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PLAINTIFF ALLEGED DEFENDANT INSURER BREACHED THE INSURANCE CONTRACT BY FAILING TO PAY THE FULL AMOUNT OF THE COVERAGE; THAT ALLEGATION DOES NOT SUPPORT AN ADDITIONAL CAUSE OF ACTION FOR BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined the cause of action for breach of the implied covenant of good faith and fair dealing duplicated the breach of contract cause of action and should have been dismissed. Plaintiff alleged defendant insurer failed to pay her the full amount of the supplemental uninsured motorist (SUM) coverage:

In the context of insurance contracts specifically, the implied covenant of good faith and fair dealing includes a duty on the part of the insurer ” ‘to investigate in good faith and pay covered claims’ ” … “[I]n order to establish a prima facie case of bad faith, the plaintiff must establish that the insurer’s conduct constituted a ‘gross disregard’ of the insured’s interests—that is, a deliberate or reckless failure to place on equal footing the interests of [the] insured with [the] insurer’s own interests” … .

… [T]he allegations in plaintiff’s complaint that defendant violated its duty of good faith and fair dealing are predicated solely upon the claim that defendant failed or refused to pay her the full amount of SUM coverage under the insurance policy, i.e., that defendant had breached the terms of the policy. Consequently, plaintiff failed to state a cause of action for breach of the implied duty of good faith and fair dealing … , and the court should have granted defendant’s motion insofar as it sought to dismiss that cause of action as duplicative of the breach of contract cause of action … . Brown v Erie Ins. Co., 2022 NY Slip Op 04459, Fourth Dept 7-8-22

Practice Point: In the context of an insurance policy, a cause of action for breach of the implied covenant of good faith and fair dealing must be supported by allegations of the insurer’s gross disregard of the insured’s interests, which is not demonstrated by the alleged failure to pay the full amount of the coverage (a simple breach of contract).

 

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