Key Points

  • The Fourth Department unanimously dismissed the owners' $2,221,818 claim for future lost profits because those consequential damages were not within the parties' contemplation under a bare-bones $1,040 oral lifting contract.
  • Neither the owners nor DES was entitled to summary judgment on the value of the damaged compressor, which was bought used for $190,000 and then modified at a cost of slightly over $100,000.
  • The court vacated Erie Insurance Company's $210,000 judgment as subrogee because Erie's own evidence showed $20,000 of its $210,000 damages figure was spent on undamaged storage cylinders, leaving fact issues on the amount due under the policy.
  • Under CPLR 5501(c), DES's notice of appeal from the summary judgment order was deemed to cover the judgment later entered on that order.

A New York appeals court on Nov. 13 threw out a $2.2 million lost-profits claim against a contractor that dropped and irreparably damaged a natural gas compressor while lifting it into place under a $1,040 oral agreement. The court held that the contractor never agreed to bear the risk of the owners' future business losses.

A unanimous five-justice panel of the Appellate Division, Fourth Department, also vacated a $210,000 judgment that Erie Insurance Company had won against the contractor, Diversified Erection Services. Erie had moved for that award as subrogee of the compressor's owners, an insurer that pays its insured's loss and then steps into the insured's place. The panel found that Erie's own evidence showed $20,000 of its $210,000 damages figure was spent on storage cylinders that were not damaged.

The unsigned memorandum decision leaves the owners, Clean and Green CNG Technologies Corp. and Diamond Builders Corp., with a breach of contract claim whose dollar value must still be proved. The panel held that neither side was entitled to summary judgment on what the compressor was worth.

The dispute arose during construction of a new commercial compressed natural gas, or CNG, station. Diversified Erection Services, which the court called DES, was performing a lifting service under an oral contract when it dropped the compressor and "irreparably damaged" it, according to the decision.

In an order entered March 10, 2025, Justice Grace Marie Hanlon of Supreme Court, Chautauqua County, granted the owners summary judgment on liability for breach of contract and dismissed their negligence claim. She also granted Erie's motion for $210,000 plus interest, costs and disbursements, and a judgment was entered against DES on May 14, 2025. Neither side challenged liability on appeal. "Our analysis thus proceeds from the premise that the damages issues are being litigated under DES's established liability for breach of contract," the panel wrote.

The owners sought $2,221,818 in future lost profits and argued they had proved that claim as a matter of law. DES countered that those damages were not within the parties' contemplation when they made their deal. The panel agreed with DES and dismissed the claim.

The court classified the lost profits as consequential damages because they stemmed from "collateral business arrangements," namely lost contracts with potential CNG purchasers. Under the decisions in Kenford Co. v. County of Erie and Biotronik A.G. v. Conor Medsystems Ireland Ltd., such profits are recoverable only if, among other things, they were "fairly within the contemplation of the parties" when the contract was made.

The record, the panel found, showed only a "bare bones" oral contract to lift the compressor into place for $1,040. Quoting its own earlier decision in Vermillion v. Roofing Guys Inc., the court wrote that "no party testified that consequential damages were contemplated when the contract was entered." The work order signed by the plaintiffs' owner likewise "makes no mention of consequential damages and contains nothing that could be interpreted as contemplating consequential damages," the panel wrote, again borrowing Vermillion's words. Quoting its 2023 decision in Buffalo Riverworks LLC v. Schenne, the court concluded that "[i]t would be highly speculative and unreasonable to infer an intent to assume the risk of lost profits in what was to be a start-up venture."

The panel then turned to the compressor itself and refused to award either side summary judgment on its value. The court explained that destroyed property is usually valued at its market price immediately before the loss. That rule "presupposes the existence of a broad market with frequent trading in articles of an identical character with the article lost," the panel wrote.

The owners' proof fell short under any method, the court held. "The vague and conclusory deposition testimony and affidavits of plaintiffs' owner were insufficient to establish as a matter of law that there was no ready market of CNG compressors for commercial stations," the panel wrote. The record showed the owners bought the roughly 18-year-old compressor on the used market months before the accident for $190,000, plus $20,000 for 80 storage cylinders that were neither part of the unit nor damaged.

The owners also spent slightly over $100,000 modifying the compressor for the station. But the court found that the owners offered no evidence "regarding the extent to which any of the various purported modifications to the compressor may have increased its value."

Those same modifications sank DES's bid for partial summary judgment dismissing the owners' damages claims. DES had argued that the owners "failed to demonstrate any additional costs incurred other than the $190,000 paid for the purchase of the compressor" and had already been more than fully compensated by Erie. The panel held that DES's own evidence of the upgrades raised a question of fact on whether the improved compressor was worth more than the purchase price and Erie's payment, and that a party seeking summary judgment "does not meet its burden by noting gaps in its opponent's proof."

On Erie's judgment, the panel noted that a subrogee "'stands in the shoes' of the insured and can have no greater rights than the insured." To the extent Erie determined that the owners suffered $210,000 in damages to the compressor and were owed that amount less a $5,000 deductible, the court said, that determination "appears to be mistaken" given that the compressor alone cost $190,000. The panel concluded that "issues of fact regarding the amount due to plaintiffs under the policy precluded an award of summary judgment to Erie as subrogee."

The court also rejected the owners' suggestion that DES's challenge to Erie's award was not properly before it because DES had not separately appealed the judgment. "That is not correct," the panel wrote. It explained that, under CPLR 5501(c), a notice of appeal from an order granting summary judgment is deemed to cover a judgment later entered on that order.

The panel consisted of Justices Bannister, who presided, Montour, Greenwood, Nowak and Hannah. The owners were represented by Samuel J. Capizzi of Collins & Collins Attorneys LLC, and DES was represented by Steven E. Peiper of Hurwitz Fine P.C., both of Buffalo.

The court modified the March 2025 order to dismiss the lost-profits claim, vacated Erie's judgment and otherwise affirmed, without costs.