Key Takeaway
New York court dismisses bad faith claim against Allstate, ruling plaintiff failed to allege tort independent of contractual obligations in no-fault insurance dispute.
Dinstber v Allstate Ins. Co., 2013 NY Slip Op 07103 (3d Dept. 2013)
Thus, “here a lawsuit has its genesis in the contractual relationship between the parties, the threshold task for a court considering defendant’s motion to dismiss a cause of action for punitive damages is to identify a tort independent of the contract” (New York Univ. v Continental Ins. Co., 87 NY2d at 316). In this regard, a “defendant may be liable in tort when it has breached a duty of reasonable care distinct from its contractual obligations, or when it has engaged in tortious conduct separate and apart from its failure to fulfill its contractual obligations” (id.). Nonetheless, “where a party is merely seeking to enforce its bargain, a tort claim will not lie” (id.).”
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“Here, plaintiff seeks an award of punitive damages based upon his allegation that defendant engaged in “bad faith tactics” by failing to promptly investigate his no-fault claim and failing to renew his insurance policy. Such claim does not allege a breach of duty distinct from defendant’s contractual obligations.”
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“In light of the foregoing, even if we construe the complaint liberally, accept as true the facts as alleged and accord plaintiff the benefit of every favorable inference (see Leon v Martinez, 84 NY2d 83, 87-88 ; Murray Bresky Consultants, Ltd. v New York Compensation Manager’s Inc., 106 AD3d 1255, 1258 ; Mesiti v Mongiello, 84 AD3d 1547, 1549 ), we concur with Supreme Court that the complaint does not allege a tort existing independently from the parties’ contract (see New York Univ. v Continental Ins. Co., 87 NY2d at 320; Alexander v GEICO Ins. Co., 35 AD3d 989, 990 )”
This case is important for what it says between the lines. The complaint at issue did not allege the tort of bad faith. But, it is clearly possible. The Court also cites Alexander which states categorically hold there is no bad-faith tort arising from a breach of no-fault benefits.
Also, be aware that the Second Department held similarly in Drysdale v Allstate Prop., 109 AD3d 784 (2d Dept 2013)(“The Supreme Court properly granted that branch of the defendant’s cross motion which was for summary judgment dismissing the second cause of action, which alleged bad faith in disclaiming coverage, as the defendant established, prima facie, its entitlement to judgment as a matter of law by showing it had a reasonable basis for issuing a letter denying the plaintiff’s claim based upon the information available to it at the time.”
