Rocanova v. Equitable Life Assurance Society, 83 N.Y.2d 603 (1994)
r
r
Punitive damages are not recoverable in insurance contract disputes unless the breach involves a fraud evincing a high degree of moral turpitude aimed at the public generally and is actionable as an independent tort.
r
r
Summary
r
This case clarifies the standard for awarding punitive damages in first-party insurance actions in New York. The Court of Appeals held that punitive damages are not available for an ordinary breach of contract. They are only recoverable when the breach involves fraud demonstrating a high degree of moral turpitude and wanton dishonesty, implying a criminal indifference to civil obligations, and is aimed at the public generally. The conduct must also be actionable as an independent tort for which compensatory damages are available. The plaintiff must demonstrate both egregious tortious conduct and that such conduct was part of a pattern directed at the public.
r
r
Facts
r
Mark Rocanova purchased a disability income policy from Equitable Life, later increasing coverage. Shortly after the increased coverage took effect, he filed a claim, alleging a disability. Equitable rescinded the policy, claiming Rocanova was already disabled and misrepresented his income. Rocanova sued, alleging various causes of action, including common-law fraud and violation of Insurance Law § 2601, and sought compensatory and punitive damages. He supported his claims with allegations of 124 other disputes between Equitable and other policyholders, claiming a pattern of unfair claim settlement practices.
r
r
Procedural History
r
The Supreme Court dismissed some of Rocanova’s causes of action but allowed the claim for violation of Insurance Law § 2601 and the demand for punitive damages to proceed, relying on the Appellate Division, First Department’s decision in Belco Petroleum Corp. v AIG Oil Rig. The Appellate Division affirmed, stating that the law in the First Department allows for the recovery of punitive damages under Insurance Law § 2601. The New York Court of Appeals granted leave to appeal.
r
r
Issue(s)
r
1. Whether a private cause of action exists under Insurance Law § 2601 for unfair claim settlement practices.
r
2. Whether Rocanova sufficiently pleaded a claim for punitive damages based on breach of the implied covenant of good faith and fair dealing or an independent common-law right of action.
r
r
Holding
r
1. No, because New York law does not recognize a private cause of action under Insurance Law § 2601.
r
2. No, because Rocanova failed to demonstrate that he was personally aggrieved by tortious conduct arising out of his contractual relationship with Equitable and failed to state a claim of egregious tortious conduct directed at him.
r
r
Court’s Reasoning
r
The Court of Appeals reversed the lower courts, holding that a private cause of action does not exist under Insurance Law § 2601. The court clarified that punitive damages are not recoverable for an ordinary breach of contract but may be available if the breach involves a fraud evincing a