What Is The Time for Responding to a Defense Tender?
Insurers must acknowledge an initial claim within 15 days of receipt. N.Y. Admin. Code § 216.4.
Insurers must accept or deny coverage within 15 days of receipt of proof of loss. N.Y. Admin. Code § 216.6.
Does Reserving Rights Create a Conflict of Interest?
Yes, where an insurer defends under a reservation of rights, the insured is entitled to retain its own counsel. Federated Dept. Stores, Inc. v. Twin City Fire Ins. Co., 807 N.Y.S.2d 62 (N.Y.App.Div.1.Dept. 2006).
Does a Reservation of Rights Create Additional Duties?
No cases found.
What Must Be Done If A Conflict of Interest Exists?
Independent counsel is only required where a clear conflict of interest exists between the interests of the policyholder and the insurer, as where counsel’s duty to the policyholder would require him to seek to dismiss the action on grounds that would affect the insurer’s interests. Public Service Mutual Ins. Co. v. Goldfarb, 425 N.E.2d 810, 815 (N.Y. 1981).
Who Is Responsible for Fees of Independent Counsel?
The insurer is required to pay for independent counsel of the insured’s choosing. 69th Street and 2d Ave. Garage Associates v. Ticor Title Guaranty Co., 622 N.Y.S.2d 13, 14 (App. Div. 1995).
What Are Independent Counsel’s Obligations?
No cases found.
What Settlement Duties Exist?
No cases found.
What Actions May Result in a Claim for Bad Faith?
An insurer is bound by a contractual duty of good faith and fair dealing, implicit in insurance contracts, which requires a reasonable insurer to investigate a claim in good faith and pay covered claims. Bi-Economy Market, Inc. v. Harleysville Ins., 886 N.E.2d 127, 131 (N.Y. 2008).
An insurer that conducts the defense of a liability claim in “gross disregard” of its insured’s interest, even if the insurer had no “sinister motive” could be found to have acted in bad faith. Pavia v. State Farm Mutual Automobile Ins. Co., 626 N.E.2d 24, 27 (N.Y. 1993).
There is no private right of action for bad faith against the insurer pursuant to New York’s Unfair Claims Settlement Practices Act. N.Y. Ins. Law § 2601; Rocanova v. Equitable Life Assurance, 634 N.E.2d 940 (N.Y. S.2d 1994).
Are Attorney’s Fees Recoverable in Insurer-Insured Dispute?
Attorney’s fees are available if a violation of the Consumer Protection Act is established. N.Y. General Business Law § 349(h); Wilner v. Allstate Ins. Co., 71 A.D.3d 155, 168 (N.Y.A.D. 2 Dept., 2010).
Are Punitive Damages Recoverable in Insurer-Insured Dispute?
Punitive damages may also be awarded in cases where an insurer breached its implied covenant of good faith and fair dealing. Wilner v. Allstate Ins. Co., 71 A.D.3d 155, 167 (2d Dept. 2010).
They are available only where necessary to deter insurers from engaging in conduct that may be characterized as “gross” and “morally reprehensible” and of such wanton dishonesty as to imply a criminal indifference to civil obligations.” N.Y. University v. Continental Ins. Co., 662 N.E.2d 763, 767 (N.Y.S. 2d 1995).
Alternative Coverage Options
Declaratory judgment actions may be filed by an insurer in advance of the resolution of the underlying case. Cocchi v. National Union Fire Ins. Co. of Pittsburgh, 548 N.Y.S.2d 804 (2d Dept. 1990).
New York courts are conflicted with regards to whether an insurer may intervene in the case against its insured. Compare American Home Assurance Company v. Weissman, 434 N.Y.S.2d 410 (App. Div. 1981)(insurer can intervene as special verdict is appropriate for determining allocation) with Kaczmarek v. Shoffstall, 500 N.Y.S.2d 902 (App. Div. 1986) (insurer cannot resolve coverage issue in the context of the underlying case).
Relevant Statutes
Declaratory Judgment – N.YC.P.L.R.. 3001
“The supreme court may render a declaratory judgment having the effect of a final judgment as to the rights and other legal relations of the parties to a justiciable controversy whether or not further relief is or could be claimed. If the court declines to render such a judgment it shall state its grounds.”
Unfair Claims Settlement Practices Act – N.Y. Ins. Law § 2601.
Unfair or Deceptive Consumer Practices – N.Y. General Business Law § 349