An insured can assert a claim against an insurer for certain additional losses when the insurer acts in bad faith and contributes to the policyholder's additional loss despite a policy exclusion of such damages from coverage, according to a New York State Court of Appeals decision.
In a 5-2 decision the court ruled that an insured can assert a claim for consequential damage for bad faith even though the insurance contract excludes such damages from coverage.
The majority opinion, written by Judge Eugene Pigott, stated that Bi-Economy Market, a wholesale and retail meat market in Rochester, N.Y., suffered structural damage and a complete loss of food inventory due to a fire in 2002. Harleysville Insurance Company insured Bi-Economy under a Deluxe Business Owner's policy that covered replacement costs on the building and contents. It also covered business interruption for up to one year from the date of the fire.
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