First Citing of Bi-Economy

We have our first citing of the Bi-Economy holding. Only a passing sighting, but one nonetheless.

Fershtadt v. Verizon Communications, Inc., (SDNY decided 4/24/2008) involved a "series of alleged machinations" by Verizon and its employee benefits plan that resulted in the underpayment of disability benefits to the plaintiff. The defendants moved to dismiss all but one cause of action of the complaint based on the preemption of federal ERISA laws.

In granting defendants' motion dismissing the plaintiff's consequential damages claim that was based on New York case law, the federal court noted that the insurance contract in Bi-Economy did not "relate to" employee benefit plans. The court also noted that "[t]he Bi-Economy rule is not a law that 'regulates insurance.' Bi-Economy held that, as a general rule of contract law, reasonably foreseeable consequential damages are available in certain circumstances, and that this general rule of contract law applies to any contract to pay a sum of money - including an insurance contract."

The court's passing citation to and brief summary of the "rule" of Bi-Economy in this case does little to clarify or predict the scope of its holding. Commentators continue to speculate whether Bi-Economy will support new causes of action for "bad faith" and extracontractual damages in a no-fault context. See, No-Fault Insurance Wrap-Up, Barshay and Lakin Shatz, New York Law Journal, April 30, 2008.