PAVIA V. STATE FARM MUTUAL AUTOMOBILE INS. CO.
82 N.Y.2d 445, 626 N.E.2d 24, 605 N.Y.S.2d 208 (1993)
NATURE OF THE CASE: This is an appeal from a judgment for an insurer's bad faith.
FACTS: Rosato, sixteen years old, picked up nineteen-year-old Pavia (P) and another youth
in Rosato's mother's car. Rosato had a learner's permit that did not authorize driving at
night. She turned a corner at an excessive speed and encountered a double parked car. In an
effort to avoid hitting the double parked car, Rosato collided with a car driven by Amerosa.
P was seriously hurt. The car was insured by State Farm (D) with a $100,000 liability limit.
In 1985, Pavia brought an action against the Rosatos and Amarosa. A preliminary
investigation by State Farm revealed that Rosatas were 100% liable. Later leads came up that
revealed that the double parked car may have been backing up, giving rise to an emergency
defense. Other leads revealed that Pavia failed to wear her seat belt, and that drugs were
being used in the car that night. In June of 1987 P's counsel wrote to State Farm demanding
the full $100,000 within thirty days. Six months later State Farm authorized the full policy
limit to P, but it was rejected as too late. A jury found Rosata liable for $6,322,000. The
Supreme Court reduced this to $5,000,000 which was further reduced by the Appellate Division
to $3,880,000. The Rosatos and P brought this action against State Farm alleging bad faith
for failing to accept P's policy limit settlement offer. The trial court instructed on a
gross disregard charge and the jury awarded $4,688,030 against State Farm. The Appellate
Division affirmed. D appealed.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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