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If there is no cap on such damages, bonding companies may not underwrite a payment or performance bond. “consequential damages”, however, lacks a precise definition, and thus, the question whether certain types of damages are recoverable in light of a consequential damages bar is a recurring subject of high-stakes litigation. [2] PNC alleged that, due to a malfunction in WKFS's software, more than 10,000 loans had been similarly affected. In a huge win for policyholders, a New York appellate court, in D.K. [19], The court questioned why PNC had not sought to recover its direct damages, which would have been equal to the amounts directly paid by PNC to WKFS for the allegedly malfunctioning system. Although PNC's damages were a potentially foreseeable result of the breach, foreseeability is only relevant where it is intended to limit the extent to which consequential damages may be available. The contract is governed by New York law and contains a provision barring the recovery of “consequential” damages. Are There Heightened Pleading Requirements When Alleging Consequential Damages Against an … On December 15, 2014, the United States District Court for the Southern District of New York ruled in PNC Bank v. Wolters Kluwer Financial Services that defendant Wolters Kluwer Financial Services ("WKFS") was not liable for certain breach of contract damages relating to a malfunction in software WKFS had licensed to PNC Bank ("PNC"). (slip op. United States: Recovery of Hedging Losses as Consequential Damages in New York Arbitration 09 March 2011 . interest allowable under New York State law. [6] PNC claimed it was entitled to the indemnification, but the court dismissed any argument that the indemnification applied because no third party claim had been asserted.[7]. Detriment that arises from the interposition of special, unpredictable circumstances. The New York Court of Appeals set the stage for the pleading of consequential damages claims by insureds against insurers in its Bi-Economy decision. These are damages that are reasonable and foreseeable, such as lost profit. at 29). [11], The court disagreed with PNC, finding that the WKFS license agreement was not like the agreement at issue in Biotronik and instead was "more closely akin to what the Court of Appeals called 'a simple resale contract, where one party buys a product at a set price to sell at whatever the market may bear. And as noted in this recent decision from the U.S. Court of Appeals for the 4th Circuit, Severn Peanut Co., Inc. v. Industrial Fumigant Co., these provisions are “widely enforced,” not only because such enforcement “maximizes parties’ freedom of contract,” but also […] [3] Recent New York decisions, however, illustrate how exceptional such instances will be. Special damages include (among other types of damages) incidental and consequential damages, terms which are often used interchangeably. (citing Biotronik, 22 N.Y.3d at 808). In November 2012, the insured filed a claim with their insurer, Insurance Company of Greater New York, for damages sustained during the storm. (slip op. This is especially important because, theoretically, a contractor could enter into a contract valued at $2 million and end up defending a consequential damage claim for a lot more. Consequential damages are damages that “do not necessarily, but do directly, naturally, and proximately result from” the injury for which compensation is sought. An example of consequential damages would be a driver getting into a car accident because, instead of paying attention to the road, he was focused on another car accident that had just happened across the street. are also a form of compensation. Attorney Advertising. [2] The winning party can also, in certain limited circumstances, recover attorneys’ fees and punitive damages. However, having a mutual waiver of consequential damages benefits the contractor much more than it does the owner. (slip op. To schedule a consultation with an experienced construction attorney in New York or Florida, please call, Things to know about commercial real estate investments, Lawsuit accuses Goldman Sachs executive of sexual harassment, The SAG issued new guidelines regarding sexual harassment, Parent company of Google agrees to major harassment settlement. Consequential damages are those "unusual and extraordinary damages" that "do not so directly flow" from a breach of contract, and because of their indirectness, the courts of New York and elsewhere have traditionally limited the circumstances under which they are recoverable. at 3). If you have questions about how a consequential damage clause can affect your livelihood, reach out to the, at Rosen Law LLC. 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