Albany, New York (February 20, 2008) -- Upholding a key principle of the insurance contract, The New York Court of Appeals ruled on February 19, 2008 that policyholders can seek consequential damages when their businesses collapse as a result of the insurance company's failure to fulfill its contractual obligations.  Bi-Economy Market, Inc. v. Harleysville Insurance Company of New York, et al.

Reversing a New York Supreme Court decision upheld by the Appellate Division, that "the insurance policy expressly exclude[d] coverage for consequential losses, "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.  Throughout a 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 an amicus brief in the case on behalf of United Policyholders, a nonprofit dedicated to educating the public on insurance issues. In the brief, Anderson Kill countered the insurance companies' position that exclusions in their policies for "consequential loss" bar recovery for consequential damages, arguing: Such exclusions limit coverage under a property insurance policy, not liability for breach of the policy... In the insurance market today, there is no specific exclusion for the consequences flowing from an insurance company's deliberate and intentional breach of a policy.  Nor could there be.  Judge. Eugene F. Pigott, writing for the majority, similarly held:Nor do we read the contractual exclusions for certain consequential 'losses' as demonstrating that the parties contemplated, and rejected, the recoverability of consequential 'damages' in the event of a contract breach. The consequential 'losses' clearly refer to delay caused by third party actors or by the '[s]uspension, lapse or cancellation of any license, lease or contract.'  Consequential 'damages,' on the other hand, are in addition to the losses caused by a calamitous event ... and include those additional damages caused by a carriers injurious conduct - in this case, the insurer's failure to timely investigate, adjust and pay the claim. Eugene R. Anderson of Anderson Kill & Olick commented: "The Court of Appeals has recognized that insurance companies should not be granted the  power to insulate themselves from remedies 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." The decision is available on the New York Court of Appeals website at http://www.nycourts.gov/ctapps/decisions/feb08/14opn08.pdfAbout Anderson Kill & Olick, P.C.Anderson Kill & Olick, P.C. was founded in 1969 on the principles of  integrity, excellence in the practice of law, and straightforward solutions  to complex legal issues. Anderson Kill practices in the areas of Bankruptcy  & Restructuring, Corporate & Commercial Litigation, Corporate & Securities, Employment & Labor Law, Insurance Recovery, Intellectual Property, Real Estate & Construction, Tax, and Trusts & Estates. The firm has offices in New York, Greenwich, Newark, Philadelphia and Washington, D.C.For more information, please contact:Eugene R. Andersoneanderson@andersonkill.com (212) 278-1751