Perlbinder

Perlbinder v Vigilant Ins. Co., 2021 NY Slip Op 00439 (2d Dept. 2021)

I think this is perhaps the most consequential bad faith 349 case I have seen in years. It won’t move the needle on Assigned first party NF cases, but can cause heartache to carriers in wage loss first-party cases. I would venture a guess that this is the precursor of a bad faith statute that will eventually be enacted sometime in the next 0-3 years.

(1) “We agree with the Supreme Court’s determination to deny that branch of the defendants’ cross motion which was pursuant to CPLR 3211 (a) to dismiss the cause of action alleging violation of General Business Law § 349. Contrary to the defendants’ contention, the plaintiff sufficiently alleged deceptive conduct on their part that was “consumer-oriented,” that is, conduct that might “potentially affect similarly situated consumers” (Oswego Laborers’ Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 25, 27 [1995]; see Brown v Government Empls. Ins. Co., 156 AD3d 1087, 1088-1089 [2017]; Wilner v Allstate Ins. Co., 71 AD3d 155, 164-165 [2010]; Acquista v New York Life Ins. Co., 285 AD2d 73, 82 [2001]; cf. Tiffany Tower Condominium, LLC v Insurance Co. of the Greater N.Y., 164 AD3d 860, 863 [2018]; Genesco Entertainment, a Div. of Lymutt Indus., Inc. v Koch, 593 F Supp 743, 752 [SD NY 1984]).”

(2) “We agree with the Supreme Court’s determination to deny that branch of the defendants’ cross motion which was pursuant to CPLR 3211 (a) to dismiss the plaintiff’s demand for punitive damages. An alleged breach of the implied covenant of good faith and fair dealing may support an award of punitive damages (see 25 Bay Terrace Assoc., L.P. v Public Serv. Mut. Ins. Co., 144 AD3d 665 [2016]). Likewise, a claim for punitive damages may be asserted in the context of a cause of action predicated upon an alleged violation of General Business Law § 349 (see Karlin v IVF Am., 93 NY2d 282, 291 [1999]; Ural v Encompass Ins. Co. of Am., 97 AD3d 562, 565 [2012]; Wilner v Allstate Ins. Co., 71 AD3d at 167). Here, accepting his allegations as true and giving him the benefit of every favorable inference (see Leon v Martinez, 84 NY2d 83, 87 [1994]), the plaintiff’s allegations were sufficient to state a claim for punitive damages based on the duty of good faith and fair dealing (see 25 Bay Terrace Assoc., L.P. v Public Serv. Mut. Ins. Co., 144 AD3d at 667-668) and based on the defendants’ alleged violation of General Business Law § 349 (see Ural v Encompass Ins. Co. of Am., 97 AD3d at 565; Wilner v Allstate Ins. Co., 71 AD3d at 167).”

Bad faith? No Bad faith? Annoyed?

Medical Care of W. N.Y. v Allstate Ins. Co., 2019 NY Slip Op 06243 (4th Dept. 2019)

Greater Buffalo Acc. & Injury Chiropractic, P.C. v Geico Cas. Co., 2019 NY Slip Op 06349 (4th Dept. 2019)

This one is hard for me to fathom. The provider appears to be upset at how claims were handled without giving concrete examples of how each case improperly handled. Furthermore and assuming the claims were not properly handled, what are the damages? A medical provider can never bill in excess of the fee schedule. Thus, any damages would be limited to the fee schedule amount of the billing. Of course, policy exhaustion would not apply in a bad faith scenario.

On a direct first-party wage case or UM case, you would be able to exceed the policy limits. But on a medical bill case, it is hard for a court to award unlimited damages to a medical provider when the law constricts their recovery to a given sum.

Bad faith not warranted: Cause of action dismissed

Liang v Progressive Cas. Ins. Co., 2019 NY Slip Op 03327 (2d Dept. 2019)

“However, the Supreme Court should have granted that branch of Progressive’s motion which was for summary judgment dismissing the bad faith in denying benefits cause of action. “[I]n [*2]order to establish a prima facie case of bad faith, the plaintiff must establish that the insurer’s conduct constituted a gross disregard of the insured’s interests” (Pavia v State Farm Mut. Auto. Ins. Co., 82 NY2d 445, 453 [internal quotation marks omitted]) and that the “insurer engaged in a pattern of behavior evincing a conscious or knowing indifference to the interests of the insured” (Bennion v Allstate Ins. Co., 284 AD2d 924, 926 [internal quotation marks omitted]).

Here, Progressive established, prima facie, that it did not act in bad faith, since its conduct, under the circumstances, did not constitute a gross disregard of Liang’s interests. Progressive conducted an investigation and had an arguable basis for disclaiming coverage (see Financial Servs. Veh. Transit v Saad, 137 AD3d 849, 853; JLS Indus., Inc. v Delos Ins. Co., 127 AD3d 645, 646; S Bros. Inc. v Leading Ins. Servs., Inc., 124 AD3d 498, 499). In opposition, the plaintiff’s conclusory assertions failed to raise a triable issue of fact as to whether Progressive’s conduct constituted a gross disregard of Liang’s interests (see Bennion v Allstate Ins. Co., 284 AD2d at 926).

I like the term arguable basis for disclaiming coverage. Here, the issue was whether Plaintiff was a “resident”. There is a triable issue of fact on this score. Had there not been a triable issue of fact, would Progressive have had an arguable basis for disclaiming coverage? It is an interesting paradigm.

Bad Faith

We inch closer and closer to becoming a bad faith state

D.K. Prop., Inc. v National Union Fire Ins. Co. of Pittsburgh, Pa., 2019 NY Slip Op 00347 (1st Dept. 2018)

(1) ” The complaint alleges that rather than pay the claim, defendant has made unreasonable and increasingly burdensome information demands throughout the three year period since the property damage occurred “

(2) “At issue is whether, at the pleading stage, a claim for consequential damages arising from defendant’s processing of plaintiff’s insurance claim requires a detailed, factual description or explanation for why such damages, which do not directly flow from the breach, are also recoverable. We find that the motion court erred in dismissing the consequential damages claim, because plaintiff fulfilled its pleading requirement by specifying the types of consequential damages claimed and alleging that such damages were reasonably contemplated by the parties prior to contracting. “

(3) ” A plaintiff may sue for consequential damages resulting from an insurer’s failure to provide coverage if such damages (“risks”) were foreseen or should have been foreseen when the contract was made (Bi-Economy Mkt, Inc. v Harleysville Ins. Co. of N.Y., 10 NY3d 187, 192 [2008]). Although proof of such consequential damages will ultimately rest on what liability the insurer is found to have “assumed consciously,” or from the plaintiff’s point of view, have warranted the plaintiff to reasonably suppose the insurer assumed when the insurance contract was made, a determination of whether such damages were, in fact, forseeable should not be decided on a motion to dismiss and must await a fully developed record (see Panasia Estates, Inc. v Hudson Ins. Co., 10 NY3d 200, 203 [2008]; see also Bi-Economy at 192). In other words, the inquiry is not whether plaintiff will be able to establish its claim, but whether plaintiff has stated a claim.”

(4) ” Here, plaintiff’s allegations meet the pleading requirements of the CPLR with respect to consequential damages, whether in connection with the first cause of action or the second cause of action for breach of the covenant of good faith and fair dealing in the context of an insurance contract (id.). Contrary to defendant’s claim, there is no heightened pleading standard requiring plaintiff to explain or describe how and why the “specific” categories of consequential damages alleged were reasonable and forseeable at the time of contract. There is no heightened pleading requirement for consequential damages (Panasia Estates Inc. v Hudson Ins. Co., 68 AD3d 530, 530 [1st Dept 2009], affd 10 NY3d 200 [2008], citing Bi-Economy 10 NY3d at 192). Furthermore, an insured’s obligation to “take all reasonable steps to protect the covered property from further damage by a covered cause of loss” supports plaintiff’s allegation that some or all the alleged damages were forseeable (Benjamin Shapiro Realty Co. v Agricultural Ins. Co., 287 AD2d 389, 389-390 [1st Dept 2001]). “

The terrain is tightening a bit.

Bad Faith and Allstate

Roemer v Allstate Indem. Ins. Co., 2018 NY Slip Op 05392 (3d Dept. 2018)

(1) “A covenant of good faith and fair dealing is implicit in every insurance contract and encompasses not only any promise that a reasonable promisee would understand to be included, but also that “a reasonable insured would understand that the insurer promises to investigate in good faith and pay covered claims” (New York Univ. v Continental Ins. Co., 87 NY2d 308, 318 [1995]; accord Bi-Economy Mkt., Inc. v Harleysville Ins. Co. of N.Y., 10 NY3d 187, 194 [2008]; see Gutierrez v Government Empls. Ins. Co., 136 AD3d 975, 976 [2016]). In turn, “consequential damages resulting from a breach of the covenant of good faith and fair dealing may be asserted in an insurance contract context, so long as the damages were within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting” (Panasia Estates, Inc. v Hudson Ins. Co., 10 NY3d 200, 203 [2008] [internal quotation marks and citations omitted]; accord Yar-Lo, Inc. v Travelers Indem. Co., 130 AD3d 1402, 1403 [2015]). As relevant here, to establish a prima facie case of bad faith, it must be established “that the insurer’s conduct constituted a gross disregard of the insured’s interests — that is, a deliberate or reckless failure to place on equal footing the interests of its insured with its own interests when considering a settlement offer” (Pavia v State Farm Mut. Auto. Ins. Co., 82 NY2d 445, 453 [1993]; see Smith v General Acc. Ins. Co., 91 NY2d 648, 653 [1998]). In establishing a claim for bad faith, although not an exhaustive list, “the courts will consider the facts and circumstances surrounding the case, including whether liability is clear, whether the potential damages far exceed the insurance coverage and any other evidence which tends to establish or negate the insurer’s bad faith in refusing to settle”

(2) “Defendant contends that there is no evidence in the record demonstrating that it acted in bad faith or engaged in conduct constituting a gross disregard of its insured’s interests such that it established its entitlement to summary judgment dismissing the complaint. We disagree. In support of its motion, defendant submitted, among other things, a copy of plaintiff’s summons and complaint and plaintiff’s verified bill of particulars. A review of the insurance claim process as set forth therein demonstrates that, the day after plaintiff’s residence was destroyed by fire, plaintiff submitted a standard fire claim form notifying defendant of the loss and defendant thereafter commenced an investigation. While the investigation was pending, defendant advanced plaintiff $5,000 for the removal of debris from the property pursuant to its insurance policy. The Warren County Fire Investigation Office subsequently determined that the cause of the fire was accidental such that there appears to be no dispute that the accident is covered by the insurance policy. Additionally, for the following 12 months, defendant paid plaintiff for additional living expenses in accordance with the terms and coverage limits provided for in its insurance policy. When initial settlement negotiations thereafter proved unsuccessful, plaintiff commenced the appraisal process pursuant to the terms of the insurance policy, and each party thereafter hired their own independent appraiser to determine the amount of loss. In June 2011, the appraisers mutually agreed upon the amount of loss; however, on July 1, 2011 — 16 months after plaintiff’s residence was destroyed by fire — defendant unexpectedly disclaimed coverage on the basis that plaintiff did not have insurable interest in the property.

We find that defendant failed to present any admissible evidence in support of its motion to explain why, after 16 months of investigation (see generally Insurance Law § 2601 [a] [4]), it only disclaimed coverage after the parties’ independent appraisers had reached a mutual agreement as to the amount of loss incurred. At no point prior to paying plaintiff various benefits to which he was otherwise entitled under the insurance policy, or during settlement negotiations or the appraisal process, did defendant ever indicate to plaintiff that coverage might ultimately be denied because he was apparently not the titled owner of the property — a fact of which plaintiff avers he made his insurance agent aware prior to purchasing the subject policy.

Bad faith and GBL 349 has really arrived

Brown v Government Employees Ins. Co., 2017 NY Slip Op 08774 (3d Dept. 2017)

(1) “Plaintiff alleged that she became permanently disabled as a result of injuries that she sustained in an automobile accident in March 2012. Following an independent medical examination (hereinafter IME), defendant denied no-fault insurance benefits on the basis that plaintiff’s injuries were preexisting and were not causally related to the accident. In December 2014, plaintiff commenced this action asserting causes of action for breach of contract, violation of General Business Law §§ 349 and 350 and intentional infliction of emotional distress, based on allegations that defendant pressured the physicians that it employed to conduct IMEs to attribute injuries to preexisting conditions and thereby facilitate the denial of claims, and seeking, among other relief, damages for emotional distress and punitive damages.”

“[Supreme Court] held that plaintiff had adequately stated a claim for consequential damages for economic loss and pain and suffering. ”

(2a) “In that regard, allegations that an insurer engaged in a practice of failing to investigate claims in good faith, or of denying claims without regard to their viability, are sufficient to state a cognizable claim for deceptive practices pursuant to General Business Law § 349”

(2b) “Moreover, “[t]he battle over whether [a] plaintiff can meet [his or] her obligation of a threshold showing that [his or] her claim was predicated upon a deceptive act or practice that was consumer oriented is best reserved for a motion for summary judgment after discovery”

(2c) “In her complaint, plaintiff alleged that defendant engaged in a consumer-oriented pattern and practice aimed at the public at large of wrongfully denying claims for no-fault benefits by pressuring the physicians it hired to perform IMEs to provide medical reports that would support the denial of benefits and, further, that she suffered injury as a result of that practice. Such allegations are sufficient to plead a cause of action pursuant to General Business Law § 349 “‘at this early prediscovery stage'”

(3) Emotion damages barred

(4) “Plaintiff’s claim for punitive damages was likewise properly dismissed. Punitive damages may be recovered for breach of contract “only where a defendant’s conduct was (1) actionable as an independent tort, (2) egregious, (3) directed toward the plaintiff and (4) part of a pattern directed at the public” (Dinstber v Allstate Ins. Co., 110 AD3d 1410, 1411 [2013]). Plaintiff’s allegations that defendant engaged in unfair claim settlement practices do not allege a tort independent of the parties’ contract sufficient to state a claim for recovery of punitive damage”

As to point 4, the first three element can be alleged: (1) Point “1” is fraud which is being piggybacked on the breach and 349 COA; (2) Point “2” can be alleged depending on the injury alleged or the conduct at issue; (3) The plaintfif was the victim; (4) This is tough – how can you show it is directed at the public unless you have the goods from seeing a pattern…

The declaratory action was properly stated

High Definition MRI, P.C. v Liberty Mut. Holding Co., Inc., 2017 NY Slip Op 01799 (1st Dept. 2017)

“Contrary to the motion court’s conclusion, the breach of contract action against defendants Liberty Mutual Holding Company, Inc., Liberty Mutual Insurance Company, Safeco Insurance Company of America, Inc., and Indiana Insurance Company provides adequate notice of the transactions and occurrences intended to be proved (see CPLR 3013), and the cause of action for a declaration that defendants’ claim-handling processes are unlawful and that plaintiff is properly incorporated states a cause of action for declaratory relief (see State Farm Mut. Auto. Ins. Co. v Anikeyeva, 89 AD3d 1009, 1010 [2d Dept 2011]).”

The discovery on this case is going to absolutely brutal, and I sense a settlement is coming

The actionable violation of 3.2(b)

Integral Assist Med., P.C. v Tri-State Consumer Ins. Co., 2017 NY Slip Op 50103(U)(App. Term 2d Dept. 2017)

“There is no merit to plaintiff’s argument on appeal that defendant “clearly took an adversarial position” during claims processing in violation of 11 NYCRR 65-3.2 (b).”

Assume that Defendant did take an adversarial role in the claims processing. What would happen at that point? The case on point states that a violation of 3.8(b)(4) is an administrative issue, not one that leads to preclusion due to its violation. Does a violation of 3.2(b) lead to the same result? Or, does this violation allow (under the right circumstance) an extra-contractual claim or a GBL 349 claim? The case law will have to be further developed.

My thinking is that a violation of 3.2(b) is not enough to impact a first-party no-contractual claim. But, this falls into the gambit of 349 and under certain extreme circumstances, bad faith.

The bad faith boondoggle that we knew was coming

Gutierrez v Government Empls. Ins. Co., 2016 NY Slip Op 01292 (2d Dept. 2016)

I would put this in the pile with “Permanent General” and “Matter of Allstate Prop. & Cas. Ins. Co. v New Way Massage Therapy P.C.”.

“This case arises from a claim for supplementary uninsured/underinsured motorist (hereinafter SUM) benefits relating to a motor vehicle accident. The complaint alleges that on February 21, 2010, the plaintiff was operating a vehicle that was insured by the defendant Government Employees Insurance Company (hereinafter GEICO), with the permission of the vehicle’s owner. The vehicle collided with a vehicle insured by Allstate Insurance Company (hereinafter Allstate), allegedly causing the plaintiff serious injuries as defined in Insurance Law § 5102(d), and property damage. The plaintiff alleged that he would incur future medical expenses “in any effort to be cured” and would be “unable to pursue [his] usual duties with the same degree of efficiency as prior to this accident.”

Allstate tendered its policy limits of $50,000 in settlement of the plaintiff’s claim, which the plaintiff contends was insufficient to make him whole. Therefore, the plaintiff made a claim under the SUM endorsement to the GEICO policy. The plaintiff alleges that GEICO unreasonably refused to pay the claim.

In July 2014, the plaintiff commenced this action, asserting three causes of action. The first cause of action, sounding in breach of contract, demanded payment of the SUM benefits. The second cause of action sought damages in tort for GEICO’s alleged breach of “its duty to act in good faith” by unreasonably withholding payment of SUM benefits. The third cause of action alleged that GEICO “breached its contract and/or policy, and absolute duties and obligations to the Plaintiff and its insureds.”

GEICO moved pursuant to CPLR 3211(a)(7) to dismiss the second and third causes of action in the complaint for failure to state a cause of action. It argued, inter alia, that if the second and third causes of action sounded in breach of the implied covenant of good faith and fair dealing, that covenant was implicit in every contract, and therefore those causes of action were duplicative of the cause of action sounding in breach of contract. In the order appealed from, the Supreme Court denied GEICO’s motion on the ground, inter alia, that the second and third causes of action were not duplicative of the cause of action sounding in breach of contract.

On a motion to dismiss a complaint pursuant to CPLR 3211(a)(7), the pleading is afforded a liberal construction, and the court must give the plaintiff the benefit of every possible favorable inference, accept the facts alleged in the complaint as true, and determine only whether the facts as alleged fit within any cognizable legal theory (see Leon v Martinez, 84 NY2d 83, 87-88; Caravello v One Mgt. Group, LLC, 131 AD3d 1191). The second cause of action alleges a failure to act in good faith. Implicit in every contract is an implied covenant of good faith and fair dealing (see Elmhurst Dairy, Inc. v Bartlett Dairy, Inc., 97 AD3d 781, 784). The implied covenant of good faith and fair dealing is a pledge that neither party to the contract shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruit of the contract, even if the terms of the contract do not explicitly prohibit such conduct (see Moran v Erk, 11 NY3d 452, 456; 511 West 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144, 153; Atlas El. Corp. v United El. Group, Inc., 77 AD3d 859, 860). Such a cause of action is not necessarily duplicative of a cause of action alleging breach of contract (see Elmhurst Dairy, Inc. v Bartlett Dairy, Inc., 97 AD3d at 784).

An insurance carrier has a duty to “investigate in good faith and pay covered claims” (Bi-Economy Mkt., Inc. v Harleysville Ins. Co. of N.Y., 10 NY3d 187, 195). Damages for breach of that duty include both the value of the claim, and consequential damages, which may exceed the limits of the policy, for failure to pay the claim within a reasonable time (see Panasia Estates v Hudson Ins. Co., 10 NY3d 200, 203; Bi-Economy Mkt., Inc. v Harleysville Ins. Co. of N.Y., 10 NY3d at 195). Such a cause of action is not duplicative of a cause of action sounding in breach of contract to recover the amount of the claim (see Michaan v Gazebo Hort., Inc., 117 AD3d 692; Genovese v State Farm Mut. Auto. Ins. Co., 106 AD3d 866, 868). Such consequential damages may include loss of earnings not directly caused by the covered loss, but caused, instead, by the breach of the implied covenant of good faith and fair dealing (see Mutual Assn. Adm’rs, Inc. v National Union Fire Ins. Co. of Pittsburgh, PA, 118 AD3d 856). The second cause of action states a claim for consequential damages for breach of the implied covenant of good faith and fair dealing. Therefore, that branch of GEICO’s motion which was to dismiss that cause of action was properly denied.”

Sanctioned for good reason?

Sanctioned for frivolity or ignorance?

Ultimate Health Prods., Inc. As Assignee of Ansel Leslie v American Tr. Ins. Co., 2015 NY Slip Op 87796(U)(App. Term 2d Dept. 2015)

ORDERED that within 20 days after service of a copy of this decision and order on motion upon it, The Rybak Firm, PLLC, counsel for appellant, shall pay a sanction in the sum of $1500 to the Lawyers’ Fund for Client Protection of the State of New York (see Rules of the Chief Administrator of the Courts [22 NYCRR] §§ 130-1.1[b]; 130-1.3); and it is further,

ORDERED that within 20 days after service of a copy of this decision and order on motion upon it, the Law Office of Daniel J. Tucker, counsel for respondent, shall pay a sanction in the sum of $500 to the Lawyers’ Fund for Client Protection of the State of New York (see Rules of the Chief Administrator of the Courts [22 NYCRR] §§ 130-1.1[b]; 130-1.3); and it is further,

…

Under the circumstances, the failure of either counsel to promptly advise this Court that a settlement had been reached and that the appeal should not be calendered warrants the imposition of sanctions against counsel in the amounts indicated. It is noted with respect to the amount assessed against appellant’s counsel, the court considered that The Rybak Firm, PLLC, has repeatedly violated the aforesaid rule, and for a second time, failed to respond at all to the court’s order to show cause.

Compas Med., P.C. As Assignee of David Perez v American Tr. Ins. Co., 2015 NY Slip Op 87797(U)(App. Term 2d Dept. 2015)

ORDERED that within 20 days after service of a copy of this decision and order on motion upon it, The Rybak Firm, PLLC, counsel for appellant, shall pay a sanction in the sum of $1250 to the Lawyers’ Fund for Client Protection of the State of New York (see Rules of the Chief Administrator of the Courts [22 NYCRR] §§ 130-1.1[b]; 130-1.3); and it is further,

ORDERED that within 20 days after service of a copy of this decision and order on motion upon it, the Law Office of Daniel J. Tucker, counsel for respondent, shall pay a sanction in the sum of $500 to the Lawyers’ Fund for Client Protection of the State of New York (see Rules of the Chief Administrator of the Courts [22 NYCRR] §§ 130-1.1[b]; 130-1.3); and it is further,

…

_____________________________________________________

Apparently, Rybak is a recidivist so he was hit with a progressively larger fine in both cases. I think he will be shooting for $10,000 per case by next year. But, keep your eyes open for Tucker’s firm. They may reach the $1,500 per case sanction by next year.