iIn a closely-watched Connecticut state court action that has dragged on for almost ten years, on June 5, Waterbury Superior Court Judge Alfred Jennings ordered The Hartford to pay $20 million in punitive damages to a class of auto body shops, finding that the insurer had “knowingly and purposefully” violated the Connecticut Unfair Trade Practices Act. The punitive damages award is in addition to an award of $14.7 million in compensatory damages awarded to the plaintiffs during a jury trial in the matter conducted in 2009, and is reportedly the largest award ever under the Connecticut Unfair Trade Practices Act.
The case, Artie’s Auto Body v. The Hartford, centered upon a claim that The Hartford had influenced insurance appraisers, who are required by statute to provide unbiased estimates of repair costs, to utilize below-market hourly labor rates in their calculations. The appraisers’ conduct resulted in a reduction in the compensation paid to the plaintiffs when making repairs for the insurer’s insureds. Plaintiffs alleged that the Hartford’s conduct violated public policy and thus was unlawful under the Connecticut Unfair Trade Practices Act.
The court’s punitive damages ruling comes approximately four years after a jury found that The Hartford’s efforts to induce the appraisers to violate the “code of ethics” that Connecticut law imposes upon them constituted “unfair” conduct under the Connecticut Unfair Trade Practices Act. Notably, pretrial, the court had rejected The Hartford’s argument that because the Connecticut Unfair Trade Practices Act is based upon Section 5 of the FTC Act, and the FTC has issued enforcement guidelines indicating that a Section 5 violation should require a showing of “substantial injury to consumers,” this requirement should be implied into the Connecticut statute as well. (The FTC’s modification to its Section 5 enforcement guidelines occurred almost twenty years after the Connecticut statute was enacted; no corresponding change to the Connecticut statute was subsequently made.)
The Hartford filed a series of post-trial motions and motions for reconsideration seeking to have the 2009 jury verdict vacated, ultimately without success. In May of this year, Judge Jennings issued his final ruling on the motions, setting the stage for the court’s consideration of plaintiffs’ request for punitive damages. Finding that The Hartford had exhibited a “heavy dose of control” over the erstwhile independent appraisers and that The Hartford’s acts reflected a “knowing and purposeful disregard” of the Connecticut statute prohibiting efforts to influence them, in a June 5 opinion Judge Jennings awarded plaintiffs $20 million in punitive damages. In deciding upon this amount, Judge Jennings explained that he was taking into account “the large net worth of The Hartford” and that the award needed to be large enough to have meaningful “deterrent motivation” going forward.
In response to the court’s ruling, The Hartford immediately filed an appeal with the Connecticut appellate court. In its appeal, The Hartford is likely to renew the argument that, because the Connecticut Unfair Trade Practices Act is patterned on Section 5, it should be interpreted in a manner that is consistent with current Section 5 jurisprudence (a view that has been embraced by the courts in several other states in similar circumstances). Given the significance of the case, and the issue generally, it can be expected that the matter will ultimately be required to be heard by the Connecticut Supreme Court. Stay tuned.
