What Constitutes Bad Faith Insurance Coverage Under New York Law?

Insurance

In the aftermath of an auto accident, one of the first questions that enters many drivers’ minds is, “Who is going to pay for this?”

Under New York law, motorists are required to carry auto insurance that covers a minimum of $25,000 for bodily injury to one person, $50,000 for bodily injury to all persons, and $10,000 for property damage in any one accident. This means that in the vast majority of circumstances, one or more insurance companies will have an obligation to pay out for coverage following a crash. Because it is in the financial best interests of the insurance company to pay out as little money as possible, the temptation arises for these insurance companies to address the claims and benefits of their policyholders in bad faith.

To prove that an insurer acted in bad faith, the policyholder must establish that “the insurer’s conduct constituted a ‘gross disregard’ of the insured’s interests – that is, a deliberate or reckless failure to place on equal footing the interests of its insured with its own interests when considering a settlement offer[.]” For example, the following conduct all may independently be enough to constitute a violation of the duty to act in good faith under New York law:

  • Willfully or intentionally denying that a valid claim is covered under the policyholder’s plan
  • Failing to conduct a reasonable investigation before denying a policyholder’s claim
  • Failing to reach a fair and equitable settlement when liability is apparent or the probability of a verdict in favor of the plaintiff is high

Insurers may also be acting in bad faith if they offer a settlement that is contrary to the agreed upon contract, if they force the policyholder to commence a lawsuit to obtain benefits, or if they willingly or knowingly cause an “excessive delay” in satisfying their obligations under the policy. Because bad faith claims all fall under breach of contract, New York law allows for a bad faith claim to be made up to 6 years following the insurer’s initial denial of benefits.

What Should I Do If I Have to File an Insurance Claim?

If you have to file an insurance claim for any reason, you should speak to an attorney to guarantee that you receive benefits in accordance with the terms of your plan. An attorney can explain to you what sort of benefits you should expect and can advocate for you on your behalf if your insurer fails to provide those benefits. Call us now at (845) 338-8884 to schedule a free consultation.