Brief Fact Summary. Dr. Acquista (Plaintiff), sued New York Life Insurance Company (Defendant), his insurance company, after Defendant denied his application for disability benefits on the basis that he was not disabled according to the definition in the policy. Plaintiff sued Defendant on breach of contract, bad faith and unfair practices, fraud and fraudulent misrepresentation, and negligent infliction of emotional distress.
Synopsis of Rule of Law. In a case for wrongful denial to pay an insurance claim, other damages should be available to the plaintiff than the mere face amount of the policy
Under this approach, where an insured demonstrates more than merely a denial of benefits promised under a policy of insurance, but instead, that the insurer's denial of the claim was deliberately made in bad faith, with knowledge of the lack of a reasonable basis for the denial, the insured may be entitled to compensatory tort damages.View Full Point of Law
Issue. Was the trial court correct in dismissing Plaintiff’s claims involving bad faith conduct?
Originally, damages available for plaintiffs, who were wrongly denied coverage by insurance companies, only consisted of the value they would have received under the policy.
The court, following the trend set by other jurisdictions, finds this remedy to be inadequate. The court found that a plaintiff, who has been denied insurance money to which he is entitled in bad faith, may recover additional damages.
The trial court’s claim that, as a matter of law, Plaintiff is not disabled according to the definition in the policy, was incorrect. That is a question of fact, thus, the trial court was incorrect in dismissing the breach of contract claims
Dissent. Plaintiff alleges that Defendant did not perform Defendant’s duty to investigate and negotiate Plaintiff’s claim. Plaintiff also claims that Defendant concluded wrongly, that Plaintiff is not disabled according to the definition of the policy. A cause of action for acting in bad faith should be dismissed when it is brought with a breach of contract action because it is duplicative.
Discussion. This case deals with two major questions: first, was Plaintiff, in fact, entitled to the insurance payout and second, is Plaintiff entitled to any compensation to compensate for the way Defendant treated him. The court declined to answer the first question as it is a question of fact and, thus, for a trial court to decide. On the second question, the court offered three possible ways of dealing with such issues. The first is to frame the question of the wrongful denial if coverage only in terms of breach of contract which would entitle the Plaintiff only to the value of the policy. The second is to allow a wrongfully denied Plaintiff a tort action against the insurer. The third is to consider a breach of contract action, but to allow damages above and beyond the value of the policy, if the insurer’s actions are particularly nasty. The court determines that imposing tort liability on an insurance company is for the legislature to do, not the courts, but that the original w
ay of dealing with such claims is inadequate.