Southern District of New York Dismisses Insured’s Bad Faith Claim
The United States District Court for the Southern District of New York dismisses an insured’s claim of bad faith as duplicative of its breach of contract claim. County of Orange v. The Travelers Indemnity Company, 13-cv-06790 (S.D.N.Y. 2014).
This case arises from property damage caused by Hurricane Irene and Tropical Storm Lee on August 28, 2011 and September 8, 2011, to four properties owned by Plaintiff, County of Orange (“Plaintiff”). Plaintiff timely notified its property insurer, Travelers Indemnity Company (“Travelers”) of the damage caused by Hurricane Irene and Tropical Storm Lee. Travelers denied the claim, informing Plaintiff that its property insurance policy did not cover the losses sustained at the four properties. Thereafter, Plaintiff filed suit in the United States District Court for the Southern District of New York for breach of contract and breach of the implied covenant of good faith and fair dealing (i.e. – common law bad faith).
Subsequently, Travelers moved to dismiss Plaintiff’s bad faith claim for failure to state a claim upon which relief can be granted. Specifically, Travelers argued that Plaintiff’s bad faith claim was duplicative of the breach of contract claim because it was premised upon the same underlying facts – Travelers’ failure to adhere to its contractual duties as set forth in the insurance policy. Plaintiff argued that the claims arose from separate sets of facts and argued that Travelers’ decision to knowingly delay and deny the Plaintiff’s claim without investigation gave rise to a distinct cause of action premised in bad faith. The District Court disagreed.
The Court first noted that while New York recognizes an implied duty of good faith in every contract, it does not recognize a separate cause of action for breach of the implied covenant of good faith and fair dealing when a breach of contract claim, based upon the same facts, is also pled. Here, the Court found that that the alleged delay and failure to investigate was ultimately based on Travelers failure to comply with the policy. The Court also noted that Plaintiff’s own complaint comported with this conclusion. Specifically, as Plaintiff alleged in its claim for bad faith that Travelers “willfully and in bad faith ignored the clear language of the Policy’s provisions.” As a result, the Court granted Travelers’ motion to dismiss the County’s bad faith claim as duplicative of its breach of contract claim.
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