When You Can Recover More Than the Policy From Your Insurer
New York's courts have long enjoyed (if that's the right term) the reputation as being one of the safest - if not THE safest - havens for insurers in the entire country, particularly with respect to claims brought by insureds. For a further discussion of this topic, see, .e.g., "Why Bad Faith Claims Against NY Insurers Usually Fail."
That article, which was written some time ago, pointed out that insurers are largely insulated against bad faith claims, because the standard for prevailing on that theory is incredibly high:
"[A]n extraordinary showing of disingenuous or dishonest failure to carry out a contract."
On the other hand, we also left off suggesting that there is a carve-out to the general rule, and that in the right circumstances, an insured can recover damages against her own insurer above and beyond the amount of the insurance under the policy, particularly in the realm of business interruption insurance.
To that end, a recent decision from New York's Appellate Division, First Department in D.K. Prop., Inc. v. National Union Fire Ins. Co. of Pittsburgh, re-emphasized that carve-out.
What Happened in D.K. Prop, Inc.
After plaintiff's building started to shift, and therefore sustain some structural damage due to construction work on the property next door, plaintiff - correctly - filed a claim with defendant NUFIC, its property insurer. Fast forward 3 years, and, at least according to plaintiff, NUFIC still hadn't paid the claim, nor had it declined coverage; instead, NUFIC continued subjecting plaintiff to ongoing, unrelenting, demands for further investigation, causing plaintiff - at least in its view - to significant, and unnecessary out of pocket expenses and losses pertaining to the building as well as legal fees. Plaintiff alleged that this was a deliberate tactic by defendant to induce plaintiff to drop its claim, and claimed that NUFIC should be liable for these expenses and losses as consequential damages as an outgrowth of their dilatory tactics.
The trial court disagreed, and dismissed those claims.
But the Appellate Division, First Department reversed, citing its seminal holding in Bi-Economy Mkt., Inc. v Harleysville Ins. Co. of N.Y., 10 NY3d 187, 192 , and stating, in pertinent part, as follows:
"A plaintiff may sue for consequential damages resulting from an insurer's failure to provide coverage if such damages ("risks") were foreseen or should have been foreseen when the contract was made (Bi-Economy Mkt., Inc. v Harleysville Ins. Co. of N.Y., 10 NY3d 187, 192 ). Although proof of such consequential damages will ultimately rest on what liability the insurer is found to have "assumed consciously," or from the plaintiff's point of view, have warranted the plaintiff to reasonably suppose the insurer assumed when the insurance contract was made, a determination of whether such damages were, in fact, forseeable should not be decided on a motion to dismiss and must await a fully developed record (see Panasia Estates, Inc. v Hudson Ins. Co., 10 NY3d 200, 203 ; see also Bi-Economy at 192)."
In truth, there are two (2) takeaways from this:
First, and significantly, if you are in New York and your insurer is stringing you along and thereby causing you to sustain additional damages to your business as a result, you may, in appropriate circumstances, be able to recover those damages under New York law. In such a case, it behooves you to contact an attorney knowledgeable about this area of the law to assure that your business's interests are properly protected.
Second, and this is an important caveat, it is important to keep in mind that just because you can make the claim, doesn't necessarily mean you can win the claim. And this point, interestingly enough, was made by the D.K. Prop., Inc. court as well:
"In other words, the inquiry is not whether plaintiff will be able to establish its claim, but whether plaintiff has stated a claim."
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