53 A.D.2d 140 | N.Y. App. Div. | 1976
Plaintiff appeals from that portion of an order of Special Term which granted summary judgment to defendant carrier in an action based on breach of an insurance contract for refusing in bad faith to settle a claim against plaintiff within the policy limits. Defendant appeals from that portion of the order which granted plaintiff’s cross motion striking two affirmative defenses of the Statute of Limitations and estoppel asserted in defendant’s answer.
Plaintiff (Town) alleged that it incurred damages in the sum of $93,750 due to defendant’s (Transamerica) bad faith refusal to settle within the policy limits a claim brought against the Town by Erie-Lackawanna Railway Company. The following facts are undisputed. On March 18, 1968 the Town and Transamerica entered into a contract for liability insurance whereunder Transamerica agreed to indemnify the Town up to the amount of $100,000. The contract further provided that Transamerica defend or at its option settle in the name of the Town any suit brought for damages covered by the contract. On November 21, 1969, while the insurance contract was in effect, a snowplow owned and operated by the Town was struck by a train of Erie-Lackawanna at a public crossing in the Town of Poland. On February 3, 1970 Erie-Lackawanna served a notice of claim on the Town for damage to its property in the sum of $650,000, alleging negligence on the part of the Town in the operation of the snowplow, and, thereafter on March 31, 1970 commenced an action against the Town on such claim. Transamerica undertook the defense of the action pursuant to its contractual obligation, with the Town’s attorney participating in the defense by reason of the damage claim being in excess of the $100,000 policy limit. On June 17, 1971 Transamerica was advised that Erie-Lackawanna would settle its claim for the $100,000 policy limit, which offer was to remain open until a pretrial conference
Following service of responses to the Town’s interrogatories, no other disclosure proceedings under article 31 of CPLR having been utilized by either party, Transamerica moved for summary judgment pursuant to CPLR 3212 and the Town cross-moved pursuant to CPLR 3211 (subd [b]) for dismissal of the three affirmative defenses. In opposing Transamerica’s motion for summary judgment the Town urged that many facts necessary to prove its claim of bad faith on the part of Transamerica were in defendant’s exclusive control concerning which discovery had not yet been undertaken and thus under CPLR 3212 (subd [f]) the granting of defendant’s motion was precluded. In addition, the Town urged that whether Transamerica had discharged its duty of good faith negotiations in settlement was a question of fact for jury determination foreclosing the award of summary judgment.
Special Term properly dismissed the asserted affirmative defense of the Statute of Limitations. An analysis of the complaint clearly evidences an action for breach of a contractually implied obligation as opposed to one "sounding in negligence” and, therefore, it is the six-year limitation under CPLR 213 (subd 2) that applies.
The dismissal by Special Term of the affirmative defense of estoppel was also proper. The general principle of contract law, that an injured party must make reasonable efforts to minimize damages or be barred from recovering losses which
Special Term’s grant of summary judgment to Transamerica, however, was not here warranted, premised as it was on a determination that, as a matter of law, Transamerica was not guilty of bad faith in its settlement negotiations on the ErieLackawanna claim, based upon the one contention that there existed an honest disagreement as to liability by reason of possible contributory negligence on the part of Erie-Lackawanna. In light of the multifaceted factors bearing upon a determination of good faith, whatever the standard may be, Special Term’s determinative credence given to one element thereof constitutes an oversimplification of the issue before it.
A review of New York decisional precedent indicates that at this juncture no definitive standard of good faith in settlement negotiations applicable to a carrier’s obligation to its insured has yet evolved. In Knobloch v Royal Glove Ins. Co. (38 NY2d 471, 477-478) the Court of Appeals, limiting its consideration solely to the sufficiency of the record to sustain a jury verdict under the trial court’s charge in defining a standard of "good
The early New York cases seem to have given the insurance carrier a rather free hand in deciding whether or not to settle (see Best Bldg. Co. v Employers’ Liab. Assur. Corp., 247 NY 451; Streat Coal Co. v Frankfort Gen. Ins. Co., 237 NY 60; Auerbach v Maryland Cas. Co., 236 NY 247). There followed a line of Federal Second Circuit Court decisions interpreting New York law, from which evolved a standard of good faith, holding, in essence, that an insurance company must consider the assured’s interest as well as its own in arriving at a decision whether to settle within the policy limits (Brown v United States Fid. & Guar. Co., 314 F2d 675; Young v American Cas. Co., 416 F2d 906, cert dsmd 396 US 997; Brockstein v Nationwide Mut. Ins. Co., 417 F2d 703, cert den 405 US 921; Peterson v Allcity Ins. Co., 472 F2d 71).
The Court of Appeals in Gordon v Nationwide Mut. Ins. Co. (30 NY2d 427, 437, cert den 410 US 931), in its consideration of the standard of good faith of an insurance carrier which denied coverage based upon advice of counsel, concededly expressed a rather stringent standard, viz, "bad faith requires an extraordinary showing of disingenuous or dishonest failure to carry out a contract”. However, thereafter in Decker v Amalgamated Mut. Cas. Ins. Co. (35 NY2d 950, 952-953), the Court of Appeals, while accepting the Gordon standard for determining good faith, significantly observed:
"We conclude that it cannot be said on this motion for summary judgment that an allegation of reliance on advice of counsel in such circumstance as a matter of law negates a charge of bad faith refusal, even bad faith of the dimension demanded by Gordon. * * *
'Gordon laid down the prerequisites for imposition on an insurer of a liability potentially greatly in excess of the policy limits on the basis of which its premiums had been calculated. Whether such prerequisites can be met in this case must await trial. ” (Emphasis added.)
So, too, in the instant appeal, whatever may be the appro
Marsh, P. J., Moule, Cardamone and Dillon, JJ., concur.
Order unanimously modified in accordance with opinion by Mahoney, J., and as modified affirmed, without costs.