Getting a Recovery for Consequential Damages from Your Insurance Company; The Door Has Opened

In two cases in 2008, the Court of Appeals has allowed insureds to recover consequential damages against their insurance companies.  See Bi-Economy Mkt,. Inc., v. Harleysville Ins. Co. and Panasia Estates, Inc. v. Hudson Ins. Co. 

This has been a monumental event in New York insurance law.

If you have an unpaid insurance claim against your insurance company, please feel free to call for a free consultation at 800-581-1434 or write to

Before these cases an insured could not collect consequential damages against his insurance company for the insurer’s refusal to pay the claim in good faith.  Examples of bad faith include the insurer’s refusal to pay to full and fair damages, delaying paying the claim, and forcing the insured to go out of business.  

In Bi-Economy the plaintiff-business, a meat market, could not re-open since its insurance company would not make a fair settlement in good faith.  The market had structural, contents, and business interruption losses as a result of a major fire, and it claimed that it could not re-open since the insurance company refused to settle at a fair rate.  Plaintiff never had enough funds to re-build, re-stock, and re-open due to its insurance company’s failure to make a prompt, full, and fair settlement.  In its lawsuit, the market sought to obtain damages in excess of the policy limits as consequential damages for the insurance company’s bad faith conduct.  The Court of  Appeals ruled that the plaintiff-insured could allege this claim in its pleadings.

Essentially, the Court of Appeals opened the door to consequential damages in excess of the insurance company’s limits.  Previously, it was very well established that an insured could not obtain a recovery greater than the insurance that he purchased.  This rule granted a certain immunity to insurance companies since they would not be penalized for offering less or refusing to pay.

We note that the Court merely opened the door.  At this time the parameters of recovery are unclear.  

In order to prevail on a consequential damages claim it appears that the insured must show the following:

  1. the insurance company acted in bad faith; and
  2. the insured can show damage in excess of the policy limits.

The bad faith requirement may be tough to prove.  The mere fact that the insurance company and its insured have a difference of opinion as to the amount of damages may not constitute bad faith.  The definition of  bad faith will have to be litigated in future cases. 

Nonetheless, the door has been opened.

If your insurance claim has been denied or delayed, please feel free to contact me for a free consultation at 800-581-1434 or write to

Mark E. Seitelman, 7/8/10,


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