Allstate Ins. Co. v. Foschio

• Decision Date: 02 May 1983
• Citation: 93 A.D.2d 328,462 N.Y.S.2d 44
• Parties: In the Matter of ALLSTATE INSURANCE COMPANY, Petitioner, v. Leslie G. FOSCHIO, Commissioner of the Department of Motor Vehicles of the State of New York, Respondent.
• Court: New York Supreme Court — Appellate Division

Page 44

462 N.Y.S.2d 44

93 A.D.2d 328

In the Matter of ALLSTATE INSURANCE COMPANY, Petitioner, v. Leslie G. FOSCHIO, Commissioner of the Department of Motor

Vehicles of the State of New York, Respondent.

Supreme Court, Appellate Division,

Second Department.

May 2, 1983.

Joseph F. Carlino, P.C., Mineola (Julian Jawitz and Daniel J. Lefkowitz, Mineola, of counsel), for petitioner.

Robert Abrams, Atty. Gen., Hauppauge (Ronald Glickman, Asst. Atty. Gen., Hauppauge, of counsel), for respondent.

Before O'CONNOR, J.P., and BRACKEN, BROWN and NIEHOFF, JJ.

BROWN, Justice.

We consider here whether the practices employed by the petitioner insurance company in the settlement of an automobile collision claim violated the provisions of the Motor Vehicle Repair Shop Registration Act (Vehicle and Traffic Law, art. 12-A, § 398 et seq.) and the regulations adopted thereunder.

The Motor Vehicle Repair Shop Registration Act was enacted in 1974 (L.1974, ch. 946) to, inter alia, "further highway safety by promoting the proper and efficient repair of malfunctioning or disabled motor vehicles and to protect the consumers of this state from dishonest, deceptive and fraudulent practices in the repair of such motor vehicles" (Vehicle and Traffic Law, § 398-a). To effect its purposes, the act provides for registration of motor vehicle repair shops (Vehicle and Traffic Law, § 398-c), establishes requirements for the conduct of such businesses (Vehicle and Traffic Law, § 398-d), and authorizes the Commissioner of the Department of Motor Vehicles to impose various sanctions upon businesses which violate the act (Vehicle and Traffic Law, §§ 398-e, 398-f, 398-g, 398-i).

Petitioner, Allstate Insurance Company (Allstate), operates a drive-in appraisal service shop and claims adjustment office in Farmingville, New York, regulated under the Motor Vehicle Repair Shop Registration Act (see Liberty Mut. Ins. Co. v. Melton, 88 A.D.2d 585, 450 N.Y.S.2d 246; Matter of Dunn Appraisal Co. v. Melton, 79 A.D.2d 707, 434 N.Y.S.2d 261). On July 9, 1979, one of Allstate's policyholders brought a damaged 1975 Cadillac to an automobile repair shop known as Coloseum Collision. Coloseum's owner, James Gressalfi, initially estimated the cost to repair the vehicle to be $3,251.97. An adjustor from Allstate's Farmingville facility, Robert Besancon, examined the vehicle the following day and estimated the cost of repair at only $1,643.71. A major point of disagreement between the two estimators concerned whether the hood of the vehicle was repairable or whether it had to be replaced. In addition, there was a dispute as to whether used parts could be secured to repair certain items of damage and with respect to the estimated labor rate and time needed to straighten the vehicle's chassis.

Gressalfi also claimed that Besancon had overlooked certain items (i.e., a bumper guard, a tire, windshield molding, paint materials, a wheel cover and a front signal monitor) which he believed should have been included in reaching his estimate. Gressalfi conceded that Besancon had agreed to include the tire if, upon inflation, it was shown to be damaged. However, it was never inflated in the presence of Besancon. Gressalfi also conceded that he never pointed out the damage to the molding to Besancon and that the signal monitor was to come with a used fender, if one could be acquired.

A day or two thereafter, during a telephone conversation with Gressalfi, Besancon re-estimated the damages at $1,917.35, based upon his inability to locate a used fender, which had been a factor in the calculation of his original estimate. The other items of disagreement, however, remained unresolved. According to Besancon, on July 12, 1979 he sent the insured a check based upon this latter estimate. He went on vacation that evening and heard nothing further. Gressalfi, on the other hand, contended that he asked Besancon to re-inspect the vehicle. Following this conversation, Gressalfi, although still dissatisfied, made no further effort to contact Allstate, but began the repair work on the vehicle pursuant to an authorization from the insured. He did, however, contact the Long Island Auto Body Repairmen's Association (LIBRA), which sent a representative to inspect the vehicle. The LIBRA representative, after inspecting the vehicle, indicated that Gressalfi's estimate was "in line", although perhaps a little too high on labor costs. At his suggestion, Gressalfi filed a complaint with the Department of Motor Vehicles (DMV).

DMV investigator Louis Feldsott inspected the vehicle on July 23, 1979 and prepared two estimates. The first estimate was in the amount of $2,781.79. The second estimate, which was based, inter alia, upon the possibility of acquiring a used nose (constituting the hood and other parts) was in the amount of $2,100.15.

On July 27, 1979, the DMV investigator called Allstate and asked to speak with John Bearese, a field inspector. Bearese was on vacation and, upon his return on August 2, 1979, he contacted the DMV investigator and agreed to inspect the vehicle that same day. When he arrived at the shop, the vehicle was dismantled and the hood, as a result of an attempt to repair it, had numerous holes drilled through it. Bearese, after viewing the vehicle, re-estimated certain items of damage and reached a figure of $2,841.82 (a figure approximately $60 greater than the higher of the two estimates of the DMV investigator and approximately $900 more than Besancon's second estimate). An agreement was reached that day (August 2), based upon Bearese's estimate, and a supplemental check was issued to the insured on August 6, 1979.

Thereafter, based upon Gressalfi's complaint to DMV, a hearing was held before an Administrative Law Judge pursuant to section 398-f of the Vehicle and Traffic Law. At the conclusion of the hearing, the Administrative Law Judge found that Allstate was in violation of subdivision (h) of section 82.5 of the DMV regulations (15 NYCRR 82.5 [h] ), in that it engaged in a fraudulent or deceptive practice, and of subdivision (a) (par [11] ) of regulation 82.4 (15 NYCRR 82.4 [a][11] ), in that it engaged in a course of conduct which unreasonably impeded or delayed a consumer's right to a fair recovery on his claim. He recommended that Allstate's license to operate its Farmingville facility be suspended for four days (two days for each violation).

The commissioner, after affirmance of the Administrative Law Judge's findings by the Repair Shop Appeals Board (Vehicle and Traffic Law, § 398-f, subds. 2, 3), concurred and Allstate thereupon commenced the instant proceeding.

Upon review of the entire record, we conclude that the administrative findings herein are not supported by substantial evidence (cf. Matter of Hannon v. Cuomo, 52 N.Y.2d 775, 436 N.Y.S.2d 617, 417 N.E.2d 1005; 300 Gramatan Ave. Assoc. v. State Div. of Human Rights, 45 N.Y.2d 176, 181-182, 408 N.Y.S.2d 54, 379 N.E.2d 1183).

The term "fraudulent or deceptive practices", as used in relation to the regulation of commercial activity, is often broadly construed, but has generally been interpreted to include those acts which may be characterized as dishonest and misleading (see People v. Federated Radio Corp., 244 N.Y. 33, 38-39, 154 N.E. 655; Matter of Lefkowitz v. Bull Investment Group, 46 A.D.2d 25, 28, 360 N.Y.S.2d 488; Matter of Prudential Adv. v. Attorney-General of State of N.Y., 22 A.D.2d 737, 253 N.Y.S.2d 491; Executive Law, § 63, subd. 12; General Business Law, § 349).

Since the purpose of such restrictions on commercial activity is to afford the consuming public expanded protection from deceptive and misleading fraud, the application is ordinarily not limited to instances of intentional fraud in the traditional sense (Matter of State of New York v. Bevis Ind., 63 Misc.2d 1088, 314 N.Y.S.2d 60; see, also, People v. Federated Radio Corp., supra; Matter of Lefkowitz v. Bull Investment Group, supra ). Therefore, proof of an intent to defraud is not essential.

Nevertheless, the instant matter, addressing as it does an alleged fraudulent or deceptive practice in the estimation of damages, calls into question the good faith of the party making the appraisal. If the estimation of damages is rationally justifiable, although of a lesser amount than a comparative estimate, it would be inappropriate to characterize the appraisal as fraudulent.

In sustaining the charge that Allstate had engaged in a fraudulent or deceptive practice, the Administrative Law Judge found that Allstate, in "its original estimate by Besancon was low on some labor items, overlooked some damaged items and called for straightening of the hood, which warranted...