New York insureds have long struggled to maintain claims against their insurers for consequential damages—damages resulting from actions following a breach of contract. A recent decision by the Appellate Division, First Department, seems to alleviate this plight of insureds.
In this case, the plaintiff owned a building located at 40 Prince Street in Manhattan. The defendant insured the building for “direct physical loss or damage.” The plaintiff submitted a claim, asserting that the building’s foundation had cracked, rendering it unstable because of work taking place on an adjacent lot. After an extended period of time during which the insurer neither paid nor denied the claim, the plaintiff building owner filed this lawsuit, seeking not only damages under the terms of the policy, but damages in consequence of the defendant’s allegedly dilatory conduct as well.
The Supreme Court granted the defendant’s motion to dismiss the claim for consequential damages, but the Appellate Division reversed, specifically rejecting the defendant’s contention that a heightened pleading requirement exists for consequential damages.
While it remains to be determined whether the plaintiff building owner will eventually prevail with its claim, to have survived a challenge at the pleading stage marks an important advancement in insureds’ rights in first-party insurance litigation.
D.K. Property v. National Union Fire Ins. Co. of Pittsburgh, Pa. (1st Dep’t 2019)
Evan S. Schwartz
Founder of Schwartz, Conroy & Hack