Appeal from an order of the Supreme Court, Oneida County (Anthony F. Shaheen, J.), entered October 12, 2011 in a declaratory judgment action.
State Farm Fire & Cas. Co. v Ricci
Appellate Division, Fourth Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
PRESENT: CENTRA, J.P., FAHEY, PERADOTTO, CARNI, AND SCONIERS, JJ.
The order, insofar as appealed from, denied in part the motion of plaintiff seeking partial summary judgment dismissing the second, third, and fourth counterclaims of defendant Matthew Ricci.
It is hereby ORDERED that the order so appealed from is unanimously modified on the law by granting that part of plaintiff's motion for partial summary judgment dismissing the second counterclaim of defendant Matthew Ricci to the extent that it alleges bad faith and improper conduct by plaintiff and as modified the order is affirmed without costs.
Memorandum: Defendant Raymond Pink was a spectator at a youth hockey game when a fight broke out among other spectators in the stands. Defendant Matthew Ricci was one of those spectators, and Raymond Pink was injured during the fight. Raymond Pink and his wife, defendant Michelle Pink, subsequently commenced a personal injury action (hereafter, underlying action) against, inter alia, Ricci, seeking damages for the injuries that Raymond Pink sustained. Plaintiff, State Farm Fire & Casualty Company (State Farm), insured Ricci pursuant to a policy of homeowner's insurance (policy) and reserved its right to deny and disclaim coverage in the underlying action in a letter sent to Ricci five days after State Farm received its first notice of the underlying action. Four days after reserving its right to deny coverage, State Farm advised Ricci that, based on the question of coverage, Ricci had the right to select attorneys of his choice to defend him at State Farm's expense in the underlying action. Ricci did not select independent counsel to defend him in that action.
Approximately two years later, State Farm commenced this action seeking, inter alia, a declaration of the rights of the parties under the policy. Ricci joined issue by submitting an answer in which he asserted four counterclaims, the second of which alleged that Ricci "is entitled to have his attorney[s'] fees paid by [State Farm] with reference to the cost of defending [the underlying] action, particularly in view of the bad faith and improper conduct engaged in by [State Farm] and its representatives and agents." The Pinks submitted an answer that did not allege that State Farm had acted in bad faith.
State Farm subsequently moved for partial summary judgment dismissing Ricci's second through fourth counterclaims. Supreme Court granted only those parts of the motion with respect to the third and fourth counterclaims. We modify the order by granting that part of the motion with respect to Ricci's second counterclaim to the extent that it alleges bad faith and improper conduct by State Farm.
"[I]n order to establish a prima facie case of bad faith [based on a disclaimer of coverage], [a party] must establish that the insurer's conduct constituted a gross disregard of the insured's interests . . . In other words, [the party] must establish that the . . . insurer engaged in a pattern of behavior evincing a conscious or knowing indifference to the interests of the insured" (Bennion v Allstate Ins. Co., 284 AD2d 924, 926 [internal quotation marks omitted]; see Pavia v State Farm Mut. Auto. Ins. Co., 82 NY2d 445, 453-454, rearg denied 83 NY2d 779).
Here, State Farm met its initial burden on that part of the motion with respect to its alleged bad faith and improper conduct (see generally Zuckerman v City of New York, 49 NY2d 557, 562). Within days of receiving the complaint in the underlying action, State Farm reserved its right to deny and disclaim coverage (see Progressive Northeastern Ins. Co. v Farmers New Century Ins. Co., 83 AD3d 1519, 1520)and, shortly thereafter, it afforded Ricci the opportunity to select attorneys of his choice to represent him in the underlying action at State Farm's expense (see Public Serv. Mut. Ins. Co. v Goldfarb, 53 NY2d 392, 401; Hall v McNeil, 125 AD2d 943). State Farm's reservation of rights is based on the complaint and, after reserving its right to deny and disclaim coverage, State Farm maintained its defense of Ricci in the underlying action. By commencing this declaratory judgment action, State Farm seeks merely to clarify its obligations under the policy, and such an approach is not only permissible but advisable (see Lang v Hanover Ins. Co., 3 NY3d 350, 356).
With respect to the issue of State Farm's alleged bad faith and improper conduct, defendants failed to raise a triable issue of fact sufficient to defeat the motion. Ricci has not submitted a brief in this appeal, and we assume for the sake of argument that the Pinks have standing to oppose it. Contrary to the contention of the Pinks, State Farm's failure to disclaim coverage in a timely manner is insufficient to establish bad faith. To the extent that State Farm failed to notify the Pinks in a timely manner that it disclaimed coverage based on a policy exclusion, the untimely disclaimer would be ineffective with respect to the Pinks (see Arida v Essex Ins. Co., 299 AD2d 902, 903; cf. HBE Corp. v Sirius Am. Ins. Co., 63 AD3d 1509, 1510). Moreover, the declaratory judgment action is premised upon the theory that the claim is ...