Depending on jurisdiction, an insurance claim for damages in an insurance claim for the first party may include consequential damages. Impact damage is an indirect result of a direct loss. 1 Lost profits, lost rents and lost business opportunities are examples of consequential damages that may result from a direct physical loss to property. In the Shawnee Tabernacle Church of GuideOne Insurance 3 a federal court recently raised the question of whether an insured could seek consequential damages in connection with the loss of property for foreclosure.
The Defenders, Shawnee Tabernacle Church and AZ Learning Daycare were insured under an insurance policy with GuideOne Insurance ("Guide One"). PrinsBank kept a mortgage on the property. The complainants rented out a significant part of the building as a source of income. In the autumn of 2014, a school that rented the property had left the premises after paying no rent. The complainants had lapsed by mortgages at that time. In November 2014, the bank submitted a deterrent complaint.
In January 2015, when things couldn't get much worse, water damage to the property occurred, and the insured provided a requirement with GuideOne. Only two days before the new tenant would occupy the property, the water damage made the coating unsustainable until the repairs could be completed. The complainants cooperated with the bank to make the payments, but GuideOne did not agree to cover up to December 2015. The sale of foreclosure occurred on February 25, 2016. The lease fell through when the plaintiff had no means to make the necessary repairs and the plaintiffs also lost another offer to rent before the day of foreclosure sales.
In a draft summary judgment, one issue for the court was the recovery of consequential damages. The court declared "the parties largely agree with the controlling law. Impact damage is available in violation of contractual measures where such damage is foreseeable and planned at the time of the contract." 4 Further "
Like many policies, the policy contained provisions that considered lease agreements and holders' ownership rights in the event of foreclosure, and it explicitly noted the plaintiff's mortgage loan. In order to allow for the recovery of consequential damage, the Eastern District of the Pennsylvania Federal District Court did not buy the carrier's argument that it could not have foreseen any damage related to foreclosure:
[A] at the time of the contract, it was well within the contemplation of GuideOne that the insured property could be rented, that it was covered by a mortgage, and that foreclosure could coincide with a property damage. . . . Specifically, GuideOne's policy contained provisions on the holders' holdings in connection with foreclosure and coverage of leased properties. . . . Consideration of these circumstances, coupled with the specific knowledge of the plaintiff's mortgage loan. . . . At least GuideOne announces that a foreclosure on the insured property could be followed if the plaintiffs' use of the property was discontinued with any consequences arising from the foreclosure significantly affected by GuideOne's performance of its obligations. This supports the plaintiff's claim that the consequential damages associated with foreclosure were predictable and considered at the time of the contract.
This is a good opinion for Pennsylvania policyholders. It is important to know if your permit allows the recovery of consequential damages in an insurance claim for the first party's property. The degree of proof of the damages is higher for consequential damages than for direct damage, and consequential damages must typically be filled with greater specificity.
1 https://www.irmi.com /term/insurance-definitions/consequential-damages
2https://www.irmi.com/term/insurance- definitions / consequential-damages Shawnee Tabernacle Church v. GuideOne Ins No. 16-5728, 2019 WL 1779829 (ED Pa. 23, 2019).
4 Id. at * 2, with quote Condo. The Court of Old Swedes by Stein-O & B; Brien 973 A.2d 475, 483 (Pa. Comm. Ct. 2009) ( cites Ferrer v. Trustees of Univ. Pa. 825 A.2d 591, 610 (Pa. 2002)).