Raymond Pink, his wife Michelle, and Matthew Ricci were spectators at a youth hockey game when a fight broke out in the stands and Ricci assaulted Pink. The Pinks filed a personal injury suit seeking damages for injuries caused by Ricci.
Ricci held a homeowner’s insurance policy through State Farm and notified State Farm of this claim. State Farm promptly sent Ricci a letter five days after receiving notice of the suit, reserving its right to deny and disclaim coverage. Nine days after receiving notice, State Farm advised Ricci that based on the question of coverage he had the right to select counsel to defend him at State Farm’s expense in the underlying action. Ricci declined to do so.
Two years later, State Farm commenced a declaratory judgment action seeking a declaration of the rights of the parties under the homeowner’s policy. Ricci answered and alleged several counterclaims, most notably that State Farm had engaged in bad faith and improper conduct. State Farm moved for partial summary judgment to dismiss this counterclaim and several others. The trial court denied State Farm’s summary judgment motion as to the bad faith counterclaim.
On appeal, Ricci did not submit any opposition, but the Pinks did. The Fourth Department ultimately granted State Farm’s summary judgment motion, stating that State Farm’s approach to clarifying its obligations under the policy was “not only permissible but advisable.” Addressing the two-year lapse between reserving the right to disclaim and filing the declaratory judgment, the court held that failure to disclaim in a timely manner is insufficient to establish bad faith. The court also noted that if State Farm had simply disclaimed coverage after two years instead of filing a declaratory judgment, the untimely disclaimer would have been ineffective with respect to the Pinks. Finally, the court noted that where a claim falls outside the scope of coverage afforded by the policy, no disclaimer is required.
Thanks to Michael Nunley for his contribution to this post.