STARR INDEMNITY LIABILITY COMPANY v. LLC (2024)

Order, Supreme Court, New York County (Robert R. Reed, J.), entered on or about July 6, 2023, which denied plaintiff Starr Indemnity & Liability Company's motion to dismiss the fourth counterclaim for breach of the implied covenant of good faith and fair dealing, unanimously modified, on the law, to grant the motion as to so much of the counterclaim as alleges bad-faith refusal or failure to settle Jose Nunez v. Coventry Vil. Apts. et al. and Susan Montefusco v. Main St. L.I., L.L.C. (the trip and fall cases), and otherwise affirmed, without costs.

The fourth counterclaim for breach of the implied covenant of good faith is not duplicative of the breach of contract counterclaim (see New York Botanical Garden v. Allied World Assur. Co. [U.S.] Inc., 206 A.D.3d 474, 476, 168 N.Y.S.3d 305 [1st Dept. 2022];  D.K. Prop., Inc. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 168 A.D.3d 505, 507, 92 N.Y.S.3d 231 [1st Dept. 2019]).  The breach of contract claim deals only with policy 810.  By contrast, the breach of implied covenant of good faith and fair dealing claim involves all three policies (809, 810, and 811), and “relies upon different facts and seeks different damages” (New York Botanical Garden, 206 A.D.3d at 476, 168 N.Y.S.3d 305).

Starr contends that the portion of the breach of the implied covenant of good faith claim dealing with its failure or refusal to settle lawsuits against its insureds should be dismissed as inadequately pleaded.  The contention is unavailing as to the actions involving a fire at one of the insured properties (fire cases).  As to the fire cases, counterclaim plaintiffs allege that Starr was “presented with the actual opportunity to settle the claims against [Dorchester, L.L.C.]” within policy limits, and that “[a]ll serious doubts about Dorchester's liability had been removed.”  These allegations sufficiently allege Starr's failure or refusal to settle the fire cases (see Pavia v. State Farm Mut. Auto. Ins. Co., 82 N.Y.2d 445, 454, 605 N.Y.S.2d 208, 626 N.E.2d 24 [1993]).

However, with respect to the trip and fall cases, counterclaim plaintiffs failed to make such allegations.  Moreover, they failed to allege that Starr exercised exclusive control over the defense or settlement of the trip and fall cases (see Pavia, 82 N.Y.2d at 452, 605 N.Y.S.2d 208, 626 N.E.2d 24;  Royal Indem. Co. v. Salomon Smith Barney, 308 A.D.2d 349, 350, 764 N.Y.S.2d 187 [1st Dept. 2003]).  With respect to Nunez, the fourth counterclaim alleges, “[counterclaim plaintiff Main Street, L.I., LLC] settled the case ․ with no participation from Starr.”  As for Montefusco, counterclaim plaintiffs allege, “Starr refused to provide Main Street with a defense”;  therefore, Main Street hired its own counsel.  However, counterclaim plaintiffs may still maintain a claim for bad-faith refusal to defend in Montefusco (see Federal Ins. Co. v. North Am. Specialty Ins. Co., 47 A.D.3d 52, 63–64, 847 N.Y.S.2d 7 [1st Dept. 2007]).

We have considered the remaining arguments and find them unavailing.