PROSPECT AUTO SALES AND REPAIRS INC v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY (2026)

DECISION & ORDER

In an action to recover damages for breach of contract, the plaintiff appeals from an order of the Supreme Court, Putnam County (Gina C. Capone, J.), dated April 25, 2024.  The order granted the defendant's motion for summary judgment dismissing the complaint.

ORDERED that the order is reversed, on the law, with costs, and the defendant's motion for summary judgment dismissing the complaint is denied.

The defendant issued an insurance policy to Janet Sukhram for her 2018 Audi Q7 (hereinafter the vehicle) for the policy period of September 11, 2022, to March 11, 2023 (hereinafter the policy).  On February 20, 2023, the vehicle sustained damage as a result of an accident.  Sukhram filed a claim with the defendant for insurance benefits under the collision section of the policy.

Thereafter, on February 22, 2023, Sukhram brought the vehicle to the plaintiff to have the vehicle repaired and restored to its pre-accident condition.  In connection therewith, Sukhram executed a repair authorization and a designated representative authorization, allowing the plaintiff to repair the vehicle and to negotiate with the defendant regarding the cost and payment for such repairs.  In addition, Sukhram executed an assignment of claim, assigning to the plaintiff all rights as against the defendant for any damages arising out of the defendant's failure to pay for the total cost of the repairs.

The plaintiff repaired the vehicle as requested by Sukhram, returning it to its pre-accident condition, at a cost of $19,736.60.  However, the defendant paid the plaintiff only $13,188.22 for the subject work.

As a result, the plaintiff, as Sukhram's assignee, commenced this action against the defendant to recover damages for breach of contract.  Specifically, the plaintiff alleged that the defendant (1) had an obligation under the policy to indemnify Sukhram for the reasonable and necessary repairs made to the vehicle as performed by the repair facility of her choice, (2) accepted full responsibility for payment for such repairs and entered into negotiations with the plaintiff regarding the specific cost of such repairs, and (3) had a duty under Insurance Law § 2601 and Regulation 64, Part 216, and the policy to negotiate in good faith with the plaintiff to repair the vehicle.  In that regard, the plaintiff alleged further that the defendant had violated, inter alia, Insurance Law § 2601 and 11 NYCRR 216.7 and breached the policy by failing to negotiate with the plaintiff in good faith, including regarding the procedures, parts, materials, and costs thereof necessary to return the vehicle to its pre-accident condition, and by failing to pay the plaintiff in full for all such necessary repairs.  The plaintiff alleged that it had been damaged in an amount of no less than $6,548.38, the difference between the $19,736.60 total cost of the repairs and the $13,188.22 paid to it by the defendant.

The defendant moved for summary judgment dismissing the complaint, contending, among other things, that there is no private right of action under Insurance Law § 2601 and 11 NYCRR 216.7.  The plaintiff opposed the motion.

In an order dated April 25, 2024, the Supreme Court granted the defendant's motion, agreeing with the defendant that there is no private right of action under Insurance Law § 2601 and 11 NYCRR 216.7 and, as such, the complaint must be dismissed.  The plaintiff appeals.

Contrary to the Supreme Court's determination and the defendant's contention, under a fair reading of the complaint, it does not set forth a cause of action to recover damages for violations of Insurance Law § 2601 and 11 NYCRR 216.7 but rather properly seeks to recover damages for breach of contract predicated, in part, on allegations of such violations (see Ural v Encompass Ins. Co. of Am., 97 AD3d 562, 565;  East Collision, Inc. v State Farm Mut. Auto. Ins. Co., 2025 NY Slip Op 33906[U] [Sup Ct, Westchester County];  cf.  Bettan v Geico Gen. Ins. Co., 296 AD2d 469, 470).  Therefore, the court improperly granted the defendant's motion for summary judgment dismissing the complaint on the basis that there is no separate private right of action due to violations of Insurance Law § 2601 and 11 NYCRR 216.7.

Further, the defendant failed to establish its prima facie entitlement to judgment as a matter of law dismissing the complaint.  The defendant argued that it did not breach the policy and, in fact, paid the plaintiff in full for all necessary repair work, since, in accordance with the policy, it paid the plaintiff based on its own repair estimate written upon the prevailing competitive rate, as determined by a survey prepared by the defendant.  However, the defendant's argument in that regard is wholly conclusory and unsubstantiated, as the defendant never furnished the survey it purported to rely upon.  Further, to the extent an affidavit of the defendant's representative submitted in support of the motion addressed the issue as to whether the defendant negotiated with the plaintiff in good faith regarding the procedures, parts, materials, and costs to return the vehicle to its pre-accident condition, the affidavit is not based on personal knowledge but rather improperly relies on hearsay within hearsay (see CPLR 4518[a];  Valerio v City of New York, 238 AD3d 945, 947).

Since the defendant failed to meet its initial burden of establishing its entitlement to judgment as a matter of law dismissing the complaint, the motion should have been denied regardless of the sufficiency of the opposing papers (see Alvarez v Prospect Hosp., 68 NY2d 320, 324).

DILLON, J.P., FORD, VOUTSINAS and MCCORMACK, JJ., concur.