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Court Discusses Insurance Claim for Real Property

Respondent Estate Company is the owner of commercial rental property located at 33 West 19th Street in Manhattan. Respondent had a commercial property insurance policy with appellant Insurance Company which included “Builders’ Risk Coverage,” covering damage to its property while undergoing renovation. A New York Probate Lawyer said that during the policy period, the roof of its building was opened in order to perform construction work. Inclement weather caused rain to enter the building through the roof opening, resulting in extensive damage to the property.

A New York Estate Lawyer said that, shortly after the occurrence, respondent claimed it promptly notified appellant of the loss. According to the respondent, however, appellant failed to investigate or adjust the claim until several weeks later. A New York Estate Litigation Lawyer said that, Appellant then denied the claim three months after that, stating that respondent’s loss was the result of repeated water infiltration over time and wear and tear rather than from a risk covered under the builders risk policy provision.

A New York Will Lawyer said that, respondent commenced this action against appellant, alleging that it breached the insurance contract by failing to properly investigate the loss and denying the loss as not covered under the policy. Respondent sought both direct and consequential damages that it claimed stemmed from appellant’s breach.

A Mahattan Probate Lawyers said that, appellant moved for partial summary judgment “dismissing all of respondent’s bad faith allegations and all prayers for consequential, extra-contractual, or incidental damages or attorneys fees.” Appellant argued, among other things, that a contractual exclusion for “any other consequential loss” precluded respondent’s request for consequential damages.

The issue in this case is whether respondent is entitled to damages for breach committed by the appellant.

As pertinent here, Bronx Probate Lawyers said the Supreme Court denied that part of appellant’s motion to dismiss respondent’s claims for consequential damages. The Appellate Division affirmed, stating that “an insured may recover foreseeable damages, beyond the limits of its policy, for breach of a duty to investigate, bargain for and settle claims in good faith”. In addition, the court concluded that appellant failed to show that the contractual exclusion for “`consequential loss'” applied to respondent’s claim, rejecting appellant’s argument that “consequential loss” and “consequential damages” were synonymous.

The Appellate Division granted appellant leave to appeal to this Court, certifying the question: “Was the order of the Supreme Court, as affirmed by this Court, properly made?” We conclude that it was.
The courts below properly rejected appellant’s contention that it was entitled to judgment as a matter of law because consequential damages are not recoverable in a claim for breach of an insurance contract. As we explained in a 2008 case, consequential damages resulting from a breach of the covenant of good faith and fair dealing may be asserted in an insurance contract context, so long as the damages were “`within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting'”. Here, the courts below failed to consider whether the specific damages sought by respondent were foreseeable damages as the result of appellant’s breach. Because the record before us is not fully developed on that issue, such claim must be considered by Supreme Court.

Lastly, as the Appellate Division correctly concluded, the contractual exclusion for consequential loss does not bar the recovery of consequential damages. Accordingly, the court held that the order of the Appellate Division should be affirmed, with costs, and certified question answered in the affirmative. As this is an appeal from a summary judgment motion, we view the facts in the light most favorable to respondent, the non-moving party.

The rule is that, Consequential damages resulting from a breach of the covenant of good faith and fair dealing may be asserted in an insurance contract context, so long as the damages were within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting. If you are involved in a similar case, seek the assistance of a New York Estate Attorney and New York Estate Litigation Attorney at Stephen Bilkis and Associates.

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