October 18, 2004

Lavaud v Country-Wide Ins. Co. (2004 NY Slip Op 51213(U))


The court considered the circumstances of an accident in which a pedestrian was struck by a vehicle insured by Country-wide Insurance Company, and the subsequent actions of the insurance company in response to settlement offers made by the injured party. The main issue was whether Country-wide Insurance Company acted in bad faith by failing to accept the injured party's settlement offer. The court held that to establish a prima facie case of bad faith refusal to settle, a plaintiff must demonstrate that the insurance carrier engaged in a pattern of behavior evincing a conscious or knowing indifference to the probability that an insured would be held personally accountable for a large judgment if a settlement offer within the policy limits were not accepted. The court determined that Country-wide's conduct in this matter was not a model of diligence but held that the limiting timeframe and other factors weighed against the injured party's bad faith claim, and granted the insurance company's motion for summary judgment dismissing the complaint.

Reported in New York Official Reports at Lavaud v Country-Wide Ins. Co. (2004 NY Slip Op 51213(U))

Lavaud v Country-Wide Ins. Co. (2004 NY Slip Op 51213(U)) [*1]
Lavaud v Country-Wide Ins. Co.
2004 NY Slip Op 51213(U)
Decided on October 18, 2004
Supreme Court, Kings County
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.
Decided on October 18, 2004

Supreme Court, Kings County

Ketly Lavaud, as Assignee of the Rights of Don N. Nixon, a/k/a Donnon N. Nixon, Plaintiff,


Country-Wide Insurance Company,, Defendant.


Ira Harkavy, J.

defendant Country-Wide Insurance Company (Countrywide) moves, pursuant to CPLR 3212, for an order granting summary judgment dismissing the complaint of plaintiff Ketly Lavaud as Assignee of the Rights of Don N. Nixon a/k/a Donnon N. Nixon (plaintiff). Plaintiff cross-moves for an order awarding her summary judgment against Countrywide on her complaint.

The Underlying Accident

On November 13, 1995, plaintiff and non-party Martha Domfe (Ms. Domfe) were pedestrians crossing Caton Avenue, at its intersection with Flatbush Avenue, in Brooklyn. When they started crossing the street, Don N. Nixon (Mr. Nixon) was stopped for a red light at the intersection in a vehicle insured by Countrywide under a liability policy with limits of $10,000 per person/$20,000 [*2]per accident. Before plaintiff and Ms. Domfe finished crossing the street, the light turned green and Mr. Nixon proceeded toward the intersection and struck plaintiff and Ms. Domfe in the cross-walk. As a result of this accident, plaintiff sustained various injuries including a fractured patella and a torn lateral and medial meniscus.

The Domfe Action

On or about February 6, 1996, Ms. Domfe commenced an action against Mr. Nixon in Kings County Supreme Court. On September 4, 1996, Mr. Nixon appeared for an examination before trial and testified that his vehicle struck both plaintiff and Ms. Domfe and that he did not see these pedestrians before contact was made. In a letter dated October 21, 1996, Ms. Domfe demanded that Countrywide tender its full policy limits. In a letter dated January 23, 1997, Ms. Domfe’s counsel notified Countrywide that his client was prepared to settle the case for the policy limits and that he would consider Countrywide’s failure to accept this offer to be in bad faith. On February 14, 1997, Ms. Domfe filed a note of issue and certificate of readiness. In or about September, 1997, the Domfe action was settled for $9,500.00.

Plaintiff’s Action

By letter dated January 10, 1996, plaintiff’s attorney notified Countrywide of the accident. On May 22, 1996, plaintiff’s attorney provided Countrywide with a copy of the police report of the accident, as well as a medical report from the hospital that initially treated plaintiff for her injuries. On March 25, 1997, plaintiff provided Countrywide with authorizations for her MRI films and no-fault records.

On or about August 11, 1998 (11 months after the Domfe action was settled), plaintiff commenced an action against Mr. Nixon. In a letter dated August 13, 1998, plaintiff’s attorney notified Countrywide that his client was prepared to settle the action for $10,000. Plaintiff’s attorney attached various records to the letter including plaintiff’s emergency room record, two operative reports, as well as her employer’s wage verification report. Finally, plaintiff’s attorney stated:

“The offer to accept the sum of herein mentioned in full settlement of the above entitled action is made without prejudice and is to be deemed withdrawn if not accepted within ten (10) days from the date of this letter. In the event I do not receive a response from your office within said time period, and upon an excess verdict in favor of my client being rendered, your company may be held responsible for said excess as well as your insured by reason of the fact that you failed to proceed in good faith.”

In a letter dated November 5, 1998, Countrywide advised plaintiff’s attorney that it was in receipt of his August 13, 1998 letter. Countrywide also advised plaintiff’s attorney that it was missing plaintiff’s no-fault file and asked that a copy of this file be sent to it in order to “expedite settlement” of plaintiff’s claim. Finally, Countrywide stated that it was “ready, willing, and able to discuss all claims,” but first needed to review the missing no-fault file. Following the exchange of these letters, the case proceeded through the discovery process. Although plaintiff’s counsel claims that he attempted to negotiate a settlement during this period, the only firm settlement offer made by plaintiff during the pendency of her action was set forth in the August 13, 1998 letter, which, by its own terms, expired on August 23, 1998. [*3]

On December 13, 2001, at the commencement of jury selection, Countrywide tendered its first settlement offer in the amount of $8,000 and plaintiff rejected this offer. The following day, Countrywide tendered a settlement offer in the amount of $10,000, the full policy limit. Plaintiff also rejected this offer. After a trial on liability and damages, the jury found Mr. Nixon 70% responsible for the accident, and plaintiff 30% responsible. The jury awarded plaintiff $750,000 for past pain and suffering and $250,000 for future pain and suffering. On appeal, the Appellate Division, Second Department upheld the jury’s determination on liability but reduced damages for past pain and suffering to $350,000 and future pain and suffering to $105,000. Ultimately, plaintiff entered a judgment against Mr. Nixon in the total amount of $459,796.75, inclusive of interest. On May 30, 2002, plaintiff and Mr. Nixon entered into an agreement whereby plaintiff relinquished her right to enforce the judgment against Mr. Nixon personally in exchange for an assignment of Mr. Nixon’s right to pursue a claim against Countrywide for an alleged bad faith refusal to accept plaintiff’s settlement offer.

The Instant Bad-Faith Action

By summons and complaint dated July 10, 2003, plaintiff commenced the instant action against Countrywide alleging that it acted in bad faith and in gross disregard of the insured’s interests when it failed to accept plaintiff’s August 13, 1998 settlement offer. The instant motions are now before the court.

“To establish a prima facie case of bad faith refusal to settle, a plaintiff must demonstrate that the insurance carrier’s conduct constituted a gross disregard of the policyholder’s interests-that is, a deliberate or reckless failure to place on an equal footing its own interests and those of the policyholder when considering a settlement offer” (Vecchione v Amica Mut. Ins. Co., 274 AD2d 576, 578 [2000]). “In other words, a bad-faith plaintiff must establish that the defendant insurer engaged in a pattern of behavior evincing a conscious or knowing indifference to the probability that an insured would be held personally accountable for a large judgment if a settlement offer within the policy limits were not accepted” (Pavia v State Farm Mut. Auto. Ins. Co., 82 NY2d 445, 453-454 [1993]).

“Factors that enter into the bad faith equation include the likelihood of success on the liability issue in the underlying action, the potential magnitude of damages and resulting financial burden each party may be exposed to as a result of a refusal to settle, and the information available to the insurance carrier at the time the demand for settlement is made” (Vecchione, 274 AD2d at 578-579). “Naturally, proof that a demand for settlement was made is a prerequisite to a bad-faith action for failure to settle” (Pavia, 82 NY2d at 454). Furthermore, a bad-faith plaintiff must demonstrate that, at the time such a settlement demand was offered, “all serious doubts about the insured’s liability were removed” (id. at 454).

It is clear from the record before the court that Countrywide’s conduct in this matter was hardly a model of diligence. For example, Countrywide has failed to offer a satisfactory excuse for waiting some three months before responding to plaintiff’s August 13, 1998 settlement offer. However, the fact of the matter is, the only settlement demand that plaintiff made in this case was contained in the August 13, 1998 letter. Thus, plaintiff’s entire case rests upon a settlement demand that was only open for ten days and was made a mere two days after she commenced the underlying [*4]action. In Pavia, the Court of Appeals expressed strong disapproval of such time-limited settlement offers on public policy grounds. Specifically, the Court noted that:

“[p]ermitting an injured plaintiff’s chosen timetable for settlement to govern the bad-faith inquiry would promote the customary manufacturing of bad-faith claims, especially in cases where an insured of meager means is covered by a policy of insurance which would finance only a fraction of the damages in a serious personal injury case. Indeed, insurers would be bombarded with settlement offers imposing arbitrary deadlines and would be encouraged to prematurely settle their insureds’ claims at the earliest possible opportunity in contravention of their contractual right and obligation of thorough investigation.”[FN1] (Pavia, 82 NY2d at 455).

Besides the public policy concerns which are implicated with plaintiff’s time-limited settlement offer, there are other factors which weigh against plaintiff’s bad faith claim. As the court noted above, plaintiff’s settlement offer was made nearly simultaneously with the filing of the underlying complaint. While it is true that Countrywide was on notice as to the circumstances of the accident given its involvement in the Domfe action, it had no opportunity to conduct an independent medical exam or to depose plaintiff regarding her injuries. Finally, plaintiff’s claim that all serious doubts about Mr. Nixon’s liability were removed at the time of the settlement offer is belied by the jury’s finding that plaintiff was 30% responsible for the accident.

Accordingly, Countrywide’s motion for summary judgment dismissing plaintiff’s complaint is granted and the action is hereby dismissed. Plaintiff’s cross motion for summary judgment against Countrywide is denied.

This constitutes the decision, order, and judgment of the court.

Dated: October 18, 2004E N T E R,

J. S. C.


Footnote 1:In Pavia, the settlement offer was valid for 30 days, three times longer than plaintiff’s offer.