Supreme Automotive Mfg. Corp. v. Continental Cas. Co.

• Decision Date: 17 March 1987
• Citation: 512 N.Y.S.2d 820,126 A.D.2d 153
• Parties: SUPREME AUTOMOTIVE MFG. CORP., and Super Mfg. Corp., Plaintiffs-Respondents, v. CONTINENTAL CASUALTY COMPANY, Defendant-Appellant, and Robert Persons, Defendant.
• Court: New York Supreme Court — Appellate Division

Page 820

512 N.Y.S.2d 820

126 A.D.2d 153

SUPREME AUTOMOTIVE MFG. CORP., and Super Mfg. Corp. Plaintiffs-Respondents, v. CONTINENTAL CASUALTY COMPANY, Defendant-Appellant and Robert Persons, Defendant.

Supreme Court, Appellate Division First Department.

March 17, 1987.

John M. Speyer, of counsel (Michelle J. France with him on brief, Speyer & Perlberg, New York City), for defendant-appellant.

Stuart A. Jackson, New York City, for plaintiffs-respondents.

Before SANDLER, J.P., and CARRO, KASSAL, ELLERIN and WALLACH, JJ.

KASSAL, Justice.

The action was commenced to recover proceeds of a fire insurance policy issued by appellant, covering plaintiffs' premises at 237 25th Street, Brooklyn, New York. On November 28 and 29, 1979, a fire occurred at plaintiffs' plant. Following an investigation by the insurer's independent adjuster and by the City Fire Marshal, it was determined that the fire had an incendiary origin and, accordingly, the carrier denied payment under the policy. This appeal concerns only the fifth cause of action in the complaint to recover punitive damages, based upon plaintiffs' claim that such relief is available and warranted as a result of defendant's morally reprehensible conduct which amounts to a fraud directed at the general public.

Essentially, plaintiffs point to three instances of wrongdoing by the insurer as justifying exemplary relief: (1) an alleged bribe offer to plaintiffs' employee to change his report as to the circumstances respecting the inoperability of the sprinkler system on the day of the fire (2) the removal of the electrical connection box from plaintiffs' premises, which plaintiffs claim was the accidental cause of the fire and which hampered the Fire Marshal's investigation; and, (3) an alleged false statement from a witness that plaintiffs' president's automobile was seen at the premises shortly before the fire, which was presented to bolster the insurer's defense of arson.

The fifth cause of action, which seeks punitive damages as a remedy for these wrongful acts in processing the claim, further alleges that, "in recent years", Continental "adopted and pursued a general policy with respect to claims asserted under fire insurance policies of raising colorable defenses of alleged incendiarism by the insured, known to be without merit, in order to use such colorable defenses as a basis upon which to delay making payment under such policies so as to obtain * * * the benefit of the use of the money" during the ensuing period required to prosecute a suit to recover on the policies.

Special Term, denying defendant's motion for partial summary judgment dismissing this cause of action, concluded that the fraudulent scheme, if established at trial, would amount to a public wrong, sufficient to authorize recovery of exemplary damages. On this record, we disagree and find no basis to preserve the punitive damages issue for trial.

It is firmly established in this State that, in an action to recover on an insurance policy, punitive or exemplary damages may not be obtained "unless there is a showing of wanton dishonesty as to imply a criminal indifference to civil obligations--morally culpable conduct directed at the general public, a public as opposed to a mere private wrong." (Samovar of Russia v. Generali, 102 A.D.2d 279, 282, 476 N.Y.S.2d 869).

As we recognized in Samovar, the principle is well-established, has been adopted by the Court of Appeals (Halpin v. Prudential Ins. Co., 48 N.Y.2d 906, 425 N.Y.S.2d 48, 401 N.E.2d 171) and has been consistently followed in this Department (Jacobson v. New York Prop. Ins. Underwriting Assn., 120 A.D.2d 433, 501 N.Y.S.2d 882; Royal Globe Ins. Co. v. Chock Full O'Nuts Corp., 86 A.D.2d 315, 449 N.Y.S.2d 740; Cook v. Hartford Fire Ins. Co., 97 A.D.2d 731, 469 N.Y.S.2d 4; Holoness Realty Corp. v. New York Prop. Ins. Underwriting Assn., 75 A.D.2d 569, 427 N.Y.S.2d 264; Cohen v. New York Prop. Ins. Underwriting Assn., 65 A.D.2d 71, 410 N.Y.S.2d 597; Kleiner v. Thomas Jefferson Life Ins. Co., 63 A.D.2d 636, 405 N.Y.S.2d 255; John C. Supermarket, Inc. v. New York Prop. Ins. Underwriting Assn., 60 A.D.2d 807, 400 N.Y.S.2d 824; Marvex Processing & Finishing Corp. v. Allendale Mut. Ins. Co., 60 A.D.2d 800, 400 N.Y.S.2d 616, affg. 91 Misc.2d 683, 398 N.Y.S.2d 464) and in the Second Department (Shapiro v. Prudential Ins. Co., 81 A.D.2d 661, 438 N.Y.S.2d 363; Waterview Catering Corp. v. New York Prop. Ins. Underwriting Assn., 79 A.D.2d 973, 434 N.Y.S.2d 456; M.S.R. Assoc. v. Consolidated Mut. Ins. Co., 58 A.D.2d 858, 396 N.Y.S.2d 684). This adheres to the general rule in contract actions that, in order to support an award of punitive damages,...