A New York trial court dismissed an action for unfair claims practices and insurer bad faith against an insurer and a claims examiner that was brought by a third-party claimant injured in an auto accident.
In Hunter v. Hereford Ins. Co., the Civil Court of Queens County held that plaintiff failed to state a cause of action against the insurer and additionally, as a third party, lacked privity to sue the insurer of the driver that had injured her. The court also dismissed the action against the claim examiner on the basis that she was acting as an agent of the insurer.
Plaintiff was injured in a motor vehicle accident with Hereford’s insured and filed a claim with the insurer. The claims examiner offered plaintiff $3000 to settle and she refused.
Plaintiff then filed suit against Hereford and the claims examiner seeking $21,500 for unfair claims settlement practices and bad faith. She did not bring any action against the driver of the car. Hereford filed an Motion to Dismiss the action against the insurer and claims examiner.
With respect to the claims examiner, the court found that she was acting as an agent of Hereford and that plaintiff failed to present any evidence that the claims examiner assumed any authority or responsibility for the claim which could potentially make her liable for her actions under New York law. In addressing the unfair claims practices cause of action, the court noted that unfair claims settlement practices are prohibited by Insurance Law § 2601. The court recognized that this statute, however, authorizes the New York State Department of Financial Services to oversee insurers and impose penalties for engaging in such practices; it does not create a private right of action for an insured, let alone a third-party claimant, to sue an insurer. Accordingly, the court found that plaintiff had no cause of action against Hereford.
In addressing the bad faith claim, the court followed longstanding New York law holding that a cause of action for bad faith against an insurer sounds in contract. Under New York law, there must be privity of contract in order to bring an action for breach of contract. Since plaintiff had no contract with Hereford, she had no standing to bring an action against Hereford.
In addition to dismissing the case, the court also granted Hereford’s motion for sanctions and costs to the extent of scheduling a hearing to address same. The court noted in support of possible sanctions that plaintiff’s opposition papers misquoted case law, as well as letters, and cited cases that in no way supported her argument that a third-party has a cause of action for unfair claims practices.
