Summary
requiring "a showing of wanton dishonesty as to imply a criminal indifference to civil obligations — morally culpable conduct directed at the general public, a public as opposed to a mere private wrong."
Summary of this case from TVT Records v. Island Def Jam Music GroupOpinion
March 17, 1987
Appeal from the Supreme Court, New York County, David H. Edwards, Jr., J.
John M. Speyer of counsel (Michelle J. France with him on the brief; Speyer Perlberg, attorneys), for appellant.
Stuart A. Jackson for respondents.
The action was commenced to recover proceeds of a fire insurance policy issued by appellant, covering plaintiffs' premises at 237 25th Street, Brooklyn, New York. On November 28 and 29, 1979, a fire occurred at plaintiffs' plant. Following an investigation by the insurer's independent adjuster and by the City Fire Marshal, it was determined that the fire had an incendiary origin and, accordingly, the carrier denied payment under the policy. This appeal concerns only the fifth cause of action in the complaint to recover punitive damages, based upon plaintiffs' claim that such relief is available and warranted as a result of defendant's morally reprehensible conduct which amounts to a fraud directed at the general public.
Essentially, plaintiffs point to three instances of wrongdoing by the insurer as justifying exemplary relief: (1) an alleged bribe offer to plaintiffs' employee to change his report as to the circumstances respecting the inoperability of the sprinkler system on the day of the fire (the employee stated that the sprinkler pipes were accidentally damaged by a forklift accident and the insurer's adjuster suggested that, had the employee's account been "a little different it might be worth his while"); (2) the removal of the electrical connection box from plaintiffs' premises, which plaintiffs claim was the accidental cause of the fire and which hampered the Fire Marshal's investigation; and (3) an alleged false statement from a witness that plaintiffs' president's automobile was seen at the premises shortly before the fire, which was presented to bolster the insurer's defense of arson.
The fifth cause of action, which seeks punitive damages as a remedy for these wrongful acts in processing the claim, further alleges that, "in recent years", Continental "adopted and pursued a general policy with respect to claims asserted under fire insurance policies of raising colorable defenses of alleged incendiarism by the insured, known to be without merit, in order to use such colorable defenses as a basis upon which to delay making payment under such policies so as to obtain * * * the benefit of the use of the money" during the ensuing period required to prosecute a suit to recover on the policies.
Special Term, denying defendant's motion for partial summary judgment dismissing this cause of action, concluded that the fraudulent scheme, if established at trial, would amount to a public wrong, sufficient to authorize recovery of exemplary damages. On this record, we disagree and find no basis to preserve the punitive damages issue for trial.
It is firmly established in this State that, in an action to recover on an insurance policy, punitive or exemplary damages may not be obtained "unless there is a showing of wanton dishonesty as to imply a criminal indifference to civil obligations — morally culpable conduct directed at the general public, a public as opposed to a mere private wrong." (Samovar of Russia Jewelry Antique Corp. v. Generali, Gen. Ins. Co., 102 A.D.2d 279, 282.)
As we recognize in Samovar (supra), the principle is well established, has been adopted by the Court of Appeals (Halpin v Prudential Ins. Co., 48 A.D.2d 906) and has been consistently followed in this Department (Jacobson v. New York Prop. Ins. Underwriting Assn., 120 A.D.2d 433; Royal Globe Ins. Co. v. Chock Full O'Nuts Corp., 86 A.D.2d 315; Cook v. Hartford Fire Ins. Co., 97 A.D.2d 731; Holoness Realty Corp. v. New York Prop. Ins. Underwriting Assn., 75 A.D.2d 569; Cohen v. New York Prop. Ins. Underwriting Assn., 65 A.D.2d 71; Kleiner v. Jefferson Life Ins. Co., 63 A.D.2d 636; John C. Supermarket, Inc. v. New York Prop. Ins. Underwriting Assn., 60 A.D.2d 807; Marvex Processing Finishing Corp. v. Allendale Mut. Ins. Co., 60 A.D.2d 800, affg 91 Misc.2d 683) and in the Second Department (Shapiro v Prudential Ins. Co., 81 A.D.2d 661; Waterview Catering Corp. v New York Prop. Ins. Underwriting Assn., 79 A.D.2d 973; M.S.R. Assocs. v. Consolidated Mut. Ins. Co., 58 A.D.2d 858). This adheres to the general rule in contract actions that, in order to support an award of punitive damages, there must be proof of more than a private wrong (see, Merrick v. Four Star Stage Light., 60 A.D.2d 806, 807, where it was observed that the wrongdoing must be "of a continuous and systematic nature, and aimed at the public generally"; see also, Garrity v. Lyle Stuart, Inc., 40 N.Y.2d 354, 358; Brook Shopping Centers v. Bass, 107 A.D.2d 615, appeal dismissed 65 N.Y.2d 923).
Here, plaintiffs have made no showing of any fraudulent, criminal, dishonest or morally reprehensible conduct by the insurer concerning or affecting the general public so as to permit recovery of punitive damages. Clearly, the action is founded upon a private breach of contract and, other than the general, conclusory allegations in the complaint, there is nothing in the record to demonstrate a fraudulent and deceitful scheme in dealing with the general public.
The insurer denies the specific charges in connection with the processing of the claim. Nevertheless, the complained of wrongs, assuming them to be true, relate to the handling of this claim and, although legally and morally reprehensible, they do not rise to the level of a wrong directed at the general public, necessary to support an award of punitive damages (cf., Marvex Processing Finishing Corp. v. Allendale Mut. Ins. Co., supra, where it was held that exemplary damages could not be recovered, notwithstanding the assertion that the insurer in that case deliberately sought to avoid payment under the policy to destroy plaintiffs' business and prevent them from reopening). Plainly, what is involved here is a private, not a public wrong.
Although discovery proceedings have been already held, the record does not include any affirmative proof to raise a triable issue that there was a gross and wanton fraud upon the public. As noted, the general, conclusory allegation in the complaint is insufficient in the absence of substantiating proof, as is the opposing affidavit by plaintiffs' attorney, who, without requisite personal knowledge of the facts, refers only to wrongdoing as applied to this claim, which, as noted, will not support a punitive damage award.
Moreover, it is well settled that a claim for punitive damages is not a separate cause of action (see, Cook v. Hartford Fire Ins. Co., supra; Carroll v. New York Prop. Ins. Underwriting Assn., 88 A.D.2d 527, lv dismissed 57 N.Y.2d 602, 774; APS Food Sys. v. Ward Foods, 70 A.D.2d 483).
Accordingly, the order, Supreme Court, New York County (David H. Edwards, Jr., J.), entered September 11, 1986, denying defendant's motion for partial summary judgment, dismissing so much of the complaint as seeks punitive damages, should be reversed, on the law, with costs, the motion granted and the fifth cause of action of the complaint dismissed.
SANDLER, J.P., CARRO, ELLERIN and WALLACH, JJ., concur.
Order, Supreme Court, New York County, entered on September 11, 1986, unanimously reversed, on the law, the motion granted and the fifth cause of action of the complaint dismissed. Appellant shall recover of respondents $75 costs and disbursements of this appeal.