JANUARY 2013 BAD FAITH CASES: COURT RULES THAT CONSEQUENTIAL DAMAGES FOR DIMINUTION OF VALUE ARE IMPROPER ABSENT A VIABLE CLAIM FOR BAD FAITH (New Jersey Federal)

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In Walsh Secs. Inc. v. Cristo Prop. Manamgement, Ltd. (see also this blog), the insured filed a motion for clarification, seeking a ruling that it may pursue damages against the carrier for diminution of the value of its company, allegedly caused by the carrier’s failure to cover damages incurred by the insured after fraud perpetrated by a third-party lead to the breakdown of a prospective merger involving the insured. The carrier opposed the insured’s motion, arguing that the court’s rejection of the insured’s bad faith count rendered this claim for consequential damages unsupported.

The court agreed with the carrier, ruling that, while the damages sustained by the insured were foreseeable, its bad faith claim was already dismissed. As such, it would be “illogical” to allow the insured to pursue a theory of damages without a supporting claim.

Date of Decision: November 28, 2012

Walsh Secs. Inc. v. Cristo Prop. Manamgement, Ltd., No. 97-3496, 2012 U.S. Dist. LEXIS 172950, U.S. District Court for the District of New Jersey (D.N.J. Nov. 28, 2012) (Debevoise, J.)

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