NY Appeals Court Revives Renewable Co.'s Insurance Claim

Law 360

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12/05/2019

Law360 (December 5, 2019, 8:35 PM EST) -- A New York appeals court on Thursday revived claims by a renewable energy company locked in a dispute with Lloyd’s over policy payouts following a fire that burned down its Tennessee plant, allowing claims that could add tens of millions to the insurer’s final bill.

The court revived Bioenergy Development Group LLC’s claims for breach of certain terms and breach of the implied duty of good faith and fair dealing. Robert M. Horkovich, an Anderson Kill PC attorney representing Bioenergy, said the revived claims are worth more than $40 million plus attorneys’ fees.

In 2016, a fire destroyed the company’s Memphis, Tennessee, renewable biodiesel plant. The company was covered by a pair of policies collectively limited to roughly $41 million, according to court documents. Bioenergy says that after the fire, its losses compounded because it wasn’t given the proper funding by the insurance company to rebuild quickly. It argued that it was due consequential damages for those delays, and the appeals court agreed that the allegations could move forward.

“It may proceed, because, given the ‘purpose and particular circumstances of the property damage and business interruption policies,' it was foreseeable that excessive delay would cause defendants to incur, as alleged, tens of millions of dollars in uncovered business interruption losses and attorneys’ fees necessary to recover therefor,” the appeals court’s opinion said.

The appeals court said Lloyd’s didn’t advance Bioenergy any more than $6.8 million in business interruption coverage despite an appraisal panel that found more than double that amount was owed. The insurer also has not paid the full amount of the roughly $24 million property damage claim arrived at by the appraisal panel, Horkovich said.

Horkovich called it a major win for New York policy holders, adding that the bad faith claim was worth roughly $36 million. He said that the business interruption coverage was critical and that the insurer failed to deliver.

“In those circumstances where your insurance company is failing to pay and the results of the failure to pay — foreseeable damages for the policyholder — the policy holder can sue on that breach of contract claim for failing to obey the implied covenant of good faith and fair dealing,” Horkovich told Law360 on the significance of the decision. 

The lower court had dismissed and severed the counterclaim from the case in October 2018. The rest of the case has continued.
Law360 (December 5, 2019, 8:35 PM EST) -- A New York appeals court on Thursday revived claims by a renewable energy company locked in a dispute with Lloyd’s over policy payouts following a fire that burned down its Tennessee plant, allowing claims that could add tens of millions to the insurer’s final bill.

The court revived Bioenergy Development Group LLC’s claims for breach of certain terms and breach of the implied duty of good faith and fair dealing. Robert M. Horkovich, an Anderson Kill PC attorney representing Bioenergy, said the revived claims are worth more than $40 million plus attorneys’ fees.

The lower court rejected the bad faith claims, saying Bioenergy does not “plausibly claim that the insurers’ conduct has created losses which would otherwise be remedied by a full payment of its losses under the policies.”

Lloyd’s initiated the litigation in 2017, pushing for the court to establish a roughly $15 million limit to the business interruption part of the policy, according to court documents.

A representative with Lloyd’s did not immediately return a request for comment.

Bioenergy is represented by Robert M. Horkovich, Dennis J. Artese and Vivian Costandy Michael of Anderson Kill PC; and Ernest Martin Jr. and Gregory E. Van Houten of Haynes and Boone LLP.

Lloyd’s is represented by Michael L. Gonzalez and Isabella Stankowski-Booker of Zelle LLP.

The case is Certain Underwriters At Lloyd’s London et al. v. Bioenergy Development Group LLC et al., docket number 10505 655792/17, in the Supreme Court, Appellate Division, First Department.

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