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Insurance Law

New York’s Difficulty With The Tort of Bad Faith – It Takes More than a Refusal to Pay a Claim to Obtain Tort Damages

Insurance companies seldom deny a claim without a reasonable basis for the denial. Regardless, when a claim is denied, the insured feels a need to sue the insurer for both contract and tort of bad faith damages plus punitive damages. New York is not as friendly to insured’s whose claims are denied as other states who are quick to hold insurers to tort damages just because a claim was denied.

Plaintiff Jo–Ann Ripka (“Ripka” or “plaintiff”) sued her insurer, seeking to recover damages from the alleged breach of a homeowner’s insurance policy issued by Peerless Insurance Company (“Peerless”). In Ripka v. Safeco Ins., Slip Copy, 2015 U.S. Dist. LEXIS 67595 (N.D.N.Y., 5/26/15), [enhanced version available to subscribers], the court was called upon to determine if Ripka stated a viable cause of action.


Ripka, a resident of Pulaski, New York, purchased a homeowner’s insurance policy from Peerless (the “Homeowner’s Policy”).

In April 2012, a plumbing leak caused substantial damage to Ripka’s home and its contents. Although plaintiff duly reported the damage in accordance with the Homeowner’s Policy, Peerless initially failed to dispatch any representatives to inspect the damage. Eventually, at plaintiff’s repeated urging, Peerless sent a contractor to “inspect only limited physical damages to the real property.”
Ripka claims that, in her repeated conversations with Peerless’s representatives, each uniformly “claimed the damages were within the scope of coverage and [assured plaintiff she] would be promptly compensated.” However, Peerless allegedly engaged in a series of delaying tactics—continually asking for the same information, switching adjustors without notice, refusing to communicate with plaintiff for long stretches of time, and refusing to inspect the premises—before ultimately failing to “pay the claim in full or tender interest for the unsubstantiated delays in payment.”


Ripka’s complaint is hardly a model of clarity. Peerless, for its part, has moved to dismiss Ripka’s: (1) claims for relief pursuant to New York statute 11 N.Y.C.R.R. § 216, [enhanced version available to subscribers], arguing New York does not recognize a private right of action under those regulations; (2) claim pursuant to N.Y. Gen. Bus. Law § 349, [enhanced version available to subscribers], arguing plaintiff has failed to state a claim under this statute; and (3) claims for recovery of consequential and punitive damages. In other words, Peerless aims to limit the dispute in this case to a relatively straightforward breach of contract claim.

First, insofar as Ripka’s complaint purports to assert any claims for relief under various provisions of 11 N.Y.C.R.R. § 216, Peerless is correct—these claims must be dismissed because the regulations in question, which implement a provision of New York State’s Insurance Law, do not give rise to any private causes of action. It is well settled that no private cause of action exists for a violation of New York Insurance Law § 2601, [enhanced version available to subscribers], or for an alleged violation of part 216 of the Insurance law. Accordingly, Peerless’s motion with respect to these claims was granted.

N.Y. Gen. Bus. Law § 349

The appellate court also concluded that Ripka’s claim seeking relief pursuant to § 349 of New York’s General Business Law must also be dismissed. “To state a cause of action under § 349, a plaintiff must assert (1) the defendant’s deceptive acts were directed at consumers, (2) the acts are misleading in a material way, and (3) the plaintiff has been injured as a result.” PB Americas Inc., 690 F.Supp.2d at 251, [enhanced version available to subscribers], (citations and internal quotation marks omitted). Importantly, however, the focus of § 349 cases is whether the alleged deceptive practice was “consumer oriented.”

A defendant cannot be held liable pursuant to § 349 where the disputed private transaction does not have ramifications for the public at large.

The appellate court found that it is clear that Ripka’s claims are based on Peerless’s actions toward her, not on any actions directed more generally toward the public at large. Plaintiff’s complaint rather conclusorily alleges “members of the public at large have been harmed and [i]njured by Defendant’s practices and policies as described in this complaint in that Defendant has unreasonably delayed the claim adjustment process of Plaintiff’s claims, Defendant has unreasonably denied insurance coverage of the Plaintiff’s claims, [d]emanded duplicative information, and irrelevant information in support of Plaintiff’s [c]laims.”

Finding the allegations insufficient to suggest Peerless advertised, marketed, issued, adjusted, settled, or paid out claims under its homeowner’s insurance policies in a way that might be misleading to the public generally. It only alleges claims arising from Peerless’s failure to pay what the Plaintiff claims was her legitimate and reasonable claims in a timely fashion. Accordingly, Peerless’s motion with respect to this claim was granted.

Bad Faith & Consequential Damages

Peerless also argued that Ripka failed to state a cause of action warranting the imposition of consequential damages. Under New York law, consequential damages resulting from a breach of the covenant of good faith and fair dealing may be asserted in an insurance contract context, so long as the damages “were within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting.” Panasia Estates, Inc. v. Hudson Ins. Co., 10 N.Y.3d 200, 856 N.Y.S.2d 513, 886 N.E.2d 135, 137 (N.Y.2008), [enhanced version available to subscribers].

Ripka alleged that Peerless’s failure to investigate and pay her claim in a timely and good faith manner resulted in various damages, including: (1) “the loss of the monetary amount due from Defendant from the full Value of the Plaintiff’s property”; (2) “the value of certain personal property damages or destroyed during the loss or occurrence”; (3) “the monetary loss of the value and cost to fully clean and restore property damaged by the loss or occurrence”; (4) “various and consequential damages including distress, aggravation and inconvenience”; and (5) “living expenses for household and other expense as well.”

Ripka’s further claim that she suffered “distress, aggravation and inconvenience” as a result of Peerless’s delays and denial, and is therefore entitled to “emotional damages as well as paid [sic ] and suffering,” is also misplaced. Under New York law, damages for emotional distress are unavailable in a breach of contract action, at least in the absence of demonstrable physical injury.

New York does not recognize an independent tort for the bad faith denial of insurance coverage, and Ripka has not offered any other independent tort basis on which to base liability for this alleged mental distress. Allegations that an insurer had no good faith basis for denying coverage are redundant to a cause of action for breach of contract based on the denial of coverage, and do not give rise to an independent tort cause of action, regardless of the insertion of tort language into the pleading.

Ripka’s complaint, which focuses entirely on Peerless’s alleged failure to timely pay her claim under the Homeowner’s Policy, fails to plausibly allege that Peerless’s conduct is actionable as an independent tort, that its actions were so “morally reprehensible” as to imply “criminal indifference,” or even how, beyond conclusory assertions of public harm, Peerless’s actions were part of a pattern directed at the general public. Rather, plaintiff’s complaint is focused only on a private insurance dispute over the proper payment of a claim under the Homeowner’s Policy.


New York has refused to enter the stampede to adopt the tort of bad faith. It does not, willy nilly, allow an insured whose claim is denied to seek, in addition to contract damages, tort and punitive damages from the insurer who had the temerity to deny a claim. I have written here often about the fact that insurers are being abused by practitioners of the tort of bad faith and it is time it is rejected as much as possible across the United States. Limitations like that imposed by New York law are more than sufficient to deter wrongful conduct by insurers. If the tort of bad faith survives litigants will destroy the insurance industry. Only lawyers profit from the tort of bad faith. Doing away with the tort will free up hundreds of courtrooms a day to deal with important civil and criminal matters.

    By Barry Zalma, Attorney and Consultant

Reprinted with Permission from Zalma on Insurance, (c) 2015, Barry Zalma.

Barry Zalma, Esq., CFE, is a California attorney who limits his practice to consultation regarding insurance coverage, insurance claims handling, insurance bad faith and fraud and acting as a mediator or arbitrator on insurance disputes. Mr. Zalma serves as a consultant and expert almost equally for insurers and policyholders. He founded Zalma Insurance Consultants in 2001 and serves as its only consultant. He recently published the e-books, "Zalma on Rescission in California - 2013"; "Random Thoughts on Insurance" containing posts from this blog; "Zalma on Insurance;" "Murder and Insurance Don't Mix;" “Heads I Win, Tails You Lose — 2011,” “Zalma on Diminution in Value Damages,” “Arson for Profit” and “Zalma on California Claims Regulations,” and others that are available at Zalma Books.

Mr. Zalma can be contacted at or, and you can access his free "Zalma on Insurance Fraud" newsletter at Zalma’s Insurance Fraud Letter.

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