Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—2d Cir.: State Farm did not commit deceptive practice by selling Personal Injury Protection coverage, (Aug 27, 2013)

By Peter Reap, J.D., LL.M.

The federal district court in Brooklyn did not err, substantially, in dismissing a claim brought by Dominick Servedio against State Farm Insurance for deceptive trade practices in violation of New York General Business Law Section 349, the U.S. Court of Appeals in New York City has ruled (Servedio v. State Farm Insurance Co., August 26, 2013, Per curiam). Thus, the district court’s dismissal of Servedio’s Section 349 claim, and his complaint in its entirety, was affirmed.

Servedio alleged that State Farm violated Section 349 based on the company’s offering of additional Personal Injury Protection (PIP) coverage. State Farm offered automobile insurance purchasers an optional PIP benefit under which it would pay additional first-party benefits to reimburse for extended economic loss sustained by an eligible injured person.

To state a Section 349 claim, the purchaser needed to show the challenged act or practice was consumer-oriented, that the act was misleading in a material way, and that he suffered injury as a result of the deceptive act. Consumers who bought a product that they would not have, absent a manufacturer’s deceptive commercial practices, did not suffer an injury under the statute. However, a consumer who alleged that a deceptive practice caused him to pay more than the good or service he actually received was worth may be able to satisfy the injury requirement.

The purchaser’s allegations that he was allegedly deceived into buying additional PIP coverage that differed from what he thought he was buying was not, standing alone, a cognizable injury under Section 349, according to the district court.

On appeal, Servedio claimed that the district court “misapprehended” his Section 349 claim, the court noted. However, the district court’s reasoning, that “[D]eceived consumers may nevertheless receive—and retain the benefits of—something of value, even if it is not precisely what they believed they were buying,” was cited with approval by the appellate court. Further, as the district court found, Servedio did not claim that State Farm failed to properly provide benefits under the additional coverage provision. Thus, the lower court’s decision was affirmed.

The case is No. 12-3884-cv.

Attorneys: Harry I. Katz (Harry I. Katz, P.C.) for Dominick Servedio. Michael P. Versichelli (Rivkin Radler LLP) for State Farm Insurance Co.

Companies: State Farm Insurance Co.

Cases: StateUnfairTradePractices ConnecticutNews NewYorkNews VermontNews