When an insurance denial seems completely wrong on its face, it is common for both lawyers and laypersons to assert that it was due to “bad faith,” entitling the policyholder to some form of extra-contractual damages. But the reality in New York is much more complex.
As tidily summarized in a 2014 decision from the Supreme Court, New York County: “It is not clearly decided whether there is a separate cause of action for bad faith claims handling in New York. While some courts have held yes, many more have held to the contrary.”1 Predictably, that decision concluded there is no bad faith. In contrast, the Southern District of New York in 2011 awarded attorney fees to an insured whose claim was denied in bad faith.2 Other examples go back and forth in each direction.
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