New York Appellate Division, First Department, Reversed Trial Court Finding that Plaintiff’s Motion to Amend Complaint For Consequential Damages Against Insurer Was Duplicative

Panasia Estates v. Hudson Insurance Co. (New York Appellate Division, First Department, December 15, 2009)

In an insurance coverage dispute, plaintiff commenced this action against  Hudson Insurance Co. alleging that it breached the insurance contract by failing to properly investigate the loss and denying the loss as not covered under the policy.  In a historic decision, the Court of Appeals, in 2008, allowed plaintiff to proceed forward with asserting a claim for consequential damages despite a contractual exclusion contained in the insurance policy prohibiting such relief.  Relying in part of that decision, plaintiff made a motion to amend its complaint to add a cause of action for breach of contract and sought consequential damages.  Hudson Insurance argued that the claim  for   consequential damages needed to be sufficiently pled as “special” damages consistent with the Court of Appeals decision.  Despite Hudson’s arguments, the trial court granted the motion to amend the complaint. 

On appeal, the First Department unanimously reversed the decision with costs.  While the First Department disagreed with Hudson’s claim that the Court of Appeals decision in 2008 did not establish a specificity requirement in make a claim for consequential damages, it nonetheless denied the motion to amend on the basis that plaintiff’s breach of contract claim with consequential damages was duplicative of its existing claim for breach of implied covenant of good faith.   The First Department also confirmed the Court of Appeals decision in 2008 by stating that consequential damages can be sought without a claim for  punitive damages.  The First Department stated that the "determinative issue is whether such damages were 'within the contemplation of the parties as the probable result of a breach at the time or prior to contracting.'" [citations omitted] 

For a copy of the decision click here

Tom Segalla and Jeffrey Kingsley

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