By JODI SOKOLOWSKI
Buffalo Law Journal

The New York State Court of Appeals last week reaffirmed a February decision that allows a commercial insurance holder to seek a breach-of-contract claim against its insurance company.

In denying Harleysville Insurance Co.'s motion to reargue the appeal June 5, the court also awarded Bi-Economy Market Inc. $100 in costs.

The case involves Joe Inclema and Tom Caracci, who co-owned a market at 175 Jay St. in Rochester. On Oct. 19, 2002, the business caught fire and was badly damaged, causing it to close.

Bi-Economy's attorney argued that Harleysville breached the contract by refusing to timely adjust the claims, using delay tactics and presenting under-valued offers when the insured party presented its losses.

"We claim that the holding in Bi-Economy simply reaffirms a policyholder's right to claim a remedy of foreseeable consequential damages under contract law," said Kathleen Burr, a Lipsitz & Ponterio LLC partner.

Burr said the court's actions may help insurance policyholders in the state by expanding similar protections to home and automobile coverage and promoting better claims-handling practices by first-party insurers.

Citing a January Consumer Federation of America study, Burr said property/casualty insurers nationwide are overpricing insurance and underpaying claims in order to achieve record profits.

"We think the decision goes far because it acts as some deterrent," she said.

However, Roy Mura of Mura & Storm PPLC said there has to be a reasonable limit to how much an insured can seek in consequential damages.

"Otherwise, parties will be able to sue for any and all types of damages alleged on breach of contract regardless of what that contract provided in terms of its benefits," he said.

Mura has noted other cases that are citing Bi- Economy v. Harleysville on his "Coverage Counsel" blog.

"I don't take any particular significance that one federal and two state courts have cited Bi-Economy, but it means that they recognize that the New York Court of Appeals has spoken again on consequential damages," he said.

That means the insurance industry will be watching to see what will happen next with the case, Mura said.

"I believe insurance companies are waiting to see whether the Bi-Economy ruling will be extended to (insurance products) other than commercial property claims and losses," he said.

While Bi-Economy won at the state's highest court for the right to sue its insurer, it still must present its case to the Monroe County Court to seek recovery of damages. Burr said her team is currently at the discovery stage on the case and hopes to set a date for a settlement conference.

Harleysville is represented by Michael F. Chelus of Chelus Herdzik Speyer & Monte PC.

He could not be reached for comment Wednesday.