Attorneys for policyholders often plead claims in complaints that sound like torts or bad faith claims in an effort to pierce policy limits. But in order to succeed in New York, a policy holder must plead and proof specific tortious conduct. Otherwise, they are limited to breach of contract claims for policy proceeds.
Recently, in Quick Response Commercial Division, LLC, v. AON Risk Services Of Illinois, Inc., the insurer paid only a portion of a fire loss and the plaintiff sued seeking payment of the entire loss. The complaint alleged that the insurer breached the insurance contract and that it also breached “the implied covenant of good faith and fair dealing.” But the Court dismissed the breach of the implied covenant of good faith and fair dealing claim as duplicative because every insurance contract contains this implied covenant.
In order to prevail on an independent tort of a breach of implied covenant, the insured must allege that the insurer engaged in “egregious conduct” directed to the insured and that this conduct was also a pattern directed to the public generally. Because the plaintiff had failed to make such an allegation here, it was limited to the breach of contract claim.
Thanks to Mendel Simon for his contribution to this post. If you would like more information, please write to Mike Bono at email@example.com.