How to Recover for Breach of Contract - Insurance Bad Faith Law
Hello, my name is michael glass, I’m a partner with Rappaport glass, levine and Zullo. We’re attorneys in New York and what we’re going to talk about today are some general concepts in the law. When a homeowner’s, insurance carrier refuses to pay for damage that you believe is covered under the policy. The first and most important principle is that the insurance policy is a contract. It’s a contract between the homeowner and the insurance company, the insured that’s you, the homeowner pays a sum of money which is called a premium. They pay that premium for the peace of mind and the comfort of knowing that you will be protected in the event of some kind of catastrophe. But what happens when the insurance carrier refuses to pay or delays payment under the policy when the insurance company fails to comply with its end of the bargain? It has breached the contract and it is responsible to the homeowner for contract damages. Usually, that means that the insurance carrier would be compelled to pay for the cost of the damage or the cost of the repair that the insurance policy provided for these damages are called actual damages. Many such claims have been made in the northeast following the massive damage caused by superstorm sandy. The more interesting and difficult question, however, is whether the homeowner can recover damages beyond the terms of the policy for losses which might be termed consequential damages, for example, can the insured the homeowner claim damages for his or her aggravation and upset due to the carrier?’s, bad faith, failure to honor the policy or recover lost wages caused by the inability to work as a consequence of the insurance carriers. Failure to promptly resolve the claim these are damages caused by the carrier.’s bad faith and there’s an implicit promise in every insurance contract that the carrier will deal with the homeowner in good faith. Now in New York, our highest court has opened the door at least a crack to such claims for consequential damages or damages, not specifically in the insurance policy in two important cases in the field of insurance law damages our Court of Appeals that’s our highest Court noted that under New York law, consequential damages can be available in a breach of contract action against an insurance carrier, but those damages must be of the type that the parties reasonably contemplated when the insurance was written. The rationale is that a party to a contract is liable for those risks that were foreseen by the parties when the contract was entered into, as well as those risks which should have been foreseen at the time the contract was made. The consequential damages, however, must be specific. It cannot be speculative or conjectural so, for example, if the claim for consequential damages was for the loss of profits from a business venture which was shut down by virtue of the insurance carriers. Bad faith delay in paying claims that kind of loss would have to be capable of proof by known and accepted measures that are consistent with assessing that type of loss. The decision in Chafee versus farmers new century insurance company represents a good example of the possibility of raising consequential damage claims in a homeowner’s insurance context in New York in Chafee, a homeowner sued his insurer following a fire which burned his house and its contents. The homeowner claimed the insurance carrier failed to pay the damages which were incurred and unreasonably delayed review of the claim and also misrepresented the benefits of the policy to the homeowner, the homeowner sued for damages caused by the fire, but sought additional damages caused by the insurance Carriers, frustration of the homeowners own attempts to lessen of what we lawyers call mitigate the damage which was caused by the fire. Well, the insurance company asked the court to throw out those additional claims as outside the scope of the contract, but based on these higher New York Court decisions, the court refused finding that the claims were properly part of the homeowners breach of contract case and the court Ordered that the claim could go forward to a trial, New York courts have also held that, although rare there can be circumstances in which an insurance companies conduct is so outrageous, it can give rise to a claim for negligent or intentional infliction of emotional distress on the Homeowner one example is a case called ural versus encompass Insurance, Company of America. In that case, the court indicated that to support such a claim, the insurance carriers conduct would have to so transcend the bounds of decency as to be regarded as atrocious and intolerable in civilized society. The pretty tough standards to meet, and in that case the court found that the claims did not rise to such a level and the claim was actually dismissed. In summary, then, when an insurance company fails to fulfill its promises in its insurance contract, the homeowner can assert a claim for breach of contract and within that claim, demand reimbursement of actual damages or losses that the homeowner sustains. In addition, the homeowner can seek consequential damages as long as those damages are reasonably foreseeable, specifically identified and redeemed to be within the contemplation of the parties. At the time the insurance contract was entered into. Nonetheless, it is equally clear that the bar to proving these extra damages – these consequential damages in New York is high and it will be the rare claimant whose proof has strong enough legs to clear that bar. This is Michael glass from Rappaport, glass, Levine and Zullo, and I hope this information has been of some help to you. If you have any questions or would like to contact our office, we can be called at our toll free number. 800. 734. 9445.
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