Justice Anil C. Singh

 

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The court opined if defendants may seek consequential damages based on a breach of implied covenant of good faith and fair dealing in this coverage dispute with an insurer. Travelers Property Casualty’s (TPC) declaratory judgment action had its genesis from various class action suits involving Wal-Mart Stores’ grated parmesan cheese, manufactured by ICCO Cheese to whom TPC issued policies. Wal-Mart tendered its defense to ICCO, who demanded coverage from TPC. Wal-Mart claimed it was an additional insured on the policies, and TPC had a duty to defend and indemnify it in the class action suits. TPC sought a declaration it had no duty to defend ICCO or Wal-Mart, who claimed TPC breached its duty of good faith and fair dealing entitling it to extra-contractual consequential damages, including attorney fees. The Court of Appeals noted “unusual or extraordinary” consequential damages may be sought if they were within the contemplation of the parties at the time the contract was entered into. Wal-Mart pointed to no policy provisions providing a basis to recoup attorney fees or consequential damages reasonably foreseeable or contemplated in the event TPC refused to provide coverage in suits by third-parties. TPC’s motion to dismiss was granted.

Justice Anil C. Singh

 

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The court opined if defendants may seek consequential damages based on a breach of implied covenant of good faith and fair dealing in this coverage dispute with an insurer. Travelers Property Casualty’s (TPC) declaratory judgment action had its genesis from various class action suits involving Wal-Mart Stores ‘ grated parmesan cheese, manufactured by ICCO Cheese to whom TPC issued policies. Wal-Mart tendered its defense to ICCO, who demanded coverage from TPC. Wal-Mart claimed it was an additional insured on the policies, and TPC had a duty to defend and indemnify it in the class action suits. TPC sought a declaration it had no duty to defend ICCO or Wal-Mart , who claimed TPC breached its duty of good faith and fair dealing entitling it to extra-contractual consequential damages, including attorney fees. The Court of Appeals noted “unusual or extraordinary” consequential damages may be sought if they were within the contemplation of the parties at the time the contract was entered into. Wal-Mart pointed to no policy provisions providing a basis to recoup attorney fees or consequential damages reasonably foreseeable or contemplated in the event TPC refused to provide coverage in suits by third-parties. TPC’s motion to dismiss was granted.