Taxi jumps a curb and strikes a person simply standing there. Excuse by the licensed taxi driver is that he pushed the gas and brake at the same time. Injured Plaintiff is awarded partial summary judgment and negotiations start from there. Eventually the case is settled well in excess of the policy limits. Is there a bad faith claim against the insurer and is there a legal malpractice claim against the defense law firm? Will there eventually be a legal malpractice claim by the insurance company against their attorneys?
Jacal Hacking Corp. v American Tr. Ins. Co. 2017 NY Slip Op 30031(U) January 6, 2017
Supreme Court, New York County Docket Number: 154248/12 Judge: Joan A. Madden says there may be a bad faith claim but that there is no legal malpractice claim. It does not address the third question.
“In this action, plaintiff Jacal Hacking seeks damages against American Transit for bad faith refusal to settle an action to recover damages for personal injuries entitled Jishan Ahmad v. Bivomi M. Alshorbagi and Jacal Hacking Corp (Index No. 115755/08, Supreme Court, New York County) (the “underlying action”). Jacal Hacking also seeks damages against the Baker firm for legal malpractice in connection with its representation of Jacal Hacking in the underlying action. The underlying action involved a motor vehicle accident that occurred on May 11, 2007.
Plaintiff in the underlying action, Ahmad, was standing on the sidewalk at LaGuardia Airport, near the taxi holding area, when a taxi owned by Jacal Hacking and driven by Alshorbagi, jumped the curb and struck him. According to the police accident report, Alshorbagi stated that he accidentally pressed the gas and brake pedals at the same time. Jacal Hacking was insured by American Transit under a policy providing liability insurance coverage with a limit of $100,000 per person and a maximum of $300,000 per accident. American Transit assigned the Baker firm to defend Jacal Hacking, and assigned separate counsel for Alshorbagi.
On April 7, 2010, the Hon. George J. Silver issued a decision and order awarding plaintiff Ahmad partial summary judgment on the issue of liability. The trial on damages commenced on February 16, 2011, and the jury returned a verdict in favor of Ahmad, awarding damages in the total amount of $800,000. Defendants appealed and by a stipulation dated January 24, 2012, the parties agreed to settle the action for $410,000, with American Transit paying Ahmad $250,000 ($100,000 on the policy and an additional $150,000) and the Sheriff $5,000, and Jacal Hacking paying Ahmad $150,000 and the Sheriff $5,000.”
“First, as to the claim against American Transit, it is “well settled that an insurer may be held liable for damages to its insured for the bad faith refusal of a settlement offer.” Smith v. General Accident Insurance Co, 91NY2d648, 652 (1998). ”
“”Bad faith is established only ‘where the liability is clear and the potential recovery far exceeds the insurance coverage.”‘ Id (quoting DiBlasi v. Aetna Life & Casualty Insurance Co, 147 AD 93, 98 (2″d Dept 1989). “The bad-faith equation must include consideration of all of the facts and circumstances relating to whether the insurer’s investigatory efforts prevented it from making an informed evaluation of the risks of refusing settlement.”
“Applying the foregoing standards, the issue of American Transit’s bad faith cannot be resolved as a matter of law. Contrary to Jacal Hacking’ s assertion, the record as a whole, as presented on the motions, does not clearly and conclusively establish bad faith as defined by the Court of Appeals, i.e. that American Transit engaged in a pattern of behavior evincing a conscious or knowing indifference to the probability that Jacal Hacking would be personally accountable for a large judgment if a settlement offer within the policy limits were not accepted. Pavia v. State Farm Mutual Insurance Automobile Insurance Co, supra. Although liability was clearly determined against Jacal Hacking in April 2010 when Ahmad was awarded partial summary judgment, the record is otherwise inconclusive as to other factors bearing on the issue of bad faith. Those factors include but are not limited to whether Ahmad would have actually accepted a settlement within the limits of the policy at some time before or during trial, whether it was “highly probable” that the nature of Ahmad’s injuries and the specific circumstances surrounding the accident would result in a large verdict in excess of the policy limits, and whether American Transit kept Jacal Hacking informed of the status of settlement offers and negotiations both before and during trial. See Smith v. General Accident Insurance Co, supra; Pavia v. State Farm Mutual Automobile Insurance Co, supra. ”
“In any event, even assuming without deciding that the Baker firm was negligent in failing to communicate directly and personally with Jacal Hacking as to the status of the settlement negotiations and trial, Jacal Hacking cannot establish that such negligence was a proximate cause of the loss sustained, i.e. that but for the attorney’s negligence, the underlying action would have settled for $75,000 and Jacal Hacking would not have sustained any damages. While Jacal Hacking asserts that it lost an opportunity to settle the underlying action for $75,0000, the undisputed record shows that American Transit was solely responsible for making the decisions as to the amounts offered in settlement and the timing of each settlement offer. Notably, Jacal Backing’s general manager, Natalia Sorkin, admits as much when she states that if they had 1 · known about the underlying action and the settlement offers and demands, “we would have demanded that American Transit meet the demands of plaintiff and settle at $75,000.” Under the circumstances presented, the alleged malpractice relates to allegations of bad faith on the part of the insurer. As noted above, an insurer’s failure to communicate with its insured and keep it informed of the status of settlement offers and negotiations can constitute some evidence of bad faith. See Smith v. General Accident Insurance Co, supra at 653. Thus, given the absence of causation, Jacal Hacking cannot maintain a claim for legal malpractice and the Baker firm is entitled to summary judgment. See Leder v. Spiegel, supra. “