Damages - New York
There are general principles established in New York law that concern the damages that are available to insurance policyholders when they bring a lawsuit for a bad-faith insurance denial.
Breach of Contract and Breach of the Duty of Good Faith
A plaintiff in a bad-faith insurance denial action will frequently allege claims of breach of contract and breach of the duty of good faith and fair dealing. These claims arise when the insurer improperly denies a claim under a fire, property, health, disability or life insurance policy. Although these two claims are closely related to one another, there can be differences between them. For instance, a breach of contract claim may result from the failure to pay for a loss, while a breach of the duty of good faith may arise from a failure to fairly, timely, and accurately examine the claimed loss.
In 2008 the New York Court of Appeals held that policyholders can recover consequential damages for an insurance company's breach of the duty of good faith. These damages--referred to as "extra-contractual" damages--must have been foreseeable to the parties when they entered into the contract.
If, for instance, an insured suffers a calamitous event and does not receive payment from the insurance company, the insured may suffer additional losses. An award of consequential damages, in this situation, is intended to place the insured in the position it would have been in had the contract been performed. It also may require the insurance company to pay damages beyond the policy limits.
In New York, a claim for punitive damages exists when the defendant has acted with conscious disregard of the rights of others. This equates to conduct that is morally reprehensible, wanton, or exhibiting criminal indifference. The conduct also must be part of a pattern directed at the public generally. It is rare for New York courts to impose punitive damages on insurance companies.
Consumer Protection Laws
While New York Insurance Law § 2601 sets forth "Unfair Claims Settlement Practices," there is no private right of action under the law and it can only be enforced by the government.
New York General Business Law § 349 protects against deceptive business practices. But, for it to apply, the insurer's conduct must impact consumers at large. Its reach is limited because private insurance contract disputes that are unique to the parties will not fall within the statute.
In addition, this is a rather weak consumer law because it only provides for actual damages and attorney's fees, as opposed to other state consumer protection laws, like New Jersey, that allow for treble damages.
Please contact New Jersey and New York Insurance Lawyer Eric Dinnocenzo at (212) 933-1675 for a free consultation if you have experienced a bad faith insurance denial.