Key Takeaway
Expert analysis of insurance bad faith claims in New York. Learn from the Liang v Progressive case and protect your rights. Call 516-750-0595 for help.
Understanding Insurance Bad Faith Claims in New York
When you purchase an insurance policy, you enter into a contract with your insurance company. This contract creates a relationship of trust and good faith – you pay your premiums, and in return, the insurer promises to provide coverage for valid claims. Unfortunately, not all insurance companies honor this fundamental principle. When insurers fail to act in good faith, policyholders in New York may have grounds for a bad faith insurance claim.
The recent case of Liang v Progressive Cas. Ins. Co., 2019 NY Slip Op 03327 (2d Dept. 2019), provides important insights into when bad faith claims are warranted and when they may be dismissed by New York courts.
The Liang v Progressive Decision: Key Takeaways
In this significant ruling, the New York Second Department addressed whether Progressive Insurance Company’s conduct constituted bad faith when handling a coverage dispute. The court ultimately determined that Progressive’s actions did not rise to the level of bad faith, providing important guidance for future insurance disputes.
“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. “n 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 ) 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 ).
Progressive’s Defense Strategy
The court found that Progressive successfully defended against the bad faith claim by demonstrating 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).
What Constitutes Insurance Bad Faith in New York?
New York law sets a high bar for proving insurance bad faith. Unlike some other states, New York does not recognize a separate tort cause of action for bad faith. Instead, bad faith claims are typically pursued as breach of contract claims with potential punitive damages for egregious conduct.
Elements Required to Prove Bad Faith
To establish a prima facie case of bad faith in New York, a policyholder must demonstrate:
- Gross disregard of the insured’s interests: The insurer’s conduct must go beyond mere negligence or poor judgment
- Pattern of conscious indifference: Evidence of systematic disregard for the policyholder’s rights and interests
- Lack of reasonable basis: The insurer’s actions must lack any reasonable justification or arguable basis
- Knowledge of probable invalidity: The insurer knew or should have known that its denial lacked merit
The “Arguable Basis” Standard
The Liang decision emphasizes the importance of the “arguable basis” standard. As the court noted: “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.”
This observation highlights the nuanced nature of insurance bad faith law. Even when coverage disputes exist, insurers may successfully defend against bad faith claims if they can demonstrate they had reasonable grounds for their position.
Common Examples of Insurance Bad Faith
While the Liang case shows when bad faith claims may not succeed, there are numerous scenarios where New York courts have found insurers liable for bad faith conduct:
Unreasonable Claim Denials
When insurers deny valid claims without reasonable investigation or justification, they may face bad faith liability. This includes situations where insurers:
- Refuse to investigate claims thoroughly
- Misrepresent policy language or coverage terms
- Fail to explain the basis for claim denials
- Ignore relevant evidence supporting coverage
Delayed Claims Processing
Unreasonable delays in processing claims can constitute bad faith, particularly when insurers:
- Fail to acknowledge receipt of claims
- Request unnecessary documentation repeatedly
- Delay payment without justification
- Create artificial obstacles to settlement
Settlement Misconduct
In liability cases, insurers have a duty to their insureds to make reasonable settlement decisions. Bad faith may occur when insurers:
- Refuse reasonable settlement offers within policy limits
- Fail to communicate settlement opportunities to insureds
- Prioritize their own interests over those of policyholders
How JTNY Law Can Help with Insurance Bad Faith Claims
Insurance companies have teams of experienced attorneys working to protect their interests. When facing potential bad faith conduct, policyholders need equally experienced legal representation to level the playing field.
Our Approach to Insurance Bad Faith Cases
At the Law Office of Jason Tenenbaum, we understand the complexities of New York insurance law and have successfully represented clients in bad faith insurance disputes. Our approach includes:
- Thorough case evaluation: We carefully review your policy, claim history, and insurer communications to assess the strength of your bad faith claim
- Expert investigation: Our team works with insurance industry experts to evaluate whether your insurer’s conduct meets the legal standards for bad faith
- Aggressive advocacy: We fight to protect your rights and pursue maximum compensation for damages caused by insurer misconduct
- Trial experience: When necessary, we have the courtroom experience to take your case to trial and present compelling arguments to judges and juries
Related Insurance Coverage Issues
Our firm also handles related insurance coverage disputes, including personal injury claims, no-fault insurance disputes, and uninsured/underinsured motorist claims. These areas of practice often intersect with bad faith issues, as insurers may improperly deny coverage across multiple types of policies.
The Importance of Timely Action
If you suspect your insurance company is acting in bad faith, it’s crucial to take prompt legal action. New York’s statute of limitations for contract claims is generally six years, but waiting too long can prejudice your case in other ways:
- Evidence may be lost or destroyed
- Witnesses’ memories may fade
- Documentation may become unavailable
- Your financial situation may deteriorate without proper insurance coverage
Frequently Asked Questions About Insurance Bad Faith Claims
Q: How do I know if my insurance company is acting in bad faith?
A: Signs of potential bad faith include unreasonable claim denials, excessive delays in processing claims, failure to investigate thoroughly, misrepresenting policy terms, or refusing to communicate about your claim. However, not every dispute with your insurer constitutes bad faith – the conduct must rise to the level of gross disregard for your interests.
Q: Can I sue my insurance company for bad faith in New York?
A: Yes, but New York law sets high standards for bad faith claims. You must prove that your insurer’s conduct constituted a gross disregard of your interests and showed a pattern of conscious indifference. Unlike some states, New York doesn’t recognize a separate tort for insurance bad faith, so these claims are typically pursued as breach of contract actions.
Q: What damages can I recover in a bad faith insurance case?
A: Successful bad faith claimants may recover the benefits wrongfully denied, consequential damages caused by the denial (such as additional medical expenses or lost income), attorneys’ fees in some cases, and potentially punitive damages for particularly egregious conduct.
Q: How long do I have to file a bad faith claim against my insurer?
A: The statute of limitations for insurance contract disputes in New York is generally six years from the date of the breach. However, it’s important to consult with an attorney promptly, as various factors can affect the applicable time limits in your specific case.
Q: Should I try to resolve the dispute with my insurance company before hiring a lawyer?
A: While you can attempt to resolve disputes directly with your insurer, it’s often beneficial to consult with an experienced insurance attorney early in the process. Insurance companies have teams of lawyers and adjusters working to minimize payouts, and having legal representation can help ensure your rights are protected from the outset.
Moving Forward After Insurance Bad Faith
The Liang v Progressive decision reminds us that insurance bad faith claims require careful legal analysis and strong evidence. While not every coverage dispute will support a bad faith claim, when insurers truly act with gross disregard for their policyholders’ interests, the law provides remedies.
If you’re dealing with an uncooperative insurance company that may be acting in bad faith, don’t face them alone. The experienced attorneys at the Law Office of Jason Tenenbaum are here to help you understand your rights and pursue the coverage you deserve.
Call 516-750-0595 for a free consultation to discuss your insurance dispute and learn how we can help protect your interests against insurance company misconduct.
