Third Citing of Bi-Economy

It's been a while, but we have our third citing of the Court of Appeals' February 2008 Bi-Economy holding, this time in a Kansas federal court case.

In United States Fire Ins. Co. v. Bunge North America, Inc., Case No. 05-2192-JWL (USDC Kansas, decided 8/4/2008), an environmental pollution coverage case decided under New York law, US District Court Judge John Lungstrum held:

Bunge insists that it may pursue a claim for consequential damages under New York law based on Travelers's breach of good faith. Indeed, only this year, in Bi-Economy Market, Inc. v. Harleysville Insurance Company of New York, 10 N.Y.3d 187, 886 N.E.2d 127 (N.Y. 2008), the New York Court of Appeals permitted an insured to pursue a claim for consequential damages, including the demise of its business, based on the insurer's breach of its implied contractual duty of good faith and fair dealing in light of evidence that such a claim was reasonably foreseeable and within the contemplation of the parties at the time of contracting. See 10 N.Y.3d at 196; see also Panasia Estates, Inc. v. Hudson Ins. Co., 10 N.Y.3d 200, 203, 886 N.E.2d 135 (N.Y. 2008) (companion case to Bi-Economy). In its summary judgment briefing, Travelers did not argue that a claim for consequential damages was not reasonably foreseeable or within the contemplation of the parties when the policies were issued. Accordingly, Travelers has not shown at this stage as a matter of law that Bunge may not pursue a claim for consequential damages based on the allegation (litigated within the context of its primary breach-of-contract claim) that Travelers breached its implied duty of good faith and fair dealing.FN 13

FN 13 In its response brief, Bunge pointed to various acts by which Travelers allegedly breached its duty of good faith. Bunge's allegations concerning Travelers's failure to pay its coverage claims and its failure to investigate adequately provide proper bases for the claim recognized in Bi-Economy as well as Bunge's claim for attorney fees. Travelers's alleged conduct in breaching separate agreements with Bunge concerning defense costs are properly litigated only in a separate action for breach of those agreements, and Bunge's breach-of-good-faith claim in this case may not rest on such allegations. Similarly, Bunge's allegations concerning Travelers's litigation tactics in this case do not provide a proper basis for a claim that Travelers breach its duty of good faith in performing its obligations under the policies. See Fed. R. Civ. P. 56(d)(1).

Not sure this adds anything to the progeny of Bi-Economy. It appears that Travelers did not vigorously oppose Bunge's claim for consequential damages based on Bi-Economy and Travelers' alleged breach of its good faith duty to investigate and pay covered claims. What is somewhat notable, or at least interesting, is the citation to Bi-Economy in a commercial liability coverage case.