New York

Were the New York Court of Appeals' decisions in Bi-Economy Market, Inc. v. Harleysville Ins. Co. of New York and Panasia Estates, Inc. v. Hudson Ins. Co. the bombshells that many thought they are? (see prior post on appeals here).  In both cases, the Court held 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 the contracting."  The consequential damages analysis, now applied to insurance contracts, is a well-settled principle.  Why then is it so surprising that an insured can seek consequential damages in the insurance contract context?

In his dissent, Judge Smith points out that these appeals conflict with the Court's past holdings in Rocanova v. Equitable Life Assur. Socy. of U.S. and New York Univ. v. Continental Ins. Co., where the Court rejected the argument that a bad-faith failure by an insurer to pay a claim could, without more, justify a punitive damages award.

Aren't consequential damages, even in the insurance contract context, different than punitive damages?  If so, do Bi-Economy and Panasia Estates truly endanger the holdings in Rocanova and New York Univ.?

Here are two good analyses of the appeals by fellow New York blawgers: Kevin Merriman over at National Insurance Law Forum Blog wrote this post and Elizabeth Fitzpatrick over a We've Got You Covered wrote this post.

Here are several articles about the decisions: here at PRWeb.com; here at Business Insurance; and  here at the Insurance Journal.