Much has been written about the 2008 New York Court of Appeals’ decisions in Bi-Economy Mkt., Inc. v. Harleysville Ins. Co. of N.Y. and Panasia Estates, Inc. v. Hudson Ins. Co.1 and their progeny, all of which permit policyholders to seek consequential damages from their insurance carriers for insurers’ breach of contractual obligations. These landmark rulings have catalyzed considerable redevelopment of New York insurance law by significantly broadening the spectrum of cases in which consequential damages are available.2 Recently, the U.S. District Court for the Northern District of New York illustrated the transformational nature of these decisions by declaring that Bi-Economy and Panasia “changed the landscape” to permit policyholders to recover attorneys’ fees incurred in bringing an affirmative action against insurers to secure policy rights.3
Evolution of Process
Policyholders in New York have long considered their attorneys’ fees to be a natural consequence of insurance coverage litigation, necessitated by their insurers’ contractual breach by non-payment of covered claims. Historically, New York state law permitted a policyholder to recoup its attorneys’ fees only after successfully defending against a declaratory judgment action initiated by an insurer seeking to free itself from its policy obligations.4 The genesis of this doctrine is found in Mighty Midgets, Inc. v. Centennial Insurance Co.5
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