The New York Court of Appeals denied an insurance company'smotion for reargument of a decision that affirmed a key principleof the insurance contract on June 6, reaffirming a decisiondelivered on February 19, 2008. The Court of Appeals upheld thelower court's decision in Bi-Economy Market, Inc. v. HarleysvilleInsurance Company of New York, et al., which held thatpolicyholders can seek consequential damages if their businesscollapses as a result of the insurance company's failure to fulfillits contractual obligations.

The Court of Appeals held that "it is well settled that inbreach of contract actions 'the nonbreaching party may recovergeneral damages which are the natural and probable consequence ofthe breach'" and that "when an insured...suffers additional damagesas a result of an insurer's excessive delay or improper denial, theinsurance company should stand liable for these damages."

Bi-Economy Market, a meat market in Rochester, New York,suffered a major fire in October 2002. Its "deluxe business owner'spolicy" with Harleysville Insurance Company provided businessinterruption coverage along with replacement cost coverage for thebuilding and "contents" loss coverage. Over the three year-longcoverage dispute, Harleysville offered to pay only seven months ofBi-Economy's business income claim, though the policy provided fortwelve months. Bi-Economy never resumed business operations.

Anderson Kill & Olick, P.C., a law firm that frequentlyrepresents policyholders in insurance coverage disputes, filed abrief that countered the insurance companies' position thatexclusions in their policies for "consequential loss" bar recoveryfor consequential damages.

"The Court of Appeals has made it crystal clear that insurancecompanies must be held accountable for their breaches of contract.When insurance company bad faith causes the death of a company,they should pay the full consequences. The court upheld that basicprinciple," said Mark Garbowski of Anderson Kill & Olick.

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