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Current Developments in the Commercial Divisions of the
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Posted: October 28, 2014

No Claim for Breach of Covenant of Good Faith and Fair Dealing When Claim Has Same Basis as Breach of Contract Claim

On October 21, 2014, Justice Whelan of the Suffolk County Commercial Division issued a decision in J. Kokolakis Contracting Corp. v. Evolution Piping Corp., 2014 NY Slip Op. 24321, dismissing a claim for breach of the covenant of good faith and fair dealing.

In J. Kokolakis Contracting Corp., the plaintiff building contractor sued a subcontractor in connection with work the defendant did on a job site, as well as its insurer. The defendant insurer moved to dismiss the plaintiff’s causes of action against it for breach of the covenant of good faith and fair dealing and for attorney’s fees. In granting the motion, the court explained:

Distinguishable [from tort claims] are claims premised upon a breach of the covenant of good faith and fair dealing which the law of this state imposes upon all contracting parties. This covenant mandates that none of such parties shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract. The covenant is breached when a party to a contract acts in a manner that, although not expressly forbidden by any contractual provision, would deprive the other party of the right to receive the benefits under their agreement.

A claim for breach of the implied covenant of good faith and fair dealing is generally actionable only where wrongs independent of the express terms of the contract are asserted and demands for the recovery of separate damages not intertwined the damages resulting from a breach of a contractual are advanced. Where a contractual party is merely seeking to reap the benefits of its contractual bargain, the implied covenant breach claim will not lie, as it is considered duplicative of the breach of breach of contract claim.

Federal appellate authorities have long held that a breach of the implied duty of good faith is a breach of the underlying contract. There is however, recognition of authority to the contrary.

. . .

Here, the court finds merit in the moving defendant’s contention that the plaintiff’s claims for recovery of consequential damages arising from any breach of the implied covenant of good faith and fair dealing and its claims for recovery of litigation costs, including attorneys fees due to the moving defendant’s alleged bad faith denial of coverage are not actionable and are thus subject to dismissal pursuant to CPLR 3211(a)(7). Review of the allegations set forth in complaint reveal that the facts which underlie these claims are the same as those which underlie the plaintiff’s breach of contract claim. There are no allegations of independent breaches of tort duties such as fiduciary duties owing to the plaintiff from the moving defendant which would support a breach of fiduciary duties claim or other tort claim.

(Internal quotations and citations omitted) (emphasis added).

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