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THE EXCESS INSURANCE CARRIER WAS NOT BARRED FROM RECOVERY OF THE AMOUNT IT CONTRIBUTED TO THE SETTLEMENT OF A PERSONAL INJURY ACTION BY THE VOLUNTARY PAYMENT DOCTRINE; THE EXCESS INSURANCE CARRIER’S BREACH-OF-THE-COVENANT-OF-GOOD-FAITH ACTION AGAINST THE PRIMARY CARRIER PROPERLY SURVIVED SUMMARY JUDGMENT (SECOND DEPT).

The Second Department determined the excess insurance carrier, MetLife, could maintain an action against the primary liability carrier, GEICO, for breach of the implied covenant of good faith and fair dealing, alleging bad faith. GEICO  unsuccessfully argued the voluntary payment doctrine barred MetLife from recovering the amount it contributed to the settlement of the personal injury action stemming from an auto accident:

“The voluntary payment doctrine ‘bars recovery of payments voluntarily made with full knowledge of the facts, and in the absence of fraud or mistake of material fact or law'” … . However, the voluntary payment doctrine does not bar an excess insurance carrier, such as MetLife, that contributed to a settlement of an underlying action from seeking to recover its settlement contribution from a primary insurance carrier, such as GEICO, based on the primary carrier’s alleged bad faith. Despite an excess insurance carrier’s decision to contribute to a settlement, an excess insurance carrier may later maintain an action against a primary insurance carrier for breaching its duty of good faith in defending and settling claims over which it exercised exclusive control, provided that the excess insurance carrier reserved its rights against the primary insurance carrier at the time of the settlement … . An insurer may be held liable for breaching its duty of good faith … , and a primary liability insurer owes an excess insurance carrier the same duty of good faith as the primary liability insurer owes its insureds … . Metropolitan Prop. & Cas. Ins. Co. v GEICO Gen. Ins. Co., 2020 NY Slip Op 05045, Second Dept 9-23-20

 

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