SMART TALK

Insurance Company Successfully Sued for Refusing to Settle-Pinto v. AllState

This past year, Wingate, Russotti & Shapiro was successful in winning one of the leading recent insurance bad faith cases in New York State.

The action was begun after the trial of plaintiff Carmella Pinto's case in Civil Court, Richmond County. Carmella sustained a bulging disc in her lower back with nerve damage as a result of a car accident. Liability was conceded by defendant.

While the jury was deliberating, it became apparent that there would be a plaintiff's verdict, well in excess of the $100,000 Allstate Insurance policy of the defendant driver. This was revealed by a jury question to the Court and an actual improper verdict of $210,000, which prompted the trial judge to return the case to the jury to continue deliberating.

Despite an all but certain loss, Allstate never raised its offer of $30,000 to plaintiff. The verdict came in for $350,000 in plaintiff's favor.

After the Appellate Term affirmed the verdict for plaintiff, Allstate paid its $100,000 policy, and WRS filed suit in Federal court for AllState's bad faith refusal to settle the case. WRS sought to recover the remainder of the $350,000 verdict from the insurance company even though this was above the $100,000 policy limit of the insured driver.

WRS alleged that Allstate acted in bad faith by not offering to settle the case for $100,000 at a time when it knew that the jury would find in excess of that amount. The legal basis of a bad faith claim in New York is that the insurer acted with a gross disregard to its insured in refusing to settle a case for the policy limits, at a time when it is clear that the injury warrants this, that a verdict in excess of the policy is likely and the plaintiff has exhibited a willingness to accept the policy limits. By the end of the Pinto trial in the Civil Court, all of these factors existed; yet Allstate refused to budge.

After extensive discovery in the Federal court action, WRS unsuccessfully opposed an Allstate motion for summary judgment. The trial court found that plaintiff did not meet the very strict Standard of showing that an issue of fact existed as to whether Allstate acted with "gross disregard" to its insured driver's interests. WRS appealed to the Second Circuit Court of Appeals, only one Step away from the Supreme Court of the United States.

The appeal, argued by Phil Russotti and written by William Hepner and Mr. Russotti convinced the Second Circuit of the error of the lower court's reasoning. An issue of fact clearly existed as to whether Allstate acted with gross disregard.

After losing the appeal Allstate finally settled the case for an additional $325,000 above the $100,000 that it had already paid, bringing the recovery to a total of $425,000 on a case in which the driver only had $100,000 in insurance coverage.

The Pinto case is now one of the leading cases in New York State bad faith litigation for personal injury actions and is likely a significant psychological blow to an insurance company which arguably puts the assets of its own insureds at risk.

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