March 15, 2023
By Riley Murdock
A New York federal judge ruled that a Chubb unit must face an apartment dweller’s breach of contract and bad faith allegations after the insurer took seven years to deny her claim for water damage.
U.S. District Judge Mary Kay Vyskocil partially granted Pacific Indemnity Co.’s motion to dismiss in an order Thursday, rejecting the insurer’s arguments that Lynda Arnet Hochfelder’s complaint was untimely. Hochfelder had said she discovered severe water damage in her apartment in 2014 but Pacific did not deny her claim until June 2021, leading her to accuse the insurer of unfairly delaying payment.
Pacific argued that its policy required Hochfelder to file her case within two years of her loss, but the policy does not define the term “loss” in that context, Judge Vyskocil said. She cited the 2010 Second Circuit ruling in Fabozzi v. Lexington Insurance C., in which the court found similar language ambiguous and sided with the policyholder, according to the order.
“Pacific Indemnity has not presented, nor has this court identified, any meaningful difference between this case and Fabozzi,” Judge Vyskocil wrote. “Pacific Indemnity denied the claim on June 30, 2021, allegedly breaching the contract. Because plaintiff brought this case within two years of that date, the motion to dismiss on timeliness grounds is without merit and is denied.”
Judge Vyskocil also refused to toss Hochfelder’s bad faith claim, which Pacific had argued was duplicative of her breach of contract count. Judge Vyskocil held that the contract claim was based on Pacific’s refusal to pay Hochfelder’s claim, while the bad faith claim was focused instead on the insurer’s repeated delays.
“This distinction (between delay and pay) is enough to preclude dismissal at the pleading stage on an argument of duplicative claims,” she wrote.
Pacific prevailed on one count, with Judge Vyskocil agreeing to toss a deceptive business practices claim. She held that Hochfelder did not accuse the insurer of actions that were deceptive or misleading in nature.
“We are very happy with this decision, which follows clear guidelines set by the Second Circuit in regards to requiring insurance companies to provide clear and unambiguous language in their insurance policies,” Hochfelder’s counsel, Jacques Catafago, said. “The defendant’s arguments failed to account for the Second Circuit precedent that the court relied upon in denying their motion, and the judge got it right.”
Hochfelder quickly reported her apartment’s water damage to Pacific after becoming aware of it in early 2014, filings show. However, despite fulfilling all the requirements of the policy, “Pacific Indemnity spent years delaying the claims process, which had costly consequences for plaintiff,” Judge Vyskocil wrote. The policy required Hochfelder to keep all damaged property until Pacific agreed she could get rid of it, leading her to incur years of unnecessary storage costs, according to the order.
Pacific eventually denied Hochfelder’s claim in 2021, citing a failure to comply with the conditions of the policy, according to case filings. She sued Pacific in February 2022 in New York state court, which the insurer removed to federal court shortly after. Hochfelder accused the Chubb unit of delaying payment and mishandling her claim in bad faith, as well as “baselessly” asserting that she hadn’t met the requirements of her policy, according to the order.
Hochfelder also had accused Pacific of violating New York business law, claiming the insurer had delayed and denied payment under false pretenses. She sought more than $3.3 million in compensatory damages for breach of contract and additional damages for her other claims, according to the order.
A representative for Chubb declined to comment.
Hochfelder is represented by Jacques Catafago of Catafago Fini LLP.
Pacific is represented by Paul Ferland of Cozen O’Connor.
The case is Hochfelder v. Pacific Indemnity Co., case number 1:22-cv-02012, in the U.S. District Court for the Southern District of New York.