Here is a link to an informative article written by Amy Bach of United Policyholders, a non-profit that advocates for the rights of insurance policyholders. It focuses on the insufficient remedies available to New York insureds when their insurance claims are wrongfully denied.
In most all cases, the insured can only sue for breach of contract for the amount that should have been originally paid by the insurance company. That means if an insurer refuses to pay a $100,000 life insurance policy, the most that the insured can hope to receive in court is that same amount. Likewise, if an insured files suit against an insurance company for denying a $250,000 claim under a homeowner’s insurance policy, courts will not usually award anything beyond that amount to a prevailing insured.
Without the ability to win punitive damages or attorney’s fees, the insurance company has an incentive to deny or lowball claims, and insureds are often without the resources or will to fight in court. This is obviously an unfair dynamic. What makes insurance claims different from other types of business transactions are that insureds who suffer losses are often in a vulnerable position and that insurance companies are uniquely able to incorporate a “delay, deny, defend” approach into their business model.
The only way to change this state of affairs – and put New York in line with other states that provide meaningful remedies for insureds – is to get politicians to understand that a change needs to be made.