Egregious Conduct Needed to Bring Bad Faith Suit

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Richard Converse and Stephanie Converse contended that State Farm violated a contract between the parties to insure rental property the Plaintiffs owned in Watertown, New York. That property burned on December 8, 2019, and Plaintiffs contend that State Farm has refused to pay their valid claim for the proceeds of their insurance policy.

In Richard Converse, and Stephanie Converse v. State Farm Fire And Casualty Company, No. 5:21-CV-457 (TJM/ATB), United States District Court, N.D. New York (March 31, 2022) the USDC applied New York law and dismissed the bad faith causes of action.

BACKGROUND

Plaintiffs sued on March 22, 2021 raising three causes of action; Count One alleged breach of contract. Count Two sought a declaratory judgment; Count Three alleged a breach of the covenant of good faith and fair dealing. Plaintiffs sought compensatory and punitive damages, along with attorneys fees.

The Watertown Fire Department concluded that the source of the fire was “‘unintentional, ‘” caused by someone who “inadvertently” threw a cigarette in the trash. Defendant denied Plaintiffs’ claim in its entirety, finding that Plaintiffs had breached the policy’s terms in three ways.

ANALYSIS

The Court found that the breach-of-contract claim and the good-faith-and-fair-dealing claim are based on the same set of facts.  Both claims rely on the same set of facts.

Plaintiffs here have alleged that Defendant breached the contract. They have also alleged that Defendant waited nearly ten months to deny their claim, did so for improper reasons, and may have told a State agency some of the facts the Defendant alleged led to denying the claim. None of that conduct is the sort of egregious conduct aimed at the public that would permit punitive damages on a contract claim. Therefore, the limited motion to dismiss was granted.

ZALMA OPINION

Cigarettes are often claimed to be the cause of a fire when the investigator is unable to find another cause. Years ago a fire cause investigator and I tried to set a fire using a lit cigarette. Nothing happened although we used almost twenty cigarettes. The court’s decision was not forthcoming about the facts but I surmise that State Farm also has a defense to the contract claim.

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