As those in insurance coverage know, a cause of action pursuant to General Business Law sec. 349 within an insurance context is a difficult claim for a plaintiff to establish. Most plaintiffs put in a sec. 349 claim, but cannot get over the obstacle that most circumstances involve disputes over a private contract and do not impact the public at large (see New York Univ. v. Cont'l Ins. Co.).
In the recent case of Wendol v. Guardian Life Ins., I was surprised to see that Justice Madden denied the insurer's motion to dismiss the plaintiff's cause of action alleging deceptive business practices under sec. 349. In Wendol, the insurer issued the plaintiff a disability income insurance policy. The plaintiff/insured alleged that he purchased the insurance with this particular insurer because (1) its reputation; and (2) the affirmative representation of its agent that the insurer administers its own claims. Notably, there is no provision in the subject insurance policy permitting the insurer to transfer administration of policyholders' claims to any third party.
Based on a dispute about the receipt of benefits under the policy, the plaintiff alleged, among other things, that the insurer engaged in deceptive business practices by representing to the plaintiff and its other policyholders that it would administer its own claims when, in fact, the claims were administered by another entity and that fact was not disclosed. Although Justice Madden held that the plaintiff failed to plead an actual injury from the misrepresentation, she did not dismiss the cause of action. Justice Madden concluded that the following remaining allegations were sufficient to survive a dismissal motion: that the insurer (i) wrongfully conspired to misinterpret Policy terms to avoid or minimize payment of Total Disability and Residual Disability benefits, (ii) wrongfully conspired to claim a delayed disability onset date, (iii) wrongfully conspired to deny and refuse to pay disability income insurance policy claims and waiver of premium claims under disability policies, and (iv) wrongfully advise[d] their customers that benefits have been approved under reservation of rights, even though the policies issued by the insurer did not contain any provisions allowing such reservation.
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