733 F.Supp.3d 164
W.D.N.Y.2024Background
- Jefferson Road LLC alleges that Travelers, as insurer, failed to defend and indemnify Jefferson Road as an additional insured under general liability policies in a state-court personal injury lawsuit.
- The personal injury plaintiff allegedly suffered chemical exposure at Jefferson Road’s property while working for an employer with agreements involving Schlegel Systems and AmesburyTruth, both of whom allegedly had insurance covering Jefferson Road.
- Jefferson Road repeatedly tendered claims to Travelers (at least 15 times), but Travelers either failed to respond or only agreed to participate with a reservation of rights, while still defending the other named insureds.
- Jefferson Road seeks a declaratory judgment and damages, including attorneys’ fees for prosecuting this federal action, asserting a breach of contract and breach of the implied covenant of good faith and fair dealing.
- Travelers moved to dismiss the request for attorneys’ fees and to strike all references to its alleged “bad faith.”
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Entitlement to attorneys’ fees for this action | Claim for fees is viable (at least early on) | Fees not recoverable in affirmative litigation | Motion to dismiss denied; claim allowed at the pleading stage given bad faith alleged |
| Relevance/striking of bad faith allegations | Bad faith allegations relevant to damages | Immaterial since bad faith claim was dismissed | Motion to strike denied; bad faith allegations are relevant to consequential damages |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading standard for plausibility in federal complaints)
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard and plausible inference)
- Bi-Economy Mkt., Inc. v. Harleysville Ins. Co. of N.Y., 10 N.Y.3d 187 (consequential damages for breach of implied covenant in insurance)
- Panasia Estates, Inc. v. Hudson Ins. Co., 10 N.Y.3d 200 (consequential damages in insurance contracts allowed if within parties' contemplation)
- Fishoff v. Coty Inc., 634 F.3d 647 (implied covenant of good faith and fair dealing in New York contracts)