Prospect Auto Sales and Repairs, Inc. v State Farm Mutual Automobile Insurance Company
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Attorneys and Parties
Brief Summary
An auto repair shop, acting as the insured's assignee, sought unpaid collision-repair benefits from an automobile insurer after the insurer paid only part of the repair bill.
The Supreme Court, Putnam County, dismissed the complaint on summary judgment, holding that there is no private right of action under Insurance Law § 2601 [statute concerning unfair claim settlement practices and good-faith claims handling] and 11 NYCRR 216.7 [Regulation 64 provision governing insurer handling and negotiation of vehicle repair claims].
The Appellate Division reversed the order granting summary judgment to the insurer and denied the insurer's motion to dismiss the complaint.
The appellate court held that the complaint fairly alleged a breach of contract claim, not an independent statutory or regulatory cause of action, and that the insurer failed to make a prima facie showing for summary judgment because its claim that it paid the prevailing competitive rate was unsupported by the survey it relied on and its affidavit lacked personal knowledge and relied on hearsay within hearsay.
Background
State Farm issued a policy covering Janet Sukhram's 2018 Audi Q7 for September 11, 2022 through March 11, 2023. After the vehicle was damaged in an accident on February 20, 2023, Sukhram made a collision claim and brought the vehicle to Prospect Auto Sales and Repairs, Inc. on February 22, 2023. She signed a repair authorization, a designated representative authorization permitting the shop to negotiate with State Farm about repair costs and payment, and an assignment of claim transferring to the shop her rights against State Farm for damages arising from any failure to pay the full repair cost. The shop repaired the vehicle to its pre-accident condition for $19,736.60, but State Farm paid only $13,188.22. The shop then sued as assignee for breach of contract, alleging that the policy required State Farm to indemnify the insured for reasonable and necessary repairs performed by the repair facility of her choice and that State Farm failed to negotiate and pay in good faith under Insurance Law § 2601 [statute concerning unfair claim settlement practices and good-faith claims handling], 11 NYCRR 216.7 [Regulation 64 provision governing insurer handling and negotiation of vehicle repair claims], and the policy.
Lower Court Decision
The Supreme Court granted State Farm's motion for summary judgment dismissing the complaint. It accepted State Farm's argument that the action improperly sought recovery based on alleged violations of Insurance Law § 2601 and 11 NYCRR 216.7, neither of which creates a private right of action.
Appellate Division Reversal
The Appellate Division reversed. It held that, fairly read, the complaint stated a breach of contract claim that used the alleged statutory and regulatory violations as part of the theory of breach, rather than asserting a standalone cause of action under those provisions. The court also held that State Farm failed to establish entitlement to judgment as a matter of law. Its assertion that it paid according to the policy and at the prevailing competitive rate was conclusory because it did not submit the survey on which that assertion depended. In addition, its supporting affidavit was not based on personal knowledge and relied on hearsay within hearsay, making it insufficient. Because State Farm failed to meet its initial burden, its motion had to be denied regardless of the adequacy of the opposition papers.
Legal Significance
This decision confirms that New York litigants may frame insurer claims-handling conduct as part of a breach of contract theory even when the same conduct is described by Insurance Law § 2601 and Regulation 64. It also reinforces that an insurer moving for summary judgment must submit competent evidence supporting its valuation methodology; conclusory references to internal surveys and affidavits lacking personal knowledge are insufficient.
An insurer cannot obtain summary judgment merely by arguing that there is no private right of action under Insurance Law § 2601 or 11 NYCRR 216.7 when the complaint actually alleges breach of contract, and the insurer must support its payment methodology with admissible evidence.