NEW YORK LAW JOUNRNAL - May 1998
EXTRA DAMAGE AWARD ALLOWED FOR INSURER'S DELAY. By Daniel Wise
A Southern District jury last week broke new ground when it awarded $1.3 million in damages against Chubb Insurance company for delaying 25 months before offering to settle a claim for smoke damage to a Sutton Place apartment owned by a retired Metropolitan Opera singer.
In addition to awarding $2 million under the former opera singer's policy, the jury awarded $1.3 million on a novel claim for consequential damages under a theory that an "implied covenant of good faith and fair dealing" had been breached.
In letting the implied covenant theory go to jury, U.S. Judge Barbara S. Jones issued a "precedent setting ruling," said Dennis T. D'Antonio of Weg & Myers, who represented the retired opera singer, Joan Postel.
Chubb's lawyer, Kenneth R. Felt of Tell, Cheser & Breitbart, described the ruling as contrary to New York law, which controlled in the diversity suit. Mr. Felt added that there will be no appeal because the parties had agreed to set the parameters for the jury's verdict in exchange for giving up their appeal rights.
Ms. Postel, who held the policy with Chubb, submitted a claim for coverage in November 1993 after smoke from a fire in a back stairwell at the River House apartment building on East 52nd Street damaged her penthouse.
For six months after the incident, Chubb paid $25,000 a month to cover the costs incurred by Ms. Postel and her husband, Robert, a former New York City Councilman, to rent alternative living quarters at the Waldorf-Astoria Hotel. After six months, the company ceased paying for the suite at the Waldorf, contending that enough time had elapsed to permit the Postels to repair their apartment, Mr. Felt said.
But according to the Postels to lawyer, Mr. D'Antonio, the insurance company made no payments to cover the repair work until the end of 1995, when it remitted $538,000 to the couple. The Postels accepted the payment without prejudice to their right to sue.
In early 1996, Ms. Postel field the suit, Postel v. Great Northern Insurance Co. No. 96-1896, claiming she was owed another $1.4 million under the policy. She also sought consequential damages under an implied covenant, charging Chubb with unreasonably delaying payment of amounts that were not in dispute.
The jury awarded Ms. Postel $1,275,000 on her consequential damage claim. Mr. D'Antonio said he had argued that because Chubb had failed to pay the full amount of the claim, the Postels had been deprived of the use of their apartment for more than four years by the time the case came to trial. A dollar value could be placed on the loss of the apartment for that time, he added, by looking to the monthly rental value, which he estimated was at least $25,000.
In letting the consequential damage claim go to the jury, Chubb's lawyer, Mr. Felt, contended that Judge Jones had disregarded a ruling by the New York Court of Appeals in Rocanova v. Equitable Life Assurance Co., 83 NY2d (1994). But Mr. D'Antonio countered that Rocanova disallowed a claim for punitive damages, not consequential damages, under a specific statutory provision not at issue in Ms. Postel's lawsuit