Key Takeaway
Landmark bad faith insurance case Perlbinder v Vigilant allows punitive damages for breach of implied covenant, potentially reshaping NY insurance law.
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 ; see Brown v Government Empls. Ins. Co., 156 AD3d 1087, 1088-1089 ; Wilner v Allstate Ins. Co., 71 AD3d 155, 164-165 ; Acquista v New York Life Ins. Co., 285 AD2d 73, 82 ; cf. Tiffany Tower Condominium, LLC v Insurance Co. of the Greater N.Y., 164 AD3d 860, 863 ; Genesco Entertainment, a Div. of Lymutt Indus., Inc. v Koch, 593 F Supp 743, 752 ).”
(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 ). 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 ; Ural v Encompass Ins. Co. of Am., 97 AD3d 562, 565 ; 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 ), 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).”
