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In Metropolitan Prop. & Cas. Ins. Co. v. GEICO Gen. Ins. Co., 186 A.D.3d 1513, 130 N.Y.S.3d 847 (N.Y. App. Div., 2d Dep't, N.Y. 2020), it was held that "voluntary payment" was not a defense available to a primary carrier against an excess carrier's claim of insurer bad faith.
As explained by the court in this case, the voluntary payment defense at common law is an affirmative defense in an action for the recovery of money which was voluntarily paid with full knowledge of the facts, in basic terms.
In this case, the appellate court carefully explained that the voluntary payment doctrine has no place:
Applying the common-law voluntary payment doctrine so as to bar actions alleging bad faith would allow primary insurance companies to benefit from their own bad conduct. Here, MetLife alleged that GEICO acted in bad faith by failing to timely notify MetLife of the underlying personal injury action commenced against their mutual insured, Colvin, by failing to timely apprise MetLife of developments in the underlying personal injury action, by failing to apprise MetLife that GEICO's tender of its policy limit to Gomez in the underlying personal injury action had been rejected, and by failing to adequately and properly defend Colvin in the underlying personal injury action. Moreover, in support of its motion, GEICO submitted copies of numerous emails and letters from MetLife's counsel and claims representative to GEICO requesting documents in order for MetLife to adequately assess Gomez's claim after being informed of the underlying personal injury action by Gomez's counsel and receiving a request from Gomez's counsel that MetLife tender its policy, as well as a copy of MetLife's reservation of rights letter issued to GEICO with respect to the settlement of the underlying personal injury action. As a result, we conclude that the voluntary payment doctrine does not apply in this action alleging bad faith.
Metropolitan Property & Casualty, 186 A.D.3d at ___, 130 N.Y.S.3d at ___ (page numbers not available at time of publication).
The voluntary payment doctrine is explored in the context of lender force-placed insurance practices in § 11:25, 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith (3d ed. and 2020 Supps. Thomson Reuters West). Actions by Excess Carriers and Defenses of Primary Carriers are the specific focus of §§ 7:7 - 7:18, inclusive, in Volume 1, id.
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