA is a
regulatory statute that provides public administrative sanctions against unfair and deceptive acts
within the insurance industry, but it does not create a private cause of action or imply a duty
toward any one person. Wilder has been consistently followed in the 30 years since it was
decided. Denis Bail Bonds v. State of Vermont, 159 Vt. 481 (1993); Larocque v. State Farm
Insurance, 163 Vt. 617 (1995); City of Burlington v. Hartford Steam Boiler Inspection and
Insurance Co., 190 F. Supp 2d. 663 (D. Vt. 2002).

       There is no private cause of action for claimed violations of the ITPA.

                              Claims under the Consumer Fraud Act

       Defendant’s claims under the Consumer Fraud Act (CFA), 9 V.S.A. § 2451 were also
addressed in Wilder. The Wilder Court held that the CFA did not apply to insurance since the
provision of insurance is neither a good nor a service.

       Four years after Wilder, the CFA was amended with respect to the definition of goods
and services. The combined definition of goods and services contained in 9 V.S.A. § 2451a (b)
now reads as follows:

               (b) “Goods” or “services” shall include any objects, wares, goods,
               commodities, work, labor, intangibles, courses of instruction or
               training, securities, bonds, debentures, stocks, real estate, or other
               property or services of any kind. The term also includes bottled
               liquified petroleum (LP or propane) gas.

        Defendant asserts that the amended definition in the CFA covers the provision of
insurance because the new language includes “intangibles” and “property or services of any
kind.” Defendant has provided the court with the amicus brief of the Vermont Attorney General
in the matter of Greene v. Stevens Gas Service, 2004 VT 67, 177 Vt. 90, a case which squarely

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presented the question of whether the amended definition of “goods” and “services” applied to
insurance. In Greene, however, the Vermont Supreme Court declined to decide the issue,
determining instead that the facts of the case did not establish CFA liability even if such liability
existed. Defendant has also provided a Vermont Bar Journal article discussing the applicability
of the CFA to the provision of insurance, and both parties have submitted portions of legislative
history in support of their positions.

        Although there has been lengthy discussion of the issue of the applicability of the CFA to
insurance contracts, as exemplified by the Bar Journal article and the briefs submitted in Greene,
the Supreme Court has not re-examined the issue in any detail. On several recent occasions the
federal district court judges have struggled with the question and noted that it is an open question
whether the amended definition was meant to “extend[] the CFA to insurance.” Sullivan v.
Allstate Insurance Co. 2010 WL 3323726 (D. Vt. Aug. 3, 2010); R.L. Vallee, Inc. v. American
Specialty Lines Insurance Co., 431 F.Supp.2d 428, 442 (D.Vt. 2006).

        In reviewing the issue here, the parties have provided excerpts from the legislative
history, as researched by the Attorney General and the parties to the Greene case. Although the
excerpts include commentary from legislators pertaining to the scope of the amended definition,
there is no mention in the record at all of the topics of insurance or Wilder. Instead, it appears
that the legislature was primarily concerned at the time with extending the protections of the
consumer-fraud statutes to farmers. It further appears that the actual amendment was included as
part of an act relating to the regulation of companies which furnish bottled gas. 1985, No. 34, §
1. Given the amount of research that has been devoted to the legislative record on this issue, this
court finds the absence of any reference to insurance or Wilder to be significant.

        It is possible to read the statutory language as supporting either position when the
amended definition is considered in the context of its enactment. At the time of the 1985
amendment, some states had held the provision of insurance to be a “good” or “service” under
their consumer-fraud statutes, but other states had expressly held that insurance did not fall
within that definition. See generally Annotation, Coverage of insurance transactions under state
consumer protection statutes, 77 A.L.R.4th 991 (1989 & Cum. Supp. 2011) (collecting cases).
In Vermont, of course, the legislature was not painting upon a blank canvas because the Supreme
Court had held just four years earlier in Wilder that insurance was neither a “good” nor a
“service.” If the legislature had wished to abrogate that holding and include the provision of
insurance as a good or service, it would have been a simple matter to so indicate by including the
term “insurance” within the definition of a “good” or “service.” Instead, the legislature did not
mention insurance at all, but rather chose to amend the definition to include the terms
“intangibles” and “property or services of any kind” within the definition of “goods” and
“services,” without any indication that it was doing so with Wilder or insurance in mind.

        It would be reasonable to include insurance within the definition of an intangible or
otherwise as a property interest of some kind. See Showpiece Homes Corp. v. Assurance Co. of
America, 38 P.3d 47, 57 (Colo. 2001) (describing insurance as “intangible property”). It would
also be reasonable to point out that (1) the CFA is a remedial statute that should construed
liberally so as to protect the public from deceptive acts in commerce, and (2) there is a canon of
statutory construction that holds that the legislative intent is best reflected in the plain meaning

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of the statutory language. Elkins v. Microsoft Corp., 174 Vt. 328, 330–31 (2002). From these
premises, one might well conclude that, by amending the definition of “goods” and “services” to
include “intangibles,” the legislature must have meant to include the provision of insurance
within the scope of the CFA.

        On the other hand, trial courts are instructed to consider not only the language of the
statute and the purposes of the legislation, but also “the legislative history and the circumstances
surrounding [the] enactment” of a statute when seeking to determine the legislative intent.
Garbitelli v. Town of Brookfield, 2011 VT 122, ¶ 12 (quoting Perry v. Med. Practice Bd., 169
Vt. 399, 406 (1999)). In this case, as noted above, there is the issue that neither the legislative
history nor the circumstances surrounding the amendment of the definition support the
conclusion that the legislature intended to abrogate Wilder and extend consumer-fraud liability to
the insurance industry. Adding to this is the canon of statutory interpretation that cautions the
legislature to be more explicit about its intent if it truly means to disapprove a recent judicial
interpretation of a statute. See, e.g., Dubaniewicz v. Houman, 2006 VT 99, ¶ 13, 180 Vt. 367.

       It is also important to keep in mind that the extension of consumer-fraud liability to the
insurance industry is an issue of significant statewide economic consequence upon which
numerous parties have established settled expectations based on the existing state of the law. It
would not be desirable for one trial court in one part of the state to upset those expectations by
proclaiming that a decided opinion of the Vermont Supreme Court is no longer good law without
some clear indication from the Supreme Court or the legislature to that effect.

        In the final analysis, therefore, there are good arguments why insurance could be
included within the amended definition of “goods” and “services,” but there are not any
indications that the legislature actually intended to include insurance within the scope of
consumer-fraud liability when it amended the statute. In the absence of a more specific
expression of legislative intent to abrogate Wilder, and in the absence of any post-amendment
suggestion by the Supreme Court to that effect, this court considers the decision in Wilder to
remain controlling precedent. Accordingly, the provision of insurance, as was done by Clerkin,
is not a “good or service” and therefore is not within the provisions of the CFA.

       Based upon the foregoing, The Clerkin Agency’s Motion to Dismiss is GRANTED.

       Dated at Chelsea this 29th day of February, 2012.

                                                     _____________________________
                                                     Harold E. Eaton, Jr.
                                                     Superior Court Judge




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