Insurance Coverage Dispute Alone Not Bad Faith
The tort of bad faith requires, for an insured to recover, that the insurer act intentionally to deprive the insured of the benefits of the policy of insurance. Garo Alexanian (d/b/a) Vet Mobile and Companion Animal Network, Inc. (“CAN,” and together with Alexanian, “Plaintiffs”) sued GEICO and Travelers seeking a declaration that Defendants have a duty to defend and indemnify Alexanian against counterclaims filed against him New York, plus tort damages for the insurers bad faith denial of his claim for defense.
In Garo Alexanian d/b/a Vet Mobile and Companion Animal Network, Inc. v. Government Employees Insurance Company and Travelers Casualty Insurance Company Of America. No. 21-CV-05427 (LDH) (TAM), United States District Court, E.D. New York (September 30, 2022) dealt with both the claims for defense and the allegations allowing extracontractual damages.
BACKGROUND The Travelers Policy excluded from coverage, however, personal injury to a person “arising out of . . . employment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation or discrimination directed at that person.” Alexanian also purchased an umbrella policy from GEICO (the “GEICO Policy”). On January 15, 2021, Alexanian sued Rosa Morales claiming back rent, and alleged that Morales was “an employee of [Alexanian] and [Alexanian's] business from September 2015 until October 2019.” It also referred to Morales as a tenant. Morales filed a counterclaim alleging that Alexanian defamed her. Travelers refused to defend Alexanian since Morales was an employee.
DISCUSSION
The duty to defend is exceedingly broad and an insurer will be called upon to provide a defense whenever the allegations of the complaint suggest a reasonable possibility of coverage. The Court must determine only whether, assuming Alexanian's allegations are true, the defamation claim is solely “within the policy exclusion.” The answer to that question is no. Thus, the breach of contract claim cannot be dismissed.
In short, Travelers failed to establish that the Underlying Action falls within the employment practice related exclusion or is otherwise outside the Travelers Policy, and therefore, the motion to dismiss Alexanian's breach of contract claim must be denied. Breach of the Covenant of Good Faith and Fair Dealing, Common Law Bad Faith, and Common Law Fraud