Skip to Main Content
Services Talent Knowledge
Site Search
Menu

Alert

Our attorneys stay on top of changes in legislation, agency regulations, case law, and industry trends—then craft timely legal alerts to keep clients up to date on legal developments important to their business.

August 5, 2014

Consequential Damage Claim Permitted Against Liability Insurer for Breach of Covenant of Good Faith

In Bi-Economy Mkt., Inc. v. Harleysville Ins. Co. of N.Y., 10 N.Y.3d 187 (2008), and its companion case, Panasia Estates, Inc. v. Hudson Ins. Co., 10 N.Y.3d 200 (2008), the Court of Appeals held that damages for claims against insurers for breach of the implied covenant of good faith may include consequential damages. Thus, an insured may recover additional costs incurred as a result of the insurer's bad-faith denial of a claim.

In a recent decision, the Appellate Division, Second Department held that the additional costs incurred as a result of such claims may include damages for loss of earnings. See Mut. Assn. Adm'rs, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 2014 NY Slip Op 4470 (2d Dep't June 18, 2014). In National Union, the insured sued for consequential damages, including lost income, based on the insurer's alleged breach of the subject insurance policy in discontinuing a defense of the insured in an underlying ERISA lawsuit following the insured's rejection of a settlement offer. The insured sought consequential damages for "'the demise of [the insured] as an operating business' and 'loss of income by [the insured]'."

The insurer moved for summary judgment based on an exclusion in the insurance policy for the recovery of consequential damages for loss of earnings. The Court, citing the Bi-Economy and Panasia decisions, denied the motion, holding that the exclusion applied only to loss of earnings caused by an event covered by the policy, not to a loss caused by the alleged breach of contract.

The Second Department's decision is a reminder that where a claim for breach of the covenant of good faith and fair dealing is asserted, policy provisions may not protect the insurer from liability for consequential damages, including lost earnings or diminished business operations.

Should you have questions regarding the information presented in this alert, please contact Anthony J. Piazza, Chair of the firm's Insurance Coverage & Regulation Practice Area, at (585) 295-4420 or apiazza@hblaw.com.

 

Subscribe

Click here to sign up for alerts, blog posts, and firm news.

Featured Media

Alerts

Second Circuit Court of Appeals Certifies Questions Regarding Damages for Improper Judgment Enforcement to New York Court of Appeals

Alerts

NYS Governor Cuomo Signs Bill to Fully Repeal Immunity for Certain Health Care Providers and Facilities

Alerts

Gridlock and Middleman Lobbying Cause NYS Pharmacy Benefit Manager Reforms to Fail Again in NYS Budget

Alerts

IRS Issues Additional Guidance on the Employee Retention Credit for First Two Quarters of 2021

Alerts

More Good News for Local Restaurants and Entertainment Establishments

Alerts

New York State Announces Deal to Legalize Marijuana

This site uses cookies to give you the best experience possible on our site and in some cases direct advertisements to you based upon your use of our site.

By clicking [I agree], you are agreeing to our use of cookies. For information on what cookies we use and how to manage our use of cookies, please visit our Privacy Statement.

I AgreeOpt-Out