The Court of Appeals was asked to reconsider, but refused to reconsider the decided case, Bi-Economy Market, Inc. v. Harleysville Insurance Co. of New York, 10 N.Y.3d 187 (decided February 19, 2008). The case involved two Rochester businessmen, Joe Inclema and Tom Caracci, who co-owned the former Bi-Economy Meat Market that had been located at 175 Jay Street, Rochester, NY. On October 19, 2002, the Bi-Economy Market caught fire and was badly damaged, causing business operations to cease.

After the fire, Inclema and Caracci presented their property losses, business equipment losses, and business income losses to their insurer, Harleysville. But, as alleged by these business owners, Harleysville proceeded to breach the insurance contract by refusing to timely adjust the claims, by employing delaying tactics, and by presenting under-valued offers, all to the ultimate demise of the business which never could resume operations.

The Court of Appeals held that Bi-Economy’s owners could state a claim for breach of contract and seek recovery of foreseeable consequential damages, in Bi-Economy’s case, the value of the lost business. This is a ground-breaking decision in the realm of first party insurance because, for the first-time, the State’s highest court has recognized that insurers are exposed to liability for extra-contractual consequential damages outside of the coverage limits of the insurance policy.

The holding in Bi-Economy Market, Inc. v. Harleysville Insurance has already found application in first-party insurance disputes of other types, and may find application in any case where a policyholder suffers foreseeable harm beyond the sole measure of benefits to which he is entitled under his policy of insurance. A downstate Appellate Court, citing to the Bi-Economy decision, recently ruled that a policy holder denied disability insurance benefits could amend his complaint against the disability insurer to claim bad faith conduct and consequential damages. Hoffman v. Unionmutual Stock Life Ins. Co. of New York, 2008 Slip Op. 04318 (decided May 6, 2008).

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The June 5, 2008 ruling by the Court of Appeals in denying Harleysville’s motion for re-argument signals both that the majority of the Court strongly believes that New York policyholders should have a standard breach of contract remedy that virtually all other contracting parties enjoy, and that the principles espoused in Bi-Economy’s case should reach beyond commercial fire policies to other types of first-party insurance contracts, despite arguments by the insurance industry that the holdings of the Bi-Economy case should be limited to business owners’ policies.

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