Pavia v. State Farm Mutual Automobile Insurance Co.
Court of Appeals of New York
626 N.E.2d 24 (1993)
After an accident, injured plaintiff Pavia offered State Farm (defendant) a settlement for its insureds' (the Rosatos') full $100,000 policy limit with a 30-day deadline, but State Farm was actively investigating potential liability defenses at that early stage and did not respond within the deadline; by the time State Farm abandoned its defense investigation (having been unable to corroborate the insureds' account) and authorized the same settlement offer months later, Pavia rejected it as too late. After a jury awarded Pavia damages exceeding the policy limit, the Rosatos assigned their bad-faith claims against State Farm to Pavia, and a jury found State Farm acted in gross disregard of the Rosatos' interests.
Whether an insured may bring a bad-faith claim against an insurer for refusing a settlement offer where the insurer's conduct amounts only to ordinary negligence.