Commercial Division Blog

Posted: November 27, 2017 / Categories Commercial, Insurance

No Claim Against Insurer for Breach of the Covenant of Good Faith and Fair Dealing Absent “Foreseeable Consequential Damages”

On October 19, 2017, Justice Scarpulla of the New York County Commercial Division issued a decision in Central Amusement International LLC v. Lexington Insurance Co., 2017 NY Slip Op. 32233(U), holding that an insured failed to state a claim against an insurance company for breach of the covenant of good faith and fair dealing, explaining:

A separate cause of action for bad faith insurance claim handling is not recognized in New York, in the absence of independent, tortious conduct. . . . New York does, however, permit an insured to claim consequential damages for breach of contract in those instances where the insured alleges that the insurance companies’ bad faith handling of the insured’s claim resulted in foreseeable, additional damages, other than damages measured by the amount of insurance coverage.

Central Amusement's second cause of action for breach of the covenant of good faith and fair dealing cannot stand as a separate claim because the only tortious conduct it alleges concerns Lexington's alleged breach of its obligation to timely investigate and pay under the insurance contract. Moreover, while Central Amusement states the words "consequential damages," the damages sought in the breach of the covenant of good faith and fair dealing cause of action are entirely duplicative of the damages sought in the breach of contract cause of action. Central Amusement has not alleged, with any clarity or specificity, any foreseeable consequential damages it suffered by the alleged bad faith handling of Central Amusement's insurance claim, other than having to litigate this action. For these reasons, the proposed second cause of action lacks merit.

(Citations omitted).

Schlam Stone & Dolan is very experienced in litigating coverage claims against insurers. If you have questions regarding a coverage dispute, contact Schlam Stone & Dolan partner Brad Nash at