A jury in Supreme Court, New York County, after a one week trial and one hour of deliberation, found that Colonial Cooperative Insurance Company had failed to sustain its allegation that its insured-claimant had been engaged in a fraud by intentionally and grossly exaggerating the claim and by submitting false documentation in support of the amount of damage, delivered a verdict awarding plaintiffs $1.2 million including interest. The jury also concluded that the defendant insurance company had acted in bad faith, and awarded the plaintiffs consequential damages in the form of attorneys’ fees.
The 6 member jury (with two alternates) adhering to Judge Emily Jane Goodman’s charge that explained the meaning of bad faith, found that Colonial Cooperative had acted in reckless disregard of policy obligations and was disingenuous or dishonest in its failure to honor its policy obligations.
Colonial Cooperative was the insurer for Apollo Express, Inc., and its president, Mohamad Rammal, retailers for high-end and upscale garments, located in Harlem, next to the Apollo Theatre. On April 15. 1999, a pipe burst sending a cascade of water into the premises. It remained for over six hours, damaging both inventory and the improvements that they had made to their leasehold.
Apollo submitted its claim under the all risk policy issued by Colonial Cooperative, for $925,941.25, representing the replacement cost, plus $26,235 for the improvements and betterments made to the premises.
The insurance company denied liability - alleging fraud by exaggeration and falsified documentation. Apollo Express retained the law firm of Weg & Myers, P.C. to bring an action for breach of contract and breach of the implied covenant of good faith and fair dealing. William H. Parash, a partner in the law firm, was counsel for the plaintiff.
During the course of the trial, Mr. Parash established that a joint inventory had been taken by Apollo’s representatives and Colonial’s salvors and that Apollo had provided proof of the replacement cost of each item as of the time of the loss. Evidence was introduced by Mr. Parash, which established that Colonial Cooperative had attempted to conceal the fact that a forensic accountant it hired had confirmed the amount of the loss suffered. Colonial Cooperative, according to Parash, then hired a second accountant but did not provide all of the documents submitted by the insured, which would have verified plaintiff’s loss. Predictably, this second accountant came to a different conclusion than the first accountant retained by the earner, Parash said.
In her charge to the jury, Justice Goodman, citing Worm v. Commercial Union Insurance Company, (NYLJ October 15, 2001) instructed jurors that they could find bad faith if Colonial Cooperative evidenced a reckless or gross disregard for its policy obligation, or was disingenuous or dishonest in its failure to carry out the contract. The jury was further instructed that bad faith could not be based upon an arguable difference of opinion, or upon ordinary negligence. Moreover, the judge said in her charge, the jury could conclude bad faith if it found that Colonial Cooperate searched its files, or made an investigation, in an effort to determine a bogus basis from which to escape its policy obligation. In connection with the charge to the jury for consequential damages, Justice Goodman instructed the jury that an insurer’s “breach of a duty to investigate, bargain and settle claims in good faith” triggers potential damages to the insured that extend beyond the “amount specified in the insurance policy.” She said that such damages include, inter alia, consequential damages, and “the allegation that an insurer makes a practice of inordinately delaying and then denying a claim without reference to itsviability,” and she concluded that these factors may be deemed a “cognizable claim for unfair practices under General Business Law Section 349.”
Colonial Cooperative Insurance Company was represented by Louis M. Rohrberg of Rohrberg & Associates.
