Monday, February 9, 2009

Bi-Economy Redux -- Fourth Department Reinstates Consequential Damages Claim

Stern v. Charter Oak Fire Ins. Co.

(4th Dept., decided 2/6/2009)

There are do-overs in many things -- playground games, movie making, golf drives, and even presidential oath taking. recalls the time-honored method of childhood conflict resolution:
Sometimes, passions were too strong, convictions too deep, perspectives too contrasting to reach agreement on a call. Still, it was understood that unless the opposing team was being absolutely unreasonable or cheating, preserving friendships and, even more importantly, continuing the game took precedence over a specific play. After the proper amount of heated discussion had taken place, one of the player would finally extend the proverbial fig-leaf by offering his opponent a "do-over", as in "you can do it again."

The do-over was one of childhood's most powerful rites, for it exerted our dominion over the laws of space and time. The clock was rolled back, the game was restored to its exact status as before before the contested event and play was resumed. If the original play was particularly important and the second attempt was dramatically different (e.g. the player striking out instead of hitting a multi-base shot as in the original play), the do-over might be invoked again. This second invocation would give the team another chance thereby insuring that the universal forces of fair play were being righteously maintained.

Yes, it is with fond memories that we recall the do-over a divine method of resolution, and contemplate the untold blessings it could bring if it were somehow extended into our contemporary lives.
There are do-overs in the law. Motions to reargue. Motions to renew. Even an appeal, in a sense, can be a do-over. The plaintiff in this case was granted a do-over based on a material change in appellate decisional law.

Plaintiff sued her commercial property insurer, alleging that it breached her contract of insurance by failing to pay certain claims for losses arising from an armed robbery at plaintiff's jewelry store. In addition to claiming contractual damages (policy coverage benefits), plaintiff's complaint alleged and sought to recover consequential damages, including future lost profits and future sale value of the business. Initially, Charter Oak Fire Insurance Company, a Travelers company, successfully moved to dismiss plaintiff's consequential damages claim, and the Fourth Department affirmed that order in March 2007, based, in part, on its decision of one month earlier in Bi-Economy Mkt., Inc. v Harleysville Ins. Co. of N.Y., 37 AD3d 1184 (4th Dept. 2007).

In February 2008, the New York Court of Appeals reversed the Fourth Department's decision in Bi-Economy and ruled that consequential damages may be recoverable under a commercial property insurance policy. Based on that reversal and change in the law, plaintiff then moved to renew her opposition to Charter Oak's original motion to dismiss her consequential damages claim. Based on the doctrine of "law of the case", Onondaga County Supreme denied plaintiff's motion, and plaintiff once again appealed to the Fourth Department, Appellate Division.

The Fourth Department MODIFIED the order appealed from to grant plaintiff's motion to renew and reinstate her consequential damages claim:
Following our decision in the prior appeal, the Court of Appeals reversed the order in Bi-Economy Mkt., Inc., concluding under circumstances similar to those present in this case that a contractual exclusion for consequential losses in the insurance policy issued to the plaintiff business did not bar its claim for consequential damages caused by the defendant insurer's alleged breach of the terms of the policy (Bi-Economy Mkt., Inc. v Harleysville Ins. Co. of N.Y., 10 NY3d 187, 194-196; see Panasia Estates, Inc. v Hudson Ins. Co., 10 NY3d 200, 203).

While the instant action remained pending, plaintiff moved, inter alia, for leave to renew her opposition to Charter Oak's motion to dismiss her claim for consequential damages, based upon the decisions of the Court of Appeals in Bi-Economy Mkt., Inc. and Panasia Estates, Inc. Supreme Court erred in denying that part of plaintiff's motion for leave to renew with respect to consequential damages based upon the doctrine of law of the case and instead should have granted leave to renew and, upon renewal, denied Charter Oak's motion. "[A] court of original jurisdiction may entertain a motion to renew or [to] vacate a prior order or judgment even after an appellate court has rendered a decision on that order or judgment" (Tishman Constr. Corp. of N.Y. v City of New York, 280 AD2d 374, 377). Furthermore, we conclude that, because "the analysis employed by this [C]ourt in the prior appeal no longer reflects the current state of the law, the doctrine of law of the case should not be invoked to preclude reconsideration of" Charter Oak's motion to dismiss plaintiff's claim for compensatory damages (Szajna v Rand, 131 AD2d 840, 840; see Foley v Roche, 86 AD2d 887, lv denied 56 NY2d 507).
The reference to "compensatory damages" in the last sentence should probably have been "consequential damages", and this decision portends similar motions to renew previously successful motions to dismiss consequential damage claims. When a court of higher authority has made a material change in the law, and even where the aggrieved party unsuccessfully prosecuted an appeal, the law of the case doctrine will not preclude that party from seeking to renew its opposition to the original motion.

Do-over to plaintiff on her consequential damages claim.

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