Insurance Law Hawaii

Insurer Liable for Bad Faith Despite Actions of Insured Contributing to Excess Judgment

    Reversing the intermediate appellate court, the Florida Supreme Court held the insurer liable for bad faith despite imperfect actions by the insured. Harvey v. GEICO Gen. Ins. Co., 2018 Fla. LEXIS 1705 (Fla. Sept. 20, 2018).

    Insured James Harvey was involved in an auto accident in which the other driver, 51 year old John Potts, was killed. Harvey's vehicle was registered in both his name and his business's name, and was covered under a $100,000 liability policy. Harvey reported the accident to his insurer, GEICO. The claim was assigned to a claims adjuster, Fran Korkus. 

    Two days after the accident, GEICO resolved the liability issue against Harvey. GEICO realized there was significant financial exposure to Harvey because Potts had died leaving a wife and children. Karkus sent Harvey a letter explaining that Potts' claim could exceed his policy limits and that he had the right to hire his own attorney.

    The law office representing Potts' estate called Korkus and requested a statement from Harvey to determine the extent of his assets, whether he had additional insurance, and if he was in the course and scope of his employment at the time of the accident. Korkus did not immediately communicate the request to Harvey and denied the law office's request.

    Three days later, GEICO tendered the full amount of the policy limits to the estate's attorney, Sean Domnick, along with a release and affidavit of coverage. Dominck wrote back to Korkus, noting that she refused to make Harvey available for a statement. Korkus faxed the letter to Harvey, who learned for the first time that a statement had been requested. Dominck wrote another letter explaining a statement from Harvey was requested to determine what other coverage or assets may be available. 

    The next day, Harvey called Korkus to discuss Domnick's letter. Harvey told Korkus that he planned to meet with his attorney, whom he had hired at Korkus's suggestion, to review his financial documents and to provide the information requested. But he advised Korkus that his attorney would not be available for a few days. Korkus entered notes in her activity log, stating the insured had hired an attorney and did not want the claimant attorney to think GEICO was not acting fast enough. The insured also asked what GEICO could do to the let the claimant's attorney know that Harvey was working on a response. Kurkus's supervisor instructed her to relay Harvey's message to Domnick, but she did not. 

    One month after the initial request for a statement from Harvey, the estate returned GEICO's check and filed a wrongful death action against Harvey. The case was tried before a jury that found Harvey 100% at fault and awarded the estate $8.47 million in damages.

    Harvey sued GEICO for bad faith based upon the judgment that exceeded his policy limits of $100,000. At the trial, Dominick testified that had he known that Harvey's only other asset was a business account worth $85,000, he would not have filed suit and would have instead advised the estate to accept the policy limits. Korkus conceded that it was reasonable for Domnick to request information about whether Harvey had other insurance coverage and the extent of his assets. Potts' widow testified that if Domnick had recommended that she settle, she would have followed his advice and accepted the policy limits offered by GEICO. 

    Harvey's expert witness testified it would have been in Harvey's best interests for Korkus to inform Domnick that he had retained an attorney, as this would have facilitated the recorded statement. The expert further explained that because GEICO was handling the claim, Harvey could not contact Domnick directly. Instead, Harvey had to use Korkus as "a go-between given his duty to cooperate with his insurer." The evidence also showed that Korkus had poor job reviews and that she had trouble managing her claims properly.

    GEICO moved for a directed verdict, which was denied. In a special verdict, the jury found that GEICO acted in bad faith and the trial court entered judgment in favor of Harvey in the amount of $9.2 million. GEICO appealed and the District Court reversed, concluding the evidence was insufficient to show GEICO acted in bad faith. 

    The Florida Supreme Court reversed the District Court. GEICO's independent investigation of the facts revealed, within days after the accident, that this was a case of clear liability and substantial damages. Not only did GEICO know that Harvey was at fault, but it knew that Potts, a husband and father of three children, died as a result. Consequently, this was a case of catastrophic damages. 

    Had GEICO acted with due regard for Harvey's interests, the excess judgment could have been prevented. Therefore, there was substantial evidence to support the jury's finding that GEICO acted in bad faith in failing to settle the estate's claim against Harvey. 

    GEICO argued that the insurer's obligations ended by tendering the policy limits. Under Florida law, however, the insurer's duty to act in good faith in handling the defense of claims against its insured continued through the duration of the claims process. 

    The District Court held that where the insured's own actions or inactions result, at least in part, in an excess judgment, the insurer cannot be held liable for bad faith. The Supreme Court disagreed. The focus in bad faith case was not on the actions of the claimant but rather on those of the insurer in fulfilling its obligations to the insured. 

    Thanks to my Damon Key blogging colleague, Robert Thomas (here) for flagging this case.

Questions of Fact Regarding Collapse of Basement Walls Prevent Insurer's Motion for Summary Judgment

    The court denied the insurer's motion for summary judgment on whether the policy covered the collapse of basement walls based upon factual issues presented. Sirois v. USAA Cas. Ins. Co., 2018 U.S. Dist. LEXIS 158508 (D. Conn. Sept. 18, 2018). 

    The insureds' purchased their home in 2010. In December 2015, a crack in the basement wall was noticed. It was not thought to be a serious problem. But in 2016, the insured read an article about defective concrete problems affecting homeowners in Connecticut. An inspector, Dean Soucy, was hired. He found faults and cracks in the foundation walls. Thereafter, a claim was submitted to USAA under homeowners' policies issued over the years to the insureds. USAA denied coverage. 

    The insureds sued, alleging that the basement walls had collapsed as defined in the policies. USAA moved for summary judgment. The court determined there were issues of fact concerning whether the claimed losses fell within the coverage of policies issued from 2010 to 2014 and policies issued from 2014 to 2016. 

    Under the pre-2014 policies, "collapse" was defined as "a sudden falling or caving in" or " a sudden breaking apart or deformation such that the building . . . is in imminent peril of falling or caving in and is not fit for its intended use." The policy further stated that "[d]amage consisting solely of settling, cracking, shrinking, bulging or expansion is not covered . . . unless it is the direct result of collapse." The insureds contended that damage to their home constituted a "caving in." A dictionary definition defined "cave in" as "yield" or to "submit to pressure." USAA contested the definition, claiming the insureds' definition referred to a colloquial definition of "cave in." The court found the term "caving in" was ambiguous because both parties' interpretations were reasonable. 

    Under the post-2014 policies, the definition of "collapse" was the same. Therefore, the term "caving in" was ambiguous here as well. The policies' exclusions differed, however, stating that there was no coverage for loss caused by "settling, cracking, shrinking, bulging or expansion of . .  foundations, walls . . ." Consequently, this phrase was moved from the definition of "collapse" to the policies' exclusions. If this exclusion were interpreted to prelude coverage for all damage consisting or resulting from cracking, shrinking, and bulging, it would contradict the "collapse" provision. For example, if cracking caused a "falling in," it would constitute a covered "collapse" under the policy. but fall within the exclusion noted above. 

    Therefore, the evidence in the record showed that the insureds' losses could fall within their proposed definition of "caving in." The Insured's expert repeatedly described the damage to the home in terms of the submission to pressure and yielding of the concrete and the walls generally. The expert also described the damage as a "substantial impairment to the structural integrity" of the property. The expert distinguished between homes with mere "cracking" damage and those where the cracking had caused a "substantial impairment to the structural integrity" of the property. He noted that, for example, a property containing only a small area of cracking did not contain a "substantial impairment." This further underscored that fact that there could be "cracking" that did not rise to the level of collapse under the policy. 

    Consequently, there was a genuine dispute of material fact regarding whether the home was subject to a "caving in" that fell within the "collapse" coverage in the policies. 

Coverage Denied Where Occurrence Takes Place Outside Coverage Territory

    The court held there was no coverage for construction defect claims that occurred outside the coverage territory. Foremost Signature Ins. Co. v. Silverboys, 2018 U.S. Dist. LEXIS 154524 (S.D. Fla. Sept. 11, 2018).

    Solo Design, LLC, a Miami-based design company, entered into a contract with Silverboys, LLC (Owner) to provide interior design services in conjunction with the renovation of the Owner's vacation home in the Bahamas. Solo retained Whittingham, a Bahamian architect, as a subcontractor to serve as project manager. 

    Owner sued Solo, Whittingham and others in Florida for breach of contract, fraud, conversion and negligence when the project did not go as planned. The underlying complaint alleged intentional misconduct, lying about qualifications and the progress of the project, submitting false invoices, requesting money for services that were not performed, etc. Owner alleged that the damages included: (a) the cost to repair substandard work; (b) loss of use of the home due to delay; and (c) overcharges for furnishings, contract fees, and expenses. The underlying complaint set forth only a few instances of physical injury to the home, including mold on the ceiling in the master shower, faulty millwork on the children's playroom bookshelf, and a defective front door and resysta facade. 

    Solo had three CGL policies with Foremost that covered "property damage" caused by an "occurrence" that took place in the "coverage territory" during the policy period. 

    Foremost brought suit for a declaratory judgment that the policies did not cover the Owner's claims and there was no duty to defend or to indemnify. Both parties moved for summary judgment. 

    The court first found that allegations regarding mold in the shower and the damaged resysta façade - injuries to otherwise nondefective property caused by defendants' failure to properly perform their job - could be read to fall within the definition of covered property damage so long defendants' failures were not intentional. Therefore, in the context of a duty to defend, the underlying complaint sufficiently alleged property damage caused by an occurrence. 

    The policies' coverage territory included " the United States . . . or all parts of the world if the damages arises out of . . . good or products made or sold by [Solo] in the United States; or activities of a person whose home is in the United States, but is away for a short time on your business." Foremost argued there was no duty to defend because all alleged property damage was caused by an occurrence in the Bahamas, outside the coverage territory. Defendants argued that the alleged negligent conduct that caused the damage occurred in the coverage territory since Solo failed to supervise Whittingham, made billing mistakes, and drafted the designs in Miami. The court determined that the location of the injuries, not of some precipitating cause, determined the location of the event for purposes of coverage. Here, the alleged property damage was in the Bahamas, outside of the coverage territory. There was no indication that Solo employees traveled to the Bahamas for a short or long period of time. 

    Accordingly, there was no property damage caused by an occurrence in the coverage area, and not duty to defend. 

    

 

Relying Upon Improper Exclusion to Deny Coverage Allows Bad Faith Claim to Survive Summary Judgment

    The insurer was successful on summary judgment in establishing it correctly denied coverage for collapse, but its motion was denied regarding the insureds' bad faith claim. Jones v. State Farm Fire & Cas. Co., 2018 U.S. Dist. LEXIS 153102 (W.D. Wash. Sept. 7, 2018). 

    The insureds' retaining wall collapsed. They tendered to State Farm under their homeowners policy. An engineer retained by State Farm determined that the wall buckled due to "excessive lateral earth pressure from retained soils behind the wall." The parties agreed that the soil, saturated by water from frequent rain, grew too heavy for the retaining wall to bear, causing the collapse. 

    State Farm denied coverage based upon the Earth Movement exclusion. This exclusion provided, in part, "We do not insure under any coverage for any loss which is caused by . . . Earth Movement, meaning the sinking, rising, shifting, expanding or contracting of earth, all whether combined with water or not."

    The insureds sued. In the response. State Farm raised additional exclusions for the denial of coverage. State Farm contended the policy did not cover for loss caused by collapse or for inadequate design or workmanship in building the wall. Further, there was no coverage for collapse because neither a building or any part of a building collapsed, as required by the policy. 

    State Farm moved for summary judgment. The insureds argued that State Farm should be estopped from asserting any reasons for denial other than earth movement because State Farm failed to cite the additional reasons in its denial letter.

    The court held that State Farm was not estopped from relying on additional reasons from those stated in the denial letter. The insureds failed to show how their pursuit of coverage would have differed had State Farm cited the additional reasons for denial in the letter. Therefore, the insureds could not show any prejudice resulting from State Farm's delay and State Farm was not estopped from asserting the additional reasons for denial in its lawsuit. 

    Next, the court considered whether the collapse of the retaining was was covered. The court first determined that the collapse did not fall under the earth movement exclusion. No earth moved until after the wall buckled. Coverage was excluded, however, under the policy's water exclusion. That provision barred coverage for losses caused by "water below the surface of the ground including water which exerts pressure on a building  . . . or other structure." The parties agreed that the wall buckled from the weight of the water-soaked soil back fill, which was likely saturated from heavy rainfall. Therefore, an excluded peril caused the loss.

    Finally, the court considered the insured's claims for bad faith and violation of the Consumer Protection Act (CPA). Washington's insurance regulations provided that an insurer committed an unfair or deceptive act by "failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim." This regulation is nearly identical to a provision in Hawaii's unfair claims settlement practices, Haw. Rev. Stat. sec. 431:13-103 (11) (P). 

    Here, State Farm's initial denial listed only the earth movement exclusion as the basis for denying the insureds' claim. As noted, the earth movement exclusion was not a proper basis for denial. Only after it was sued did State Farm provide the insureds with a comprehensive explanation of the bases for denying coverage.The record supported an inference that State Farm may have violated the relevant insurance regulations and thus breached its duty of good faith and committed an unfair or deceptive act. Therefore, State Farm's motion was denied on the bad faith and CPA claims. 

Thoughts and Prayers Going Out to Saipan and Tinian

    Having lived and worked in the Northern Mariana Islands for ten years during the 1990's, I followed the approach of Super Typhoon Yutu and its direct hit on Tinian and southern Saipan with concern. It was barely a week ago that the typhoon arrived. A category 5 storm with winds at 180 miles per hour, Super Typhoon Yutu was the strongest storm to hit any part of the U.S. this year. The road to recovery and normalcy will be long and hard, but the people living on the islands are resilient and will return stronger.

    Residents hunkering down during the storm reported that their cement homes shook as the full force of the winds struck. Most of the homes on Tinian were destroyed as the storm lingered over the island for half an hour. Approximately 800 homes were destroyed on Saipan. Three major hotels are closed due to typhoon damage. Lines for gas and supplies have been long. Schools may be closed for another two to eight weeks. Elections on the island will be postponed until November 13, 2018. Miraculously, only one death from the storm has been reported.

    A week after the storm, the local press is reporting that Saipan has been turned into a disaster zone. Nevertheless, some stores have opened and lines for gas, water and other supplies are shortening. It is predicted that it will take three to six months to restore 50 percent of Saipan's pre-storm power. 

    From an insurance perspective, it is unfortunate that home owners and businesses likely face a cumbersome process in seeking coverage for their losses. A slight silver lining might be that most of the damage was apparently produced by wind and not flood or storm surge, eliminating a common exclusion in policies which victims of many past storms in the U.S. have faced. 

    Good luck to Saipan and Tinian, and here's to a quick and painless recovery as possible.

 

Requiring Approval of All Insureds and Mortgagees To Assign Policy Upheld by Florida Court

    The Florida Court of Appeal upheld an assignment of benefits provision that required signatures of all insureds and mortgagees. Restoration 1 of Port St. Lucie v. Ark Royal Ins. Co., 2018 Fla. App. LEXIS 12633 (Fla. Ct. App. Sept. 5, 2018). 

    Ark Royal issued a homeowner's policy to the insureds. The policy stated that "[n]o assignment of claim benefits, regardless of whether made before a loss or after a loss, shall be valid without the written consent of the insureds, and all mortgagee(s) named in this policy." 

    The insureds' home suffered water damage. The insureds contacted Restoration 1 to provide cleanup services and signed an agreement assigning to Restoration 1 "any and all insurance rights, benefits, proceeds and any cause of action under any applicable insurance policies." The cleanup was completed by Restoration 1 and it submitted a claim to Ark Royal for $20,305.74. Ark Royal refused to pay the full amount of the claim, stating it was unable to recognize the assignment because it did not have all of the required signatures. 

    Restoration 1 sued Royal Ark for breach of contract and sought a declaratory judgment determining that a clause requiring the signatures of all insureds and mortgagees for an assignment contravened Florida public policy. Ark Royal moved to dismiss. The trial court granted the motion because the assignment failed to comply with the policy's requirements. 

    On appeal, the appellate court recognized that the consent to assignment provision in policies did not apply to an assignment after loss. But a significant difference existed between requiring the insurer's consent and requiring the consent of the insureds and mortgagees. The contract here did not prohibit assignment. It imposed a condition, requiring the approval of all insureds and the mortgagee. This restriction did not conflict with the public interest. Therefore, the trial court's granting of the motion to dismiss was affirmed. 

Collapse Claim Dismissed

    The complaint alleged collapse, but the claimed cause of the collapse was not a covered cause under the insured's policy, mandating a dismissal of the complaint. Coonce v. CSSA Fire & Cas. Ins. Co., 2018 U.S. App. LEXIS 25010 (10th Cir. Sept. 4, 2018). 

    The ceiling in the insured's living and dining areas caved in. An engineering survey determined that the nails used in the construction had failed to hold. The insured made a claim on her policy issued by CSAA. Coverage was denied and the insured sued. 

    The insured was given two opportunities to amend her complaint by the district court, but the motion to dismiss for failure to state a claim was eventually granted.

    The Tenth Circuit affirmed. The amended complaint failed to allege any facts to overcome the policy's exclusions and limitations of coverage. Collapse was not covered, except as provided the paragraph E 8 of the policy. The policy covered collapse only if it was caused by certain perils, such as hidden decay, insect or vermin damage, weight of contents, etc. Even assuming the cave-in was a collapse, the amended complaint did not allege that any of the listed causes were involved. Instead, the amended complaint alleged that the cause of the cave-in was because "the nails did not hold."

    Further, there were other applicable exclusions in the policy. CSAA argued that the exclusion for loss caused by "wear and tear, marring or deterioration" applied. Further "faulty, inadequate or defective" "design, specifications, workmanship, repair or construction" was excluded. The amended complaint did not contain any facts showing that these exclusions did not apply. Therefore, dismissal of the complaint was proper. 

 

Pollution Exclusion Does Not Apply To Concrete Settling Dust

    Applying Virginia law, the federal district court determined that the pollution exclusion did not bar coverage. Allied Prop. & Cas. Ins. Co. v. Zenith Aviation, Inc., 2018 U.S. Dist. LEXIS 14727 (E.D. Va. Aug. 29, 2018).

    Zenith Aviation, Inc. hired Abby Construction Company to install an elevator at its warehouse. A wet saw was used to cut away concrete, but Abby did not use any water with the wet saw. This created a significant amount of concrete dust to leave the warehouse. Surrounding businesses contacted the fire department because they thought the dust was smoke from a fire. The concrete dust settled inside Zenith's building, damaging airplane parts stored in the warehouse. 

    Allied issued to Zenith a commercial insurance policy. Zenith submitted a claim for its loss. The policy's pollution exclusion barred coverage for the discharge, dispersal, etc. of "pollutants" unless the escape of a "pollutant" was not "caused by any of the 'specified causes of loss.'" But if the discharge . . . of 'pollutants' results in a 'specified cause of loss,' we will pay for the loss or damage caused by that 'specified cause of loss.'" "Pollutants" included any irritant or contaminant, including smoke, chemicals and waste. Finally, "specified causes of loss" were defined as "fire; lightening; explosion; windstorm or hail; smoke . . ." 

    Cross motions for summary judgment were filed. Allied acknowledged that Zenith suffered a "direct physical loss" that would be covered but for the pollution exclusion. Allied argued that the concrete dust meet the definition of a "pollutant" since it was an "irritant or contaminant." Zenith contended that cement was not a pollutant and Allied had offered nothing to suggest it was.

    The court agreed that concrete dust was a pollutant since it could function as both an "irritant" and a "contaminant." There was no genuine issue of fact concerning whether the concrete dust "contaminated" Zenith's products and machinery. 

    Zenith then argued that the dust was a "specified cause of loss" in the form of "smoke." The court found the applicable definition of "smoke" as used in the Pollution Exclusion to be unclear, with more than one reasonable definitions. Zenith argued "smoke" could mean a cloud of fine particulate matter. Allied submitted that "smoke" meant "the gaseous products of burning materials" and "suspension of particles in a gas." With two reasonable definitions, the court construed the ambiguity in favor of the insured. "Smoke" referred to any visible suspension of particles in a gas, including the concrete dust suspended in the air in Zenith's warehouse.

    Allied then argued that even if the concrete dust was "smoke," it did not "cause" a loss when it merely settled on the airplane parts, contaminating them, because the concrete in the air did not "result in" the dust on the inventory and machinery since it was the dust. 

    The exceptions to the Pollution Exclusion required a causal nexus between a specified cause of loss and the pollutant. The facts reflected: (1) Abby Construction used a wet saw without water to cut concrete; (2) the saw "released" concrete solids into the air; (3) the dust, rather than falling immediately to the ground, carried into a cloud of particulate, resulting in "smoke;" and (4) the particulate from the cloud of smoke ultimately settled on Zenith's products and equipment, contaminating them and causing the loss.

   Therefore, Zenith's loss resulted from the dispersal or migration of a pollutant onto its inventory and machinery, and that dispersal or migration was caused by a visible gaseous suspension of the concrete particulate in the air, i.e., smoke. The "dispersal" or "migration" of the concrete dust onto Zenith's products was therefore "itself caused by" the smoke from which it settled, and therefore the loss fell under the exception to the pollution exclusion. Further, the "discharge, dispersal, seepage, migration, release or escape" of the concrete dust from the wet saw "resulted in" smoke, a specified cause of loss, which then caused Zenith's loss. 

    Allied argued that "smoke" could not simultaneously be both the "pollutant" and the "specified cause of loss." But the fact that the particles that contaminated Zenith's products and equipment were the same as the particles that were a constituent part of the "smoke" did not mean that there was no causal separation between the "pollutant" that was dispersed and the "specified cause of the loss" that dispersed it or resulted from it. 

    Therefore, the court believed that the Supreme Court of Virginia would conclude that the Pollution Exclusion did not apply and that there was coverage under the policy for Zenith's alleged losses. 

Granting of Lodestar Multiplier in Coverage Case Affirmed

    The trial court's use of a multiplier in awarding fees to the insured was affirmed by the Florida Court of Appeal. Citizens Prop. Ins. Corp. v. Laguerre, 2018 Fla. App. LEXIS 11794 (Fla. Ct. App. Aug. 22, 2018). 

    Following Hurricane Wilma, the insured made a claim for wind damage to her insurer, Citizens. Citizens investigated the claim and paid $8,400.77. The insured then demanded an appraisal and submitted an appraisal estimate in the amount of $60,256.79. There was no response to the appraisal demand. 

    The insured filed suit against Citizens alleging it breached the insurance policy by failing to participate in the appraisal process. Two motions for summary judgment filed by Citizens were denied. The insured's motion to compel appraisal was granted. The appraisal umpire issued an award in the amount of $27,367.63. 

    Citizens agreed that the insured was entitled to attorneys' fees under the state statute. A hearing was conducted on the issue of the lodestar amount and whether a multiplier was justified. The insured presented the expert testimony of Roniel Rodriguez, who testified that these types of cases had become very difficult. He stated, "Insureds have a difficult time finding qualified and capable lawyers because of the risk that's involved." Rodriguez testified that a multiplier of 1.6 or 1.7 would be appropriate in this type of case. Citizens cross-examined Rodriguez only with regard to his testimony on the reasonableness of the hourly rate sought by the insured's attorney. 

    Citizens' expert, Dawn Jayma, testified that the insured's attorneys had thousands of similar cases and that this was not a complex case that warranted a multiplier. The trial court applied an hourly rate of $325.00 and found that a reasonable number of hours expended on the case was 185. The trial court also applied a 2.0 multiplier, determining that a fee multiplier was necessary to obtain competent counsel. After applying the 2.0 multiplier to the lodestar amount, the trial court awarded $120,250.00 in attorneys' fees.

    On appeal, Citizens argued the 2.0 multiplier was not warranted because: (1) there was no evidence the insured had difficulty obtaining competent counsel; (2) the results obtained did not warrant a multiplier; and (3) the complexity of the issues could not be a basis for awarding a multiplier.The appellate court affirmed the trial court's award of the multiplier. The court found the testimony of Rodriguez regarding the multiplier persuasive. This testimony was unchallenged by Citizens. Therefore, the trial court did not abuse its discretion in applying the multiplier. 

Claim for Consequential Damages Survives Motion to Dismiss

    The insured's claim for consequential damages survived the insurer's motion to dismiss. Tiffany Tower Condominium, LLC v. Ins. Co. of the Greater N.Y., 2018 N.Y. App. Div. LEXIS 5783 (N.Y. App. Div. Aug. 22, 2018). 

    Tiffany Tower submitted a claim in November 2012 with Insurance Company of the Great New York for damages sustained by its building during Superstorm Sandy. The insurer paid the original claim in December 2012. Then, in September 2014, Tiffany Tower submitted a supplemental claim for additional losses which it asserted were caused by the storm. The insurer denied the supplemental claim. 

    In October 2014, Tiffany Tower sued the insurer seeking to recover damages for breach of contract. In a second cause of action, they sought to recover consequential damages for breach of the implied covenant of good faith and fair dealing. The insurer moved to dismiss the second cause of action. The motion was denied.

    On appeal, the court found that Tiffany Tower sufficiently stated a cause of action to recover consequential damages for breach of the implied covenant of good faith and fair dealing based upon the insurer's refusal to pay the supplemental claim. The cause of action was not duplicative of the breach of contract cause of action. Breach of the implied duty could result in recoverable consequential damages, which could exceed the limits of the policy. 

   Tiffany Tower alleged they did not have the financial resources to repair the damage to the building and that the insurer's delay in paying the supplemental claim caused the building to continue to deteriorate. Damage to fireproofing and additional water damage were alleged. Therefore, the trial court correctly declined to dismiss the second cause of action to the extent that it was based upon the insurer's failure to pay the supplemental claim.