Insurance Company Disclaimed Coverage After Landlord Refused to Settle Case

Facts: Unknown attackers entered landlord NYCHA's building lobby and shot tenant. Tenant was paralyzed from the shooting. Tenant sued landlord, claiming negligence in maintaining building locks. Landlord's insurance company tried to settle the case, but tenant rejected its offer. NYCHA then refused to let the insurer make a second settlement offer. The insurer then disclaimed coverage. At a trial, the jury ruled for tenant and awarded him $5.5 million. Landlord then sued the insurer to get insurance coverage for this award. The court ruled against landlord without a trial. Since tenant had a reasonable chance of winning the lawsuit, landlord breached the terms of its insurance agreement by refusing to let the insurance company settle the case. Landlord appealed. Court: Landlord wins. Although tenant had a reasonable chance of winning his lawsuit, the insurer couldn't disclaim coverage without showing that landlord willfully interfered with its settlement efforts. Since the insurer didn't even try to get landlord to cooperate, it couldn't disclaim coverage. The case was sent back to determine if tenant would have accepted the insurance company's second settlement offer. If so, this could limit the amount of money that the insurance company was liable for.

NYCHA v. Hous. Auth. Risk Retention Group: NYLJ, 2/2/00, p.25, col.2 (Ct. App. 2d Cir.; Oakes, Pooler, Katzmann, CJJ)