Three recent federal district court decisions, Southbridge 21 v. Standard Fire Ins. Co., __F.Supp.3d __, 2014 WL4637083 (N.D.N.Y. 2014), Flanders v. Fidelity National Property and Casualty Ins. Co., __ F.Supp.3d __, 2014 WL4909154 (E.D.N.Y. 2014), and Ragusa Corporation v. Standard Fire Ins. Co., __ F.Supp.3d __, 2014 WL1281314. (D. Conn. 2014) create a conflict within the U.S. Court of Appeals for the Second Circuit about whether private insurance companies selling federal flood insurance are immune from liability to the policyholder beyond the policy limits for their bad faith handling of flood insurance claims. The issue is now likely to go to the Second Circuit.
The New York Court of Appeals in Bi-Economy Market v. Harleysville Ins. Co., 10 NY3d 187 (2008), issued a groundbreaking decision that provided a remedy for New York insurance policyholders to recover consequential damages beyond the policy limits. The court held that the a business policyholder could establish that its insurance company in handling a business interruption claim had breached its implied duty of good faith and fair dealings.
