State v. Merchants Ins. Co. of New Hampshire

• Decision Date: 07 March 1985
• Citation: 109 A.D.2d 935,486 N.Y.S.2d 412
• Parties: STATE of New York, Respondent, v. MERCHANTS INSURANCE COMPANY OF NEW HAMPSHIRE, Formerly New Hampshire Merchants Insurance Company, Inc., Appellant.
• Court: New York Supreme Court — Appellate Division

Page 412

486 N.Y.S.2d 412

109 A.D.2d 935

STATE of New York, Respondent, v. MERCHANTS INSURANCE COMPANY OF NEW HAMPSHIRE, Formerly New

Hampshire Merchants Insurance Company, Inc., Appellant.

Supreme Court, Appellate Division,

Third Department.

March 7, 1985.

Maynard, O'Connor & Smith, Albany (Roger J. Cusick, Albany, of counsel), for appellant.

Robert Abrams, Atty. Gen., Albany (Maurice K. Peaslee, Asst. Atty. Gen., Albany, of counsel), for respondent.

Before CASEY, J.P., and WEISS, MIKOLL, LEVINE and HARVEY, JJ.

HARVEY, Justice.

Appeal from a judgment of the Supreme Court in favor of plaintiff, entered December 27, 1983 in Albany County, upon a verdict rendered at Trial Term.

On the afternoon of March 14, 1975, a State-owned dump truck equipped with a snowplow attachment collided with a pickup truck in the Town of Deerpark in Orange County. The operator of the pickup truck died as a result of injuries sustained in the accident and a claim for wrongful death was commenced against the State in the Court of Claims. The estate of the operator was awarded $179,069 in the Court of Claims action.

Defendant in the instant action was the liability insurer for motor vehicles owned and operated by the State. The policy limit was $100,000. After the accident, there were communications between representatives of the estate and defendant. However, no settlement was achieved. After the decision in the Court of Claims, the State negotiated a reduction in the award to $150,000 and then commenced this action to recover the extra $50,000 from defendant, alleging bad faith in the settlement negotiations. The jury found in favor of the State and this appeal by defendant ensued.

Defendant contends that plaintiff failed to establish a prima facie case for imposing excess liability on the basis of bad faith in its settlement negotiations and that the verdict in the State's favor was not supported by a fair preponderance of the evidence. We reject defendant's contention since our review of the record reveals that there was sufficient evidence presented to enable the jury to reasonably reach a decision in favor of the State.

Insurance Law § 2601(a)(4) notes, inter alia, that it is an unfair practice for insurers "not [to attempt] in good faith to effectuate prompt, fair and equitable settlements of claims submitted in which liability has become reasonably clear". A complaint adequately sets forth a prima facie case against an insurer for liability in excess of policy limits where it is asserted that "an insured lost an actual opportunity to settle the negligence claim against him within the coverage limits of his policy by reason of the insurer's purported 'bad faith' " (Reifenstein v. Allstate Ins. Co., 92 A.D.2d 715, 716, 461 N.Y.S.2d 104).

A reasonable investigation of the facts of the accident would indicate that the chances of successfully defending the Court of Claims action were very remote. The State vehicle crossed over the center line and collided with decedent in her own lane of traffic. Consequently, a fair and reasonable offer should have been made. There was a strong indication that the case could have been settled for $90,000. This was contained in a...