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Early Dismissal of Extra-Contractual Insurance Claims
By: Charles W. Benton, Esq.

Plaintiffs who bring direct actions against insurers frequently include one or more extra-contractual causes of action. Typical claims in this area allege either statutory violations or tort-based unfair claims settlement practices.

Defense counsels often seek the early dismissal of these types of causes of action via a motion for summary judgment. Frequently, however, the trial court denies a defendant's motion for summary judgment to dismiss with leave to renew after discovery is complete, in effect allowing a plaintiff to further develop evidence to bolster plaintiff's extra-contractual claims.

Drepaul v. Allstate Insurance Company (299 A.D.2nd 391, 749 N.Y. Supp.2nd 439), recently decided by the Appellate Division, Second Department, strengthens the defense's position that it is never too early for a trial court to deal with inadequately pled and developed causes of action. The defendant in Drepaul appealed the pre-discovery completion denial of its cross motion to dismiss the second cause of action for punitive damages, the third cause of action alleging violations of New York General Business Law S 349 and part of the fourth cause of action asserting discriminatory practices under 42 U.S.C. Section 1981.

The punitive damage claim was dismissed based on the fact that the defendant insurer did not have an underlying tort duty sufficient to support a claim for punitive damages. With regard to the General Business Law S 349 cause of action, the plaintiffs could not point to evidence that the defendant engaged in deceptive or misleading acts or practices that impacted consumers at large rather than just the parties. The S 1981 claim failed because it did not allege events claimed to constitute intentional discrimination as well as circumstances giving rise to a plausible inference of racially discriminatory intent.

Most importantly, the Second Department in Drepaul indicated that it was not necessary to wait until discovery was complete before these causes of actions could be dismissed. In the Court's words, ". . . the mere hope that evidence sufficient to defeat the motion may be uncovered during the discovery process is not enough to defeat a motion for summary judgment . . . " (299 A.D.2nd 391 at 393, 749 N.Y. Supp.2d 439 at 441).

Defense counsel is well advised to cite Drepaul in its next pre-discovery completion summary judgment motion to dismiss insurance based extra-contractual causes of action. Likewise, for the sake of judicial economy and to further encourage the early settlement of legitimate insurance claims, trial courts should follow Drepaul's reasoning and dismiss any claim whose continued existence depends only upon the "mere hope" that discovery will uncover evidence which will breathe life into an otherwise moribund cause of action.

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