Acquista v. New York Life Insurance

Dr. Acquista became seriously ill in November 1995. His physicians determined that he could develop leukemia. It became critical for him to avoid radiation exposure. As a result, Acquista, who was a pulmonologist, could no longer practice the chest specialty that involved radiation.

With his earning capacity taking a nosedive, Acquista filed a claim for disability benefits with the New York Life Insurance Company ("Life").

Life policies under which Acquista was insured required his "total disability" for collection of benefits.

After a massive amount of red tape (dilatory tactics taking 2 years), Life denied Acquista's disability claim. Life retorted that Acquista wasn't completely disabled because he could, for example, still teach.

Acquista sued Life for contract breach, bad-faith conduct, & miscellaneous tort claims.

Life won in the New York trial court ("Supreme Court of New York").

May an insurer that denies benefits in bad faith be liable for foreseeable contract damages beyond the amount of the insurance policy?

Yes. If an insurer denies benefits entitled to the insured in bad faith, contract damages may include foreseeable money damages beyond the limit of the insurance policy.

Judge Saxe: New York law doesn't recognize a tort action against insurers for bad-faith conduct....Insurers have no incentive to pay claims if consequences of denying in bad faith is just policy amount plus interest (without additional money damages).