Hunter v. Hereford Ins. Co.
(NYC Civ. Ct., Queens Co., decided 8/14/2015)
Mary Hunter was involved in motor vehicle accident with Hereford Insurance Company's insured, Herman Charles. Unimpressed with the unserious nature of Hunter's claimed bodily injuries, Hereford's claim examiner, Sherri Gordon, offered Hunter $3,000 to settle her BI claim. An indignant but undaunted Hunter both complained as a "third-party insurance claimant" to the New York State Department of Financial Services' Customer Assistance Unit and sued not the adverse driver Herman, but his insurer Hereford and Hereford's claims examiner Gordon personally for $21,500, the amount to which Hunter alleged she was "entitled to for injuries...incurred as a result of the accident caused by defendant's insured." Hunter's complaint in this action purported to assert causes of action sounding in unfair claims practices and insurer bad faith.
Hereford moved to dismiss the action: (1) against Hereford for Hunter's failure to state a cause of action, or in the alternative on the ground that Hunter lacked standing to file the action for lack of privity of contract; (2) against its claim examiner Sheri Gordon on the ground as an agent of a disclosed principal she could not be held personally liable; (3) for failure to state a cause of action for unfair claims practices; and (4) for costs and sanctions against plaintiff for filing a frivolous action.
In GRANTING Hereford's motion in all respects, New York City Civil Court Judge Cheree A. Buggs first dismissed the action against Hereford's claims examiner based on the well-settled law of New York that "...[u]nless the agent has assumed authority and responsibility, as if he were acting on his own account, then the duty which the agent fails to perform is a duty owing to his principal and not to the third party, to whom he has assumed no obligation[.]" Finding that Hunter had presented no argument or evidence that Gordon in any way assumed the "authority and responsibility" New York case law requires in order to make her personally liable, the court dismissed Hunter's complaint as to Gordon.
Judge Buggs next distinguished and rejected as authority the two cases Hunter's attorney cited -- Bi-Economy Market v Harleysville, 10 NY3d 187 (2008), and Pavia v State Mut. Auto Ins. Co., 82 NY2d 455 (1993) -- in opposition to Hereford's motion to dismiss and in support of the complaint's cause of action for unfair claim practices. The court reasoned:
New York State Insurance Law §2601 prohibits unfair claim settlement practices; however, that statute regards oversight by the New York State Department of Financial Services (NYSDFS) of insurance companies which might be engaging in such practices, and provides for penalties which NYSDFS might impose. The statute makes no provision for an insured to have a cause of action against his or her insurance company under that section of law. In New York University v Continental Insurance Co. (87 NY2d 308 ), the Court of Appeals found that §2601 "...does not give rise to a private cause of action," and that in absence of such a private cause of action, the statute "...cannot be construed to impose a tort duty of care flowing to the insured separate and apart from the insurance contract." (Id. At 317.) It follows that if the insured has no private cause of action for unfair claim settlement practices, there is also no such cause of action for a third party.
Further, any cause of action against an insurer for "bad faith" would sound in contract; the common law duty of good faith is one that arises from the insurance contract. (See Gordon v Nationwide Mut. Ins . Co., 30 NY2d 427 , cert denied 410 US 931 .) Hunter, as a third party, has no privity with Hereford, and therefore would not be able to bring such an action. New York case law is consistent that in absence of privity, a cause of action may not be maintained for breach of contract (Plaisir v Royal Home Sales, 81 AD3d 799 [2d Dept 2011]; CDJ Builders Corp v Hudson Group Construction, 67 AD3d 720 ; Grinnell v Ultimate Realty, LLC, 38 AD3d 600 ; M. Paladino, Inc. v Lucchese & Son Contracting Corp., 247 AD2d 515 ). Hereford owed no duty to Hunter.
Movant Hunter's opposing papers state that she brought this action based on a letter from an NYSDFS Customer Assistance Unit Examiner stating that Hunter's claim involved "a question of fact as to the level of the injury, and degree of liability held by the insurance company" and that "[s]uch issues are best determined by a court of competent jurisdiction." [FN1] In no way could that letter be construed to indicate that Hunter had a cause of action against the insurance company for not settling the case to her liking; and in any event, it would not be the place of NYSDFS to tell an individual whether or not she has a cause of action against an insurance company. In fact, the appropriate action would have been for Hunter to bring an action against the policyholder, Herman Charles, since any issues of fact regarding liability and damages would have been between the parties involved in the accident, not between the insurance company and the person who alleges she was injured.
Based on the foregoing, the Court grants the motion to dismiss the action against both Hereford Insurance Company and its agent, Sheri Gordon. The case is dismissed against Hereford for failure to state a cause of action and for lack of privity; it is dismissed against Gordon, as she was acting as an agent for her employer, Hereford.
Finally, the court granted Hereford's motion for sanctions and costs "to the extent of setting this matter down for a hearing ... to determine whether Hunter's bringing this action, which according to opposition papers, was based on a letter from a NYSDFS Examiner not intended to dispense legal advice, was frivolous, and therefore a basis for sanctions and/or costs", noting:
In further consideration of sanctions and/or costs, the opposition papers misquote both case law and the NYSDFS letter, and cite cases which in no way support the argument that a third-party has a cause of action for unfair claims practices.Bad choice of client? Or bad choice of lawyer?