Eight Years after Bi-Economy and Panasia, What is the Law of Bad Faith in New York?

July 26, 2016 Published Work
Insurance Litigation Reporter Vol. 38, No. 12

Prior to 2008, the law of bad faith in New York seemed fairly well established. A claim for bad faith against an insurer, which might give rise to extra contractual compensatory damages, could only be maintained by demonstrating ‘gross disregard' to the interests of the policy holder.2 However, in deciding the Bi-Economy and Panasia cases on February 19, 2008,3 the Court of Appeals appeared to abandon the ‘gross disregard' standard and, instead, appeared to hold, in the context of first party claims, that a policyholder can recover consequential damages from an insurer in a coverage dispute, without a showing of bad faith at all.

It was in the immediate aftermath of these decisions that we and our colleagues wrote an article commenting on Bi-Economy and Panasia, in which we concluded that it was now a "whole new ball game and there aren't any rules" for insurance coverage disputes in New York.4 However, in 2010, when we surveyed the ensuing jurisprudence in New York in a subsequent article, we concluded that little had changed.5 Now, six years after that review of the legal landscape, we return to this topic and undertake another survey.

[To read the full article, please click the PDF below.]

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2. Pavia v. State Farm Mutual Auto. Ins. Co.,626 N.E.2d 24, 26 (N.Y 1993); See also DiBlasi v. Aetna Life & Cas. Ins. Co., 147 A.D.2d 93, 98-99 (N.Y. App. Div. 2d. Dept. 1993) ("the standard is not that of a sinister motive – guilty knowledge – an intent to do harm or deprive another of his just rights and property, but rather, whether the conduct in question constituted a gross disregard of its insured's interests" (internal quotation marks omitted)).

3. Bi-Economy Market Inc., v. Harleysville Ins. Co. of New York, 886 N.E.2d 127 (N.Y. 2008); Panasia Estates, Inc. v. Hudson Ins. Co., 886 N.E.2d 135 (N.Y. 2008).

4. Charles Platto, Rachel Lebejko-Preister, and Sujuta Gadkar Wilcox, "New York's ‘Good Faith' Standard – What Does it Mean for Bad Faith?," 30-6 Ins. Litigation R. 165, 165 (Apr. 23, 2008).

5. Charles Platto, Joseph Grasso, Rachel Lebejko Priester and Alison Weir, "What is the Law of Bad Faith in New York Two Years Ago after Bi-Economyand Panasia– Have The Questions Been Answered?," 32-3 Ins. Litigation R. 69 (March 8, 2010).

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