Underlying action - On May 3, 2002, a 52 year-old union banquet waiter, was a rear-seat passenger of a taxi that was traveling northbound on First Avenue, near its intersection with East Sixth Street, in Manhattan. As the vehicle was approaching the intersection, it struck the rear of a rental vehicle. The taxi was subsequently struck in the rear by another taxi. Both taxis were insured by American Transit Insurance Company.
The underlying action resulted in a bifurcated jury trial. On April 13, 2006, the jury returned a verdict apportioning liability between both taxicabs.
The underlying action proceeded to a damages trial. On May 1, 2006, a damages verdict was returned by the jury in the aggregate sum of $9,263,326.00.
This verdict was upheld by the Supreme Court of the State of New York, Appellate Division Second Department on December 23, 2008, by a decision and order reducing the total appealed damages to the sum of $2,500,000.00. An additional $150,000 for past lost wages was not appealed. On June 24, 2009 this Court entered an Amended Judgment in the underlying action against the Defendants, in the amount of $2,650,000 including awards for past and future damages.
Bad Faith Action - . Both taxi cabs were insured by Defendant American Transit Insurance Company, with policy limits of $100,000 per person and $300,000 per occurrence. The instant matter is a bad faith action based on Defendant American Transit Insurance Company's failure to settle the underlying action within the $100,000 policy limits for its insureds ($200,000 total) and thus exposing its insureds to a verdict in excess of $9,000,000.00, and an amended judgment of $2,650,000.00.
The evidence of bad faith in this action came from the admissions of American Transit Insurance Company's own employees in charge of handling the underlying claim brought by the Plaintiff. Through depositions, every single one of American Transit's own employees involved in the claims handling of the file (including the claims representative handling the file, claims supervisors, the claims manager, and up to Richard Carroll - the Vice President of American Transit) repeatedly admitted that American Transit Insurance Company's conduct was "reckless," demonstrating a pattern of behavior evincing a conscious or knowing indifference to its insured. The claims representative handling the file even deemed it "suicide" to go forward on damages, based upon the limited information maintained and the lack of any colorable defense to plaintiff's damages.
Plaintiff successfully established during discovery and deposition testimony that American Transit Insurance Company:
- violated their rule by having one claims examiner handle the claims files of both insureds, despite the obvious and admitted conflict of interest.
- failed to adhere to its own internal protocols in properly documenting the claims files of both insureds which should have noted documents received, such as medical records, bills of particulars, operative reports, conversations with defense counsel, meetings with claims supervisors or claims managers, periodic claims evaluations and bad faith letters.
- was aware of their own failure to document all pertinent information in its claims notes for its insureds and that they allowed this violation to occur.
- violated its own protocol of maintaining the hard copy of the claims file regarding the claims against its insured.
- never communicated directly with its insured
- failed to inform its insured of any settlement negotiations or settlement offers made by the Plaintiff throughout the entirety of the underlying action.
- refused to settle the underlying action without receiving the pre-trial report from Defense counsel
- never reviewed the file, or even knew the case was going to trial
Based on the foregoing discovery and deposition testimony, the Court was confident in determining there were no triable issues of fact and summary judgment was granted in favor of Plaintiff. This landmark decision was prominently published in the New York Law Journal and other local periodicals. It remains the only decision in New York State history where summary judgment has been granted in a bad-faith action under these circumstances.
A judgment in the bad faith action was entered and the parties agreed to a settlement of $2,850,000.00.
The matter was handled by Jeffrey A. Block, Robyn Brazzil and David Scher of Block O'Toole & Murphy.