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Rocanova v. Equitable Life Assur. Soc'y

Court of Appeals of New York

March 23, 1994, Argued ; May 10, 1994, Decided

No. 79, No. 80

Opinion

 [*610]  [**942]  [***341]    Ciparick, J.

In both of these first-party insurance actions [****13]  alleging unfair claim settlement practices, the issue presented is whether plaintiffs have pleaded actionable claims for punitive damages. We conclude they have not.

Rocanova 

In 1985, plaintiff Mark Rocanova purchased an individual disability income policy from defendant Equitable Life Assurance Society of the United States. Rocanova later increased his coverage effective November 1987. Shortly thereafter he filed a claim for payment under the policy, asserting that a month after the effective date of the increased coverage he developed a disease known as "dry eye syndrome". In May 1988, Equitable informed Rocanova that it was rescinding his policy and the increased protection on the grounds that Rocanova was already disabled before the increased coverage became effective and that he had misrepresented his income in applying for the policy. Rocanova commenced this action. He  [*611]  seeks $ 250,000 in compensatory damages and $ 450 million in punitive damages.

The complaint alleges six causes of action--(1) common-law fraud, (2) illegal evasion of insurance claims, (3) violation of Insurance Law § 2601, (4) breach of the implied covenant of good faith and fair [****14]  dealing, (5) breach of fiduciary duties, and (6) intentional infliction of economic damage--and contains two types of allegations: those relating to Rocanova's individual dispute with Equitable, and those relating to an alleged 10-year fraudulent pattern and practice of selling insurance policies to the general public with the intention of not honoring the policies as written. Rocanova's complaint specifically refers to 124 disputes between Equitable and other policyholders in support of his assertion that Equitable systematically ignored claimholders, lied, invented artificial disputes, filed groundless lawsuits, and otherwise wrongfully and deliberately evaded claims and withheld moneys, all for the purpose of defrauding claimholders of interest on moneys withheld and extorting principal from claimholders through fear and intimidation.

Equitable moved, pursuant to CPLR 3211 (a) (5) and (7) and 3016 (b), to dismiss Rocanova's request for punitive damages and to dismiss all causes of action except the fourth. Supreme Court granted the motion to the extent of dismissing the first (common-law fraud), fifth (breach of fiduciary duty), and sixth (intentional infliction of economic [****15]  damages) causes of action. Supreme Court denied Equitable's motion to dismiss the second and third causes of action (for illegal evasion of insurance claims and violation of Insurance Law § 2601, which it deemed the same cause of action) as well as the demand for punitive damages. In dismissing the common-law fraud claim, Supreme Court concluded that "no inference of fraudulent intent can be drawn from the mere compilation of the 124 vignettes" of policyholder "difficulties" with Equitable. The court stated that the compilation, spanning approximately two decades, could nevertheless assist Rocanova in demonstrating the pattern and practice of unfair claim settlement practices required to establish a violation of Insurance Law § 2601. On the issue of punitive damages, the court relied on the Appellate Division,  [**943]   [***342]  First Department's decision in Belco Petroleum Corp. v AIG Oil Rig (164 AD2d 583) in holding that a violation of Insurance Law § 2601 gives rise to a private right of action for which exemplary damages are recoverable.

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83 N.Y.2d 603 *; 634 N.E.2d 940 **; 612 N.Y.S.2d 339 ***; 1994 N.Y. LEXIS 1064 ****

Mark Rocanova, Respondent, v. Equitable Life Assurance Society of the United States, Appellant. Marsel Mirror & Glass Products, Inc., Respondent, v. American International Underwriters Insurance Company, Also Known as American International Underwriters Corporation, et al., Appellants.

Prior History:  [****1]   Appeal, in the first above-entitled action, by permission of the Appellate Division of the Supreme Court in the First Judicial Department, from an order of that Court, entered May 27, 1993, which affirmed an order of the Supreme Court (Walter M. Schackman, J.), entered in New York County, granting a motion by defendant to dismiss to the extent of dismissing and severing the first, fifth and sixth causes of action of plaintiff's first amended complaint for failure to state a cause of action, and otherwise denying the motion. The following question was certified by the Appellate Division: "Was the order of the Supreme Court, as affirmed by this Court, properly made?"

Appeal, in the second above-entitled action, by permission of the Appellate Division of the Supreme Court in the First Judicial Department, from an order of that Court, entered June 17, 1993, which modified, and, as modified, affirmed an order of the Supreme Court (Diane A. Lebedeff, J.), entered in New York County, granting a motion by defendants to dismiss the complaint to the extent of dismissing the first, third and fourth causes of action and denying the motion as to the second and fifth through eighth causes [****2]  of action. The modification consisted of granting defendant's motion to the extent of dismissing the second cause of action. The following question was certified by the Appellate Division: "Was the order of the Supreme Court, as modified by this Court, properly made?"

 Rocanova v Equitable Life Assur. Socy., 193 AD2d 569, reversed.

 Marsel Mirror & Glass Prods. v American Intl. Underwriters Ins. Co., 194 AD2d 431, reversed.

Disposition: In Rocanova v Equitable Life Assur. Socy.: Order reversed, etc.

In Marsel Mirror & Glass Prods. v American Intl. Underwriters Ins. Co.: Order reversed, etc.

CORE TERMS

cause of action, punitive damages, Equitable, damages, claim for punitive damages, motion to dismiss, practices, of Insurance Law, common-law, fraudulent, unfair claim settlement, insurance claim, good faith, compensatory, allegations, settlement

Civil Procedure, Remedies, Damages, Punitive Damages, Contracts Law, Breach, General Overview, Torts, Types of Damages, Punitive Damages, Insurance Law, Penalties, Business & Corporate Compliance, Contract Formation, Mistake, Mutual Mistake, Settlement Agreements, Enforcement, Affirmative Defenses, Coercion & Duress, Settlements, Contract Interpretation, Defenses, Ambiguities & Mistakes