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Bad Faith - Punitive Damages

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  • Lawrence
    Jun 4, 2013 Expand Messages
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      NO BAD FAITH LIABILITY FOR INSURER IN REGARD 
      TO PUNITIVE DAMAGE AWARD

      Seldon v Allstate Ins. Co. 
      2013 NY Slip Op 03954
      Decided on June 4, 2013
      Appellate Division, First Department
      Edited by Lawrence N. Rogak

      Order, Supreme Court, New York County (Debra A. James, J.), entered April l9, 2012, which denied defendants Allstate Insurance Company and Allstate Insurance Co., Inc.'s (Allstate) motion for summary judgment dismissing the third cause of action, unanimously reversed, on the law, without costs, and the motion granted.

      The third cause of action alleges that defendant insurer acted in bad faith by failing to settle libel and slander claims within policy limits, resulting in a judgment against plaintiff that included punitive damages. Defendant is entitled to summary judgment on that claim based on public policy precluding an insured from recovering the punitive damages portion of any judgment which may have resulted from the insurer's bad faith failure to settle (see Soto v State Farm Ins., 83 NY2d 718 [1994]). Although this public policy argument was advanced for the first time in defendant's appellate brief, defendant alleged no new facts, but rather raised pure legal arguments which may be considered for the first time on appeal (see Vanship Holdings Ltd. v Energy Infrastructure Acquisition Corp., 65 AD3d 405, 408 [1st Dept 2010]).

      Comment:  Because an insurer is never obligated to pay a punitive damage award, there is no cause of action for bad faith for refusing to settle if the only consequence is a punitive damage award.

      Larry Rogak