Can An Insurer Demand Repayment of the Deductibles Form the Insured After Settling Claims ?
In Commerce & Industry Ins. Co. v. North Shore Towers Management, Inc., 162 Misc.2d 778, 617 N.Y.S.2d 632 (Civ. Ct., N.Y. Co. 1994), the plaintiff insurer submitted evidence that the claims were covered by the insurance policy at issue; that the policy entitled the insurer to settle claims on the insureds' behalf that the policy provided for specified deductibles; that the plaintiff insurer paid out the amounts at issue; and that the insurer demanded repayment of the deductibles from the defendant insureds.
In North Shore Towers the defendants pointed out that all of the claims were paid after the insurance policy expired and was not renewed.
They argued that plaintiff, having lost the defendants' business, failed to exercise good faith in settling the claims.
The court in North Shore Towers observed that "cases involving settlements within a deductible ... present a potential conflict between the insured's interest in paying as small a part of the deductible as possible, and the insurer's interest in limiting its own exposure to liability by ensuring a settlement within the deductible, or in avoiding [the] litigation expenses [of obtaining] dismissal of a claim which may readily be settled within the deductible." 162 Misc.2d at 780.
After a thorough, cogent, and persuasive review of the law, the court in North Shore Towers thus determined that a bad faith claim can be raised on the ground that the insurer has permitted its own interests to prevail. the court in North Shore Towers further held, inter alia, 162 Misc.2d at 781-783:
The court in North Shore Towers determined that the defendants there had failed to meet the burden which they bore to raise triable issues of fact as to bad faith, in that they had "not submitted an affidavit on personal knowledge setting forth any investigations defendants made on their own of the claims at issue, and defendants' reasons, based on those investigations, for disputing their liability or the amount of damages paid to the claimants.
Nor have defendants shown that they made any requests to plaintiff, prior to settlement of the claims, for information about plaintiffs investigation of the claims or the progress of settlement negotiations, or that plaintiff failed to respond to such request." 162 Misc.2d at 785.
The court in North Shore Towers further determined that on that record there was not even circumstantial support for a claim of bad faith, as "there is no appearance that the insurer engaged in a pattern of settling the claims for the amount of the deductible." 162 Misc.2d at 783 (observing that of the three claims at issue there, one was settled for a little more than half of the deductible amount, one for substantially more, and only one for the precise deductible amount).