First Party Insurance Consequential Damages are here to Stay in New York
The Court of Appeals has upheld a first-party insured's right to obtain
an award of consequential damages as a result of a carrier's failure
to handle an insurance claim in good faith. In
Bi-Economy Market, Inc. v. Harleyswille Insurance Company,
(
click here to read) plaintiff's building and inventory were destroyed by fire. However,
the carrier only agreed to pay the insured $163,000 in damages. The insured
had to wait another year before receiving an additional $244,000 through
an alternative dispute resolution procedure. It also only paid the insured
for 7 months of business interruption when the fact indicated that the
full 12 months should have been paid. Under this backdrop, the insured
sued the carrier for its bad faith handling of the claim. It was this
claim that the Court of Appeals has now recognized in the State of New
York. In so doing, the Court of Appeals reversed both the Motion Court
and the Appellate Division and denied defendant's motion which sought
to assert a defense based upon the exclusion of "consequential damages"
from coverage and then went on to reinstate the consequential damage claim
that had been stricken by the lower courts. The Court of Appeals held
that the business interruption coverage provided under the policy made
Harleysville aware that it would be liable for business loss damages if
it breached its agreement. As a result, the Court held that consequential
damages allegedly stemming from the carrier's failure to properly
adjust the loss was recoverable. A Federal Court in New York has recently held in
Quick Response Commercial Division, LLC v. Travelers Property Casualty
Company of America
that such consequential damages include interest payments made by the
insured and attorneys fees expended.
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