NY Court of Appeals Permits Consequential Damages Against Commercial Property Insurers Found to Have Wrongly Denied Coverage or Delayed Payment

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In a pair of potentially far-reaching decisions, the New York Court of Appeals has confirmed that consequential damages may be sought against a commercial property insurer found to have wrongfully denied coverage or delayed payment. In its rulings, New York State's highest court determined that all contracts with insurers featured a covenant of good faith that, when breached, could give rise to consequential damages. Two dissenting Judges noted that these decisions are simply changing the label of "punitive damages" to "consequential damages," which could result in the punitive punishment of honest insurers. New York law firm Traub Lieberman has published an article on the subject, in which one of its founding partners discusses the potential impact these rulings could have on the property insurance industry.

Traub Lieberman Straus and Shrewsberry (Traub Lieberman) has detailed two landmark decisions by the New York Court of Appeals, the State's highest court, that consequential damages are available against an insurer who improperly denies coverage or delays payment under a commercial property insurance policy.

In a summary prepared by Meryl R. Lieberman, Founding Partner, Traub Lieberman details the potentially significant impact that Bi-Economy Market, Inc. v. Harleysville Insurance Company (2008 NY Slip Op 01418) and Panasia Estates, Inc. v. Hudson Insurance Company (2008 NY Slip Op 01419) will have on the commercial property insurance industry.

In both opinions, the New York Court of Appeals determined that Harleysville Insurance Company's failure to pay the full amount of lost income to Bi-Economy, as defined in the commercial property insurance policy, was a breach of contract. The Court found that all contracts, by their very nature, feature of a covenant of good faith. Any breach of that good faith could give rise to consequential damages above and beyond policy limits.

Ms. Lieberman's article on the case details the conditions that consequential damages can be awards, as well as the key difference the Court found between "punitive damages" and "consequential damages."

In a companion case, Hudson Insurance Company was accused by a builder of failing to investigate a commercial property claim in a timely manner. When the claim was investigated three months later, the claim was denied by Hudson, who insisted the loss was due to wear and tear (as opposed to covered risk). in a follow-up inquiry from the Appellate Division as to whether consequential damages could be applied in this case, the Court answered yes, citing the Bi-Economy decision.

The Court's rulings were far from unanimous. As Ms. Liberman noted in her summary, two Judges accused the majority of abandoning precedent by simply changing the label of "punitive damages" to "conequential damages". The dissent also notes how this sweeping decision will result in damages of a punitive nature, and will undoubtedly lead to the punishment of honest insurers.

Traub Lieberman is monitoring these two breaking developments, and will keep its clients updated on the ramifications of these two decisions. The full summary of the two cases by Ms. Lieberman, along with downloadable copies of the two opinions, are available for immediate download at:


For more information on the author of this summary, please review her C.V. at:



TRAUB LIEBERMAN STRAUS & SHREWSBERRY LLP has achieved a national reputation for excellence in legal representation. Our philosophy is to provide quality legal representation in an expeditious and efficient manner. Our emphasis on client service, as well as our reputation in the legal community, has served our clients and the firm well. Traub Lieberman has been recognized by many, including Martindale-Hubbell, for outstanding legal ability and ethical standards. For more information, visit us online at http://www.traublieberman.com.

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Meryl R. Lieberman