N.Y. Court of Appeals allows consequential damages for breach of business-interruption policy


The Bi-Economy holding illustrates an important practical lesson. At least in the context of business interruption insurance, where a carrier breaches its obligation of good faith and fair dealing by failing to promptly pay a covered claim, a court may find that it is “reasonably foreseeable” that the insurer’s “injurious conduct” will “cause additional damages that the policy was purchased to protect against in the first place.”  In those limited circumstances, New York courts may hold the insurer liable, in excess of limits, for the insured’s “consequential damages including the demise of its business.” Whether and to what extent this ruling may apply outside the context of business interruption insurance will have to await future decisions.


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