On October 31, 2024, the First Department issued a decision in OH 126th St. Hous. Dev. Fund Corp. v. Berkley Ins. Co., 2024 NY Slip Op. 05410, holding that a consequential damages waiver in a contract did not extend to a related surety bond, explaining:
Here, plaintiffs’ alleged damages against defendant surety for breach of the performance bond were not foreclosed as a matter of law based solely on a waiver of consequential damages in the construction contract. A surety’s breach of its own obligation under a surety bond may give rise to claims for damages flowing from its breach. Although the construction contract between plaintiffs and the contractor waives consequential damages, plaintiffs’ claim against defendant arises from the alleged breach of its obligations as surety under the performance bond.
Section 3 of the performance bond states that defendant’s obligation arises out of plaintiffs’ performance of certain obligations, and Section 6 of the performance bond states that if the Surety proceeds as provided in Section 5.4, and Owner refuses the payment or the Surety has denied liability, in whole or in part, without further notice, the Owner shall be entitled to enforce any remedy available to the Owner. Since the language of the performance bond provides an independent cause of action for plaintiffs against defendant, the waiver of consequential damage in the construction contract does not affect plaintiffs’ claim against defendant as surety. As plaintiffs only moved for summary judgment on liability, there is no need to address at this juncture their further argument that the motion court failed to provide them with an opportunity to prove any non-consequential damages arising out of defendant’s breach.
(Internal quotations and citations omitted).