New York Law Review

Tag: Duty to Inform

  • Smith v. General Accident Ins. Co., 91 N.Y.2d 648 (1998): Insurer’s Duty to Inform Insured of Settlement Offers

    91 N.Y.2d 648 (1998)

    An insurer’s failure to inform its insured of settlement negotiations is a factor a jury can consider when determining if the insurer acted in bad faith by failing to settle a claim within policy limits.

    Summary

    This case concerns an insurer’s potential bad faith in refusing to settle a claim. A 14-year-old, David Smith, was severely injured after being hit by a car. Smith sued both the driver and Jay Brody, whose truck obstructed Smith’s view. The jury found Smith and Brody equally liable. General Accident, Brody’s insurer, with a $500,000 policy limit, did not settle. A subsequent jury awarded Smith $1.1 million. Smith, as Brody’s assignee, then sued General Accident for bad faith. The court instructed the jury to consider if General Accident informed Brody of settlement offers. The jury found bad faith, but the Appellate Division reversed. The New York Court of Appeals reversed the Appellate Division, holding that the jury could consider whether the insurer kept its insured informed during settlement negotiations as evidence of bad faith.

    Facts

    David Smith was severely injured when struck by a car after his view was obstructed by Brody’s delivery truck. Smith sued both the driver of the car and Brody. General Accident insured Brody with a $500,000 policy. The jury found Smith and Brody each 50% at fault for the accident. Despite Smith’s significant injuries, General Accident’s highest settlement offer was $300,000. Smith’s injuries included fractures, a collapsed lung, eye injuries, and brain damage resulting in an eight-day coma and permanent cognitive impairment. Brody testified that General Accident did not keep him informed of settlement negotiations, including Smith’s offer to settle for the policy limits. The insurer’s own claims manual instructed representatives to keep insureds informed of settlement negotiations when liability might exceed policy limits.

    Procedural History

    Smith sued Brody and the car driver, securing a verdict of $1.1 million against Brody. Brody assigned his rights against General Accident to Smith. Smith then sued General Accident for bad faith refusal to settle. The trial court found for Smith. General Accident appealed. The Appellate Division reversed, holding that the jury charge incorrectly stated that General Accident had a duty to advise Brody on settlement negotiations. Smith appealed to the New York Court of Appeals.

    Issue(s)

    Whether a jury, in determining an insurer’s bad faith refusal to settle a claim, can consider the insurer’s failure to inform its insured of settlement negotiations and offers.

    Holding

    Yes, because evidence of an insurance company not informing its insured of settlement negotiations is a factor the jury is entitled to consider in a bad faith claim.

    Court’s Reasoning

    The Court of Appeals reasoned that an insurer can be liable for bad faith refusal to settle. This stems from the implied covenant of good faith in all contracts, including insurance policies. A conflict arises when settlement offers approach policy limits; the insurer wants to minimize costs, while the insured wants to avoid excess liability. To prove bad faith, the insured must show the insurer acted with “’gross disregard’ of the insured’s interests”. The court noted that most jurisdictions allow juries to consider whether the insurer kept the insured informed of negotiations. While the court acknowledged that prior cases suggested an insurer has no unqualified duty to inform its insured of settlement offers, the court distinguished those cases. The court stated, “If an insurer acting in good faith would ordinarily keep its insured informed of settlement negotiations then the failure of an insurer to do so could raise the inference that the insurer is acting in bad faith by failing to provide its insured with settlement information, regardless of the insurer’s legal obligations.” Here, Smith presented evidence that the insurance industry standard, and General Accident’s own policies, required keeping the insured informed when liability might exceed coverage. The court emphasized that this factor was only one of many the jury considered in assessing bad faith, concluding that it was appropriate evidence for the jury to consider. The court reversed the Appellate Division and reinstated the trial court’s judgment.

  • Matt v. LaRocca, 71 N.Y.2d 154 (1988): Duty to Inform Public Employees of Automatic Immunity

    Matt v. LaRocca, 71 N.Y.2d 154 (1988)

    A public employer is not obligated to inform a public employee that immunity from criminal prosecution attaches automatically when the employee is compelled to answer questions directly related to their official duties under threat of dismissal.

    Summary

    Matt, a Department of Transportation supervisor, was dismissed for refusing to answer questions about misconduct in his division, invoking his Fifth Amendment privilege. He argued that he was not informed of the automatic immunity from criminal prosecution that would attach if he answered. The Court of Appeals reversed the Appellate Division’s decision to reinstate Matt, holding that there is no requirement for the State to inform a public employee of this automatic immunity. The court emphasized that the immunity flows directly from the Constitution and is not subject to the employer’s discretion.

    Facts

    Matt, a supervisory employee, was investigated for unauthorized employee absences and misuse of State property. He initially cooperated, but disciplinary charges were filed, and he was suspended. A criminal investigation was also initiated. The Commissioner of Transportation then requested Matt to testify under oath about matters under his jurisdiction, but Matt refused, invoking his Fifth Amendment privilege against self-incrimination, even when ordered to answer and warned about insubordination charges.

    Procedural History

    Disciplinary charges were brought against Matt for insubordination. After a hearing, the Commissioner accepted the Hearing Officer’s determination, but rejected the recommended two-month suspension and instead ordered Matt discharged. Matt then filed an Article 78 proceeding challenging the Commissioner’s determination. The Appellate Division granted the petition, but the Court of Appeals reversed that decision.

    Issue(s)

    Whether a public employer is required to inform a public employee that they automatically receive immunity from criminal prosecution when compelled to answer questions directly related to their official duties under threat of dismissal.

    Holding

    No, because the immunity flows directly from the Constitution, attaches automatically by operation of law, and is not subject to the employer’s discretion; thus, the employer has no affirmative obligation to inform the employee of the automatic attachment of immunity.

    Court’s Reasoning

    The Court of Appeals distinguished this case from People v. Masiello, which held that a witness before a Grand Jury must be accurately informed about the scope of immunity conferred. Here, Matt’s appearance was at a civil proceeding for work-related misconduct, not a Grand Jury investigation. The Court noted that the immunity protecting Matt flowed directly from the Constitution. It emphasized that public employees do not have an absolute right to refuse to account for their official actions while retaining employment. Citing Gardner v. Broderick, the court stated that the privilege against self-incrimination is not a bar to dismissal where a public servant refuses to answer questions specifically, directly, and narrowly relating to the performance of their official duties, without being required to waive immunity. The court reasoned that because the Commissioner’s representative did not have the power to confer or modify the immunity, there was no basis for concluding that he had an obligation to inform Matt of the automatic attachment of immunity.

  • People v. Copeland, 9 N.Y.2d 450 (1961): Authority to Arrest for Traffic Infractions

    People v. Copeland, 9 N.Y.2d 450 (1961)

    A police officer may arrest a person without a warrant for a traffic infraction committed in the officer’s presence, and is not required to inform the person of the cause of arrest when the person is apprehended in the actual commission of the infraction.

    Summary

    Copeland was pulled over for speeding. The officer did not inform Copeland why he was being arrested, but took him to a justice of the peace where he was charged with speeding. Copeland argued the arrest was unlawful because the officer failed to inform him of the cause of the arrest. The New York Court of Appeals held that the arrest was lawful. The Court reasoned that because Copeland was actively committing the traffic infraction of speeding in the officer’s presence, the officer was not required to inform him of the reason for the arrest. The Court emphasized that traffic infractions are treated as misdemeanors for procedural purposes, including arrest.

    Facts

    A state trooper observed Copeland driving at a high speed and clocked him going 70-75 mph in a 50-mph zone.
    The trooper stopped Copeland and took his driver’s license and registration.
    When Copeland asked, “What did I do wrong?”, the trooper directed him to follow him to the judge.
    At the judge’s house, the trooper filed an information charging Copeland with speeding.
    Copeland pleaded not guilty but was convicted and fined $50 after a trial where he admitted exceeding the speed limit.

    Procedural History

    Copeland filed an action for false arrest seeking $10,000 in damages.
    The trial court concluded the arrest was illegal because the trooper failed to inform Copeland of the cause of the arrest and instructed the jury to only consider damages.
    The jury returned a verdict of $600.
    The Appellate Division affirmed the judgment by a 3-2 vote.
    The New York Court of Appeals granted leave to appeal.

    Issue(s)

    Whether a police officer must inform a person of the cause of arrest when the person is apprehended in the actual commission of a traffic infraction.

    Holding

    No, because when a person is apprehended in the actual commission of a crime, there is no need to inform him of the cause of his arrest, and traffic infractions are treated as misdemeanors for procedural purposes, including arrest.

    Court’s Reasoning

    Section 180 of the Code of Criminal Procedure states that an officer arresting without a warrant must inform the person of the cause of the arrest, “except when the person arrested is in the actual commission of a crime.” The court reasoned that the exception exists because “when a person is apprehended in the actual commission of a crime, there is, of course, no need to acquaint him with the cause of his arrest. The reasonable and necessary assumption… is that the offender caught in the act is fully aware of what he is doing and why he is being taken into custody.”

    Copeland argued that speeding is a “traffic infraction” not a “crime” under the Vehicle and Traffic Law, and therefore the exception does not apply. The Court rejected this argument, explaining that the Vehicle and Traffic Law explicitly states that for the purposes of jurisdiction, traffic infractions “shall be deemed misdemeanors and all provisions of law relating to misdemeanors…shall apply to traffic infractions.” The court reasoned that it would be inconsistent to treat traffic infractions as misdemeanors for prosecution purposes, but not for arrest purposes. As the court stated, such a reading would be “inconsistent, fraught with practical difficulties and would defeat the apparent purpose of the Legislature in providing an orderly and consistent procedure for punishment of violators of the Vehicle and Traffic Law.”

    The Court observed that to accept Copeland’s view would mean that a peace officer could never make an arrest for a traffic infraction without a warrant, even if the offense were committed in their presence. This would require officers to obtain a warrant from a magistrate before taking someone into custody for a traffic infraction, a consequence that would “hamper prompt and effective enforcement” of traffic laws.

    The court concluded that a person committing an offense, whether a felony, misdemeanor, or traffic infraction, is aware of what they are doing. Therefore, an officer apprehending someone in the act of committing the offense need not state the obvious and inform the offender of the reason for the arrest.