In Pandarakalam v. Liberty Mut. Ins. Co., 137 A.D.3d 1234, 29 N.Y.S.3d 413 (N.Y. App. Div., 2d Dep't, New York, 2016), the parties went to an appraisal of an otherwise covered fire loss to determine the damages to the policyholders' home from the loss. The homeowner's carrier refused to pay for continuing "ALE" or additional living expenses after the appraisal process dragged on. As reported by a New York Appellate Division:
The plaintiff thereafter commenced this action against the defendant alleging, inter alia, that the defendant breached the insurance policy by acting in bad faith in its handling of the plaintiff's claim. The complaint sought, among other things, damages for debris removal that the plaintiff incurred during the rebuilding of his house, as well as consequential damages for the plaintiff's additional living expenses.
Pandarakalam v. Liberty Mut. Ins. Co., 137 A.D.3d 1234, 29 N.Y.S.3d 413, 414 (N.Y. App. Div., 2d Dep't, New York, 2016). The homeowner's carrier-defendant challenged the policyholder's entitlement to consequential damages by filing a motion for summary judgment. Unfortunately for the carrier, this put it in the position of in effect proving a negative, i.e., it thereby assumed a burden of proof that consequential damages were not within the contemplation of the parties at the time they contracted for the homeowner's insurance contract, which is the applicable standard for recovering consequential damages where a breach of any contract including the covenant of good faith and fair dealing is proven.
The New York Appellate Division held that the homeowner's insurer had not met its burden of proof which it assumed when it filed a motion for summary judgment that the homeowner was not entitled to consequential damages in this case, even if the homeowner proves a breach of contract or bad faith:
A defendant insurer moving for summary judgment dismissing a claim for consequential damages must make a prima facie showing that the damages sought were “a type of damage not within the contemplation of the parties when they executed the insurance policy” (citation omitted). A defendant does not meet its burden of affirmatively establishing its prima facie entitlement to judgment as a matter of law “by merely pointing to gaps in the plaintiff's case; rather, it must affirmatively demonstrate the merits of its defense” (citations omitted). Here, the defendant failed to make a prima facie showing that the consequential damages sought by the plaintiff were “not within the contemplation of the parties when they executed the insurance policy” (citation omitted).
Pandarakalam v. Liberty Mut. Ins. Co., 137 A.D.3d 1234, 29 N.Y.S.3d 413, 415 (N.Y. App. Div., 2d Dep't, New York, 2016).
Please Read The Disclaimer. ©2016 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with Supplements). You are invited to visit the author's website here. All rights reserved.
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