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CAUSE OF ACTION FOR BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING NOT DUPLICATIVE OF BREACH OF CONTRACT CAUSE OF ACTION.

The Second Department determined a cause of action alleging breach of the insurer’s duty to act in good faith was not duplicative of the breach of contract cause of action. Therefore the motion to dismiss the “duty to act in good faith” cause of action was properly denied. Plaintiff sued his own car insurance carrier to recover supplementary uninsured/underinsured motorist (SUM) coverage. The court explained the elements of a “duty to act in good faith” cause of action:

 

The second cause of action alleges a failure to act in good faith. Implicit in every contract is an implied covenant of good faith and fair dealing … . The implied covenant of good faith and fair dealing is a pledge that neither party to the contract shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruit of the contract, even if the terms of the contract do not explicitly prohibit such conduct … . Such a cause of action is not necessarily duplicative of a cause of action alleging breach of contract … .

An insurance carrier has a duty to “investigate in good faith and pay covered claims” … . Damages for breach of that duty include both the value of the claim, and consequential damages, which may exceed the limits of the policy, for failure to pay the claim within a reasonable time … . Such a cause of action is not duplicative of a cause of action sounding in breach of contract to recover the amount of the claim … . Such consequential damages may include loss of earnings not directly caused by the covered loss, but caused, instead, by the breach of the implied covenant of good faith and fair dealing … . The second cause of action states a claim for consequential damages for breach of the implied covenant of good faith and fair dealing. Gutierrez v Government Empls. Ins. Co., 2016 NY Slip Op 01292, 2nd Dept 2-24-16

 

INSURANCE LAW (CAUSE OF ACTION BASED ON DUTY TO ACT IN GOOD FAITH)/CONTRACT LAW (INSURANCE, CAUSE OF ACTION BASED UPON INSURER’S DUTY TO ACT IN GOOD FAITH IS NOT DUPLICATIVE OF  BREACH OF CONTRACT CAUSE OF ACTION)/IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING (INSURANCE, CAUSE OF ACTION BASED UPON INSURER’S DUTY TO ACT IN GOOD FAITH IS NOT DUPLICATIVE OF BREACH OF CONTRACT CAUSE OF ACTION)

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