Fourth Department dismissed plaintiffs’ conclusory allegations of bad faith and alleged late disclaimer in a property damage case, and plaintiffs’ demand for punitive damages in connection with a withdrawn claim.

Plaintiff homeowners sued their homeowner-insurer Allstate for its denying and disclaiming plaintiffs’ property-damage claim.  After answering plaintiff’s complaint, Allstate moved to dismiss, under CPLR 3211(a)(7) (failure to state a cause of action), three of plaintiffs’ causes of action: for bad faith, for unfair claims practices, and for late disclaimer plus plaintiffs’  demand for punitive damages in connection with the bad-faith and unfair-claims-practices claims.  Plaintiffs withdrew their claim for unfair claims practices but not their demand for punitive damages related thereto.  Supreme Court denied Allstate’s motion, but the Fourth Department reversed and dismissed these claims and punitive-damages demands in their entirety.

In doing so, the Fourth Department expressly applied the standard for deciding a motion to dismiss for failure to state a cause of action under CPLR 3211(a)(7): the court accepted as true each of plaintiffs’ allegations and limited the court’s inquiry to the legal sufficiency of plaintiffs’ claims.   With regard to plaintiffs’ bad-faith claim, it failed to allege any conduct by Allstate that constituted the requisite gross disregard of the insured’s interests, and plaintiffs’ claim that “Allstate had no good-faith basis for denying coverage” was redundant of plaintiffs’ breach-of-contract claims and therefore failed to support an independent tort claim of bad faith.

With regard to the punitive damages demand in connection with plaintiff’s now withdrawn claim for unfair claims practices, the court dismissed it because there was no viable substantive cause of action for it to attach to.  Plaintiffs’ conclusory allegation as to Allstate’s motive for its refusal to pay plaintiffs’ claim was insufficient to support plaintiffs’ otherwise disassociated demand for punitive damages.

Plaintiffs also failed to state a cause of action for untimely disclaimer.  Because the underlying claim arose out of a property damage claims and not out of an accident involving bodily injury or death, the notice-of-disclaimer provisions from Insurance Law § 3420(d) were inapplicable and, under the common-law rule, a delay in disclaiming coverage, even if unreasonable, does not estop the insurer from disclaiming unless the insured has suffered prejudice from the delay.  Plaintiffs’ conclusory allegation that they were “damaged and prejudiced” by the untimely disclaimer is insufficient to withstand this CPLR 3211(a)(7) motion to dismiss.

Miller v Allstate Indem. Co., 2015 NY Slip Op 07134, 4th Dept 10-2-15

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