{"id":895497,"date":"2019-02-06T12:17:27","date_gmt":"2019-02-06T19:17:27","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=895497"},"modified":"2019-02-06T12:17:36","modified_gmt":"2019-02-06T19:17:36","slug":"consequences-of-well-pled-complaint","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/consequences-of-well-pled-complaint\/","title":{"rendered":"Consequences of a Well-Pled Complaint"},"content":{"rendered":"\n

Deborah Trotter | Property Insurance Coverage Law Blog<\/a> | February 1, 2019<\/p>\n\n\n\n

The New York Supreme Court, Appellate Division, First Department \u201cunanimously reversed, on the law, with costs, the motion denied and the claims reinstated,\u201d the New York County Supreme Court trial judge\u2019s order dated April 2, 2018, to the extent appealed from, which granted dismissal of Plaintiff D.K. Property, Inc.\u2019s (\u201cD.K.\u201d) consequential damages (other than attorney\u2019s fees) pled in its amended complaint.1<\/sup> The dispute involves an \u201call-risk\u201d commercial property policy issued by Defendant National Union Fire Ins. Co. of Pittsburgh, PA (\u201cNational Union\u201d) and its denial of D.K.\u2019s October 2014 claim for policy proceeds and benefits arising from damage to one of its buildings insured under the policy.<\/p>\n\n\n\n

D.K. alleged in its complaint filed in February 2017 that National Union refused to pay or deny its claim, even after repeated inspections and documentation presented to support its claims, which it alleged amounted to a breach of contract and breach of the covenant of good faith and fair dealing. After being served the complaint, National Union filed a partial motion to dismiss D.K.\u2019s demand for consequential damages for attorneys\u2019 fees, costs, and expenses or disbursements alleging the complaint failed to contain allegations sufficient to support those claims. The trial court granted National Union\u2019s partial motion to dismiss, without prejudice, to allow D.K. an opportunity to amend its complaint.<\/p>\n\n\n\n

Plaintiff filed an amended complaint on July 14, 2017, containing greater detail in the allegations regarding National Union\u2019s inadequate and unfair claim handling, unreasonable denial and requests, as well as the foreseeable attorneys\u2019 fees, costs and expenses that National Union\u2019s breach and conduct would reasonably require D.K. to incur to protect its rights. National Union again filed a partial motion to dismiss D.K.\u2019s consequential damages demands alleged in its amended complaint.<\/p>\n\n\n\n

Persuaded by a heightened pleading standard of specificity for consequential damages argued by National Union, the trial court dismissed the consequential damages demanded in D.K.\u2019s count one of the amended complaint for breach of contract and count two for breach of the covenant of good faith and fair dealing, except for attorneys\u2019 fees.2<\/sup>\u00a0See my colleague\u00a0Jason Cieri\u2019s post on April 11, 2018, concerning the trial court\u2019s ruling.<\/p>\n\n\n\n

D.K. appealed the trial judge\u2019s ruling and argued that at the pleading stage, a claim for consequential damages, which do not flow directly from the breach does not require a detailed, factual description or explanation for why those damages are recoverable. The appellate court agreed with D.K. finding, \u201cthe motion court erred in dismissing the consequential damages claim, because plaintiff fulfilled the pleading requirement by specifying the types of consequential damages claimed and alleging that such damages were reasonably contemplated by the parties prior to contracting.<\/strong><\/em>\u201d3<\/sup><\/p>\n\n\n\n

The appellate court reasoned:<\/p>\n\n\n\n

It is well settled law that on a motion to dismiss pursuant to pursuant to CPLR 3211(a)(7), the pleading is afforded a liberal construction, facts as alleged in the complaint are accepted as true, plaintiffs are afforded the benefit of every possible favorable inference, and the motion court must only determine whether the facts as alleged fit within any cognizable legal theory<\/em> (see e.g. Leon v Martinez<\/em>, 84 NY2d 83, 87\u201388 [1994]).<\/p>

The complaint alleges that rather than pay the claim, defendant has made unreasonable and increasingly burdensome information demands throughout the three year period since the property damage occurred. Plaintiff contends that this was a tactic by defendant to make the claim so expensive to pursue that plaintiff would abandon it altogether. Plaintiff contends defendant\u2019s investigatory process has taken so long and become so attenuated that the structural damage to the building has worsened. Among the consequential damages alleged are engineering costs, painting, repairs, monitoring equipment, and moisture abatement to address water intrusion, loss of rents, and other expenses attributable to mitigating further damage to the property.<\/p>

Despite substantial documentation of the cause and extent of the damage to plaintiff\u2019s building, not only by plaintiff\u2019s engineer, but also an engineer that defendant hired, who inspected the building several times, defendant has persisted in demanding further, unnecessary monitoring, data collection, inspections, and reinspections. Although it has yet to pay the loss or deny the claim, defendant nonetheless sought to intervene as plaintiff\u2019s subrogor under the policy when plaintiff sued the owner of the adjoining property. By doing so, defendant forced plaintiff to incur significant, unnecessary legal fees. A plaintiff may sue for consequential damages resulting from an insurer\u2019s failure to provide coverage if such damages (\u201crisks\u201d) were foreseen or should have been foreseen when the contract was made (Bi-Economy Mkt, Inc. v Harleysville Ins. Co. of N.Y.<\/em>, 10 NY3d 187, 192 [2008]). Although proof of such consequential damages will ultimately rest on what liability the insurer is found to have \u201cassumed consciously,\u201d or from the plaintiff\u2019s point of view, have warranted the plaintiff to reasonably suppose the insurer assumed when the insurance contract was made, a determination of whether such damages were, in fact, forseeable should not be decided on a motion to dismiss and must await a fully developed record (see Panasia Estates, Inc. v Hudson Ins. Co.<\/em>, 10 NY3d 200, 203 [2008]; see also Bi-Economy<\/em> at 192). In other words, the inquiry is not whether plaintiff will be able to establish its claim, but whether plaintiff has stated a claim.<\/em>4<\/sup><\/p><\/blockquote>\n\n\n\n

The appellate court found D.K.\u2019s amended complaint met the pleading requirements with respect to consequential damages, in both the first cause of action for breach of contract and in the second cause of action for breach of the covenant of good faith and fair dealing in the context of an insurance contract.5<\/sup> And contrary to National Union\u2019s claim, the appellate court found \u201c[t]here is no heightened pleading standard requiring plaintiff to explain or describe how and why the \u201cspecific\u201d categories of consequential damages alleged were reasonable and foreseeable at the time of the contract. (Panasia Estates Inc. v. Hudson Ins. Co.<\/em>, 68 AD3d 530, 530 [1st Dept 2009], aff\u2019d 10 NY3d 200 [2008], citing Bi-Economy<\/em> 10 NY3d at 192).\u201d<\/p>\n\n\n\n

In closing, the appellate court offered its guidance on issues raised, though not currently before it:<\/p>\n\n\n\n