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New York Court of Appeals Will Resolve Conflict on Consequential Damages in Breach of Insurance Contract Context

The New York Court of Appeals recently heard oral arguments on whether an insured may recover consequential damages in a breach of contract action against his or her insurer.  The two appeals -- Bi-Economy Market, Inc. v. Harleysville Ins. Co. of New York [Fourth Department] and Panasia Estates, Inc. v. Hudson Ins. Co. [First Department] -- reached opposite results.

The Fourth Department in Bi-Economy held that the insured could not recover consequential damages.  The Court observed that the insurance policy expressly excludes coverage for consequential losses, and thus it cannot be said that such damages were “contemplated by the parties when the contract was formed.”

By contrast, the First Department in Panasia held that the insured could recover consequential damages, citing   Acquista v. New York Life Ins. Co., 285 A.D.2d 73, 730 N.Y.S.2d 272 [2001] ).  The insurance policy in Panasia excluded consequential losses.  The First Department held that the insurer had not shown that the exclusion was an applicable provision and observed that the terms "consequential loss" and "consequential damages" are not synonymous.

The forthcoming decision will finally put to rest whether consequential damages are recoverable in this context.

Comments (1)

Well, there you have it, the Court of Appeals ruling in favor of the policyholder in Bi-Economy. Is the dissent right and are consequential damages as discussed in Bi-Economy merely a kind way of overturning Rocanova?

Will New York lawyers begin to show up at Bad Faith seminars? Will extra-contractual damages become the order of the day?

So may questions, so difficult to predict.

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