Insurer Authorized to Settle Third Party’s Coverage Claim, N.Y. Federal Judge Rules

NEW YORK — A New York federal judge has dismissed without prejudice a breach of contract claim filed against Zurich American Insurance Co. by its policyholders, finding the insurer was authorized under the policy to settle a coverage claim filed by a third party.

On May 4, Judge Paul A. Engelmayer of the U.S. District Court for the Southern District of New York also dismissed the plaintiffs’ contractual and statutory bad faith claims, finding Zurich did not act “arbitrarily or unreasonably” so as to “frustrate the fruits” of the policy.

Zurich issued a commercial general liability policy to construction companies …