The New York Court of Appeals denied an insurance company's motion for reargument of a decision that affirmed a key principle of the insurance contract on June 6, reaffirming a decision delivered on February 19, 2008. The Court of Appeals upheld the lower court's decision in Bi-Economy Market, Inc. v. Harleysville Insurance Company of New York, et al., which held that policyholders can seek consequential damages if their business collapses as a result of the insurance company's failure to fulfill its contractual obligations.

The Court of Appeals held that "it is well settled that in breach of contract actions 'the nonbreaching party may recover general damages which are the natural and probable consequence of the breach'" and that "when an insured...suffers additional damages as a result of an insurer's excessive delay or improper denial, the insurance 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's policy" with Harleysville Insurance Company provided business interruption coverage along with replacement cost coverage for the building and "contents" loss coverage. Over the three year-long coverage dispute, Harleysville offered to pay only seven months of Bi-Economy's business income claim, though the policy provided for twelve months. Bi-Economy never resumed business operations.

Anderson Kill & Olick, P.C., a law firm that frequently represents policyholders in insurance coverage disputes, filed a brief that countered the insurance companies' position that exclusions in their policies for "consequential loss" bar recovery for consequential damages.

"The Court of Appeals has made it crystal clear that insurance companies 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 basic principle," said Mark Garbowski of Anderson Kill & Olick.

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New York Court Reaffirms Policyholder's Right to Seek Consequential Damages for Breach of Insurance

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