Dawn/NASA
In a case in Massachusetts, a District Court dismissed an excess carrier's claims for "equitable subrogation" and "breach of the implied covenant of good faith and fair dealing" against a primary carrier of their common insured. HDI-Gerling Am. Ins. Co. v. Navigators Ins. Co., No. 15-10338-FDS, 2015 WL 5315190 (D. Mass. September 11, 2015).
However, the court deferred ruling on Gerling's motion to dismiss Navigators' alleged claim for "bad faith." The case presented a conflict-of-laws question as to whether New York or Massachusetts law should apply to the question of whether there is a direct duty of good faith in settlement owed by a primary carrier to an excess carrier. In New York, a primary insurer owes a direct duty of good faith in settlement to an excess insurer, but not under Massachusetts insurance law. Since the record did not allow for a full and final answer to the choice-of-insurance-laws question, the court deferred ruling in order to allow the record to be more fully developed for a ruling in the future.
It is interesting that the District Court's dismissal of the excess carrier's claim for alleged breach of an implied covenant of good faith and fair dealing did not cause it to similarly dismiss the excess carrier's alleged "bad faith" claim. As the District Judge saw the question, there could be an independent bad faith claim in tort under New York law even where there is no contractual duty of good faith and fair dealing even under an implied contractual covenant. Accordingly, the excess carrier could have a claim upon which relief can be granted if New York law and not Massachusetts law applies to the question. The answer to the choice-of-insurance-laws question will simultaneously determine the outcome of that question too.
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