48 N.Y.2d 871, 873, 424 N.Y.S.2d 356, 357, 400 N.E.2d 298, 298 (1979).
An insurer is not liable if its decision not to settle was the result of an error of judgment or mere negligence. Best Building Co. v. Employers' Liability Assur. Corp., Ltd., 247 N.Y. 451, 454-6, 160 N.E. 911 (1928); Brennan v. Mead, 81 A.D.2d 821, 821, 438 N.Y.S.2d 821, 823 (2d Dep't 1981), aff'd, 54 N.Y.2d 811, 443 N.Y.S.2d 652, 427 N.E.2d 949 (1981). The Hospital must show that Hartford acted in "gross disregard" of the Hospital's interests. DiBlasi v. Aetna Life and Casualty Ins. Co., 147 A.D.2d 93, 99, 542 N.Y.S.2d 187, 191 (2d Dep't 1989).
Whether the D'Alessios indicated a willingness to settle for the policy limits is one way, but not the only way, to show that an actual opportunity to settle existed. See Young v. American Casualty Co., 416 F.2d 906 (2d Cir. 1969) (interpreting New York law to find an insurer under an affirmative duty to pursue negotiations with claimant).
The New York cases have not established that an offer by a plaintiff to settle within the policy limits is a prerequisite to liability for excess damages under New York law. The court will consider all the pertinent "multifaceted factors" in determining whether excess liability should be imposed. Town of Poland v. Transamerica Ins. Co., 53 A.D.2d 140, 144, 385 N.Y.S.2d 987, 990 (4th Dep't 1976). Among such other factors are the likelihood that the insured will be subject to personal liability, DiBlasi, supra, 147 A.D.2d at 99, 542 N.Y.S.2d at 191, and the timing of settlement offers, Knobloch v. Royal Globe Ins. Co., 38 N.Y.2d 471, 478, 381 N.Y.S. 2d 433, 437, 344 N.E.2d 364, 368 (1976).
There is no reason to believe New York courts would differ with courts of other jurisdictions holding that the absence of a formal offer by a plaintiff to settle within the policy limits is "merely one factor to consider" when evaluating whether an insurer in bad faith lost an actual opportunity to settle within the policy limits. Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 493, 323 A.2d 495, 505 (1974). See also State Automobile Ins. Co. v. Rowland, 221 Tenn. 421, 432, 427 S.W.2d 30, 34 (1968); Cernocky v. Indemnity Ins. Co., 69 Ill. App.2d 196, 208-9, 216 N.E.2d 198, 205 (2d Dist. 1966). But see Commercial Union Ins. Co. v. Mission Ins. Co., 835 F.2d 587 (5th Cir. 1988) (interpreting Louisiana law).
There is nothing inconsistent in the New York cases cited by Hartford. If an insured thwarts settlement opportunities by its own misconduct, it has no basis for a bad faith claim. Brennan, supra, 81 A.D.2d at 821, 438 N.Y.S.2d at 823. United States Fidelity & Guar. Co. v. Copfer, 48 N.Y.2d 871, 424 N.Y.S.2d 356, 400 N.E.2d 298 (1979), was a case where the insurer declined to defend, asserting there was no coverage under the policy. In the insured's later declaratory judgment action the court held that the insurer was liable under the policy, but it restricted damages to the policy limits and did not include the excess resulting from the settlement negotiated by the insurer's independent counsel. The court said that speculation that the insurer might have been able to settle within the policy limits was insufficient to support a claim for excess damages.
All of the circumstances, including the timing of Hartford's eventual offer to settle within the policy limits and the D'Alessios' rejection of this offer, may affect the evaluation of whether Hartford acted in good faith and whether an actual opportunity to settle within the policy limits was lost.
The Hospital is entitled to present all of those circumstances at trial.
Hartford's motion for summary judgment is denied. So ordered.
Dated: Brooklyn, New York
February 28, 1992
Eugene H. Nickerson, U.S.D.J.
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