In K2 Investment, NY high court reverses itself, confirms well-established case law
By Aidan M McCormack and Mark L Deckman
The New York Court of Appeals, in K2 Investment Group, LLC v American Guarantee & Liability Insurance Company, has vacated its own prior decision, reversed the Appellate Division’s order and held that where an insurer breaches a contractual duty to defend its insured in a personal injury action, and the injured party obtains a judgment against the insured, the insurer is not liable to indemnify the insured when coverage is disputed.
Ruling on 18 February, the court stated that this remains true whether it was a settlement with the injured party or judgment against the insured. The court correctly explained that ‘a liability insurer’s duty to indemnify its insured does not depend on whether the insured settles or loses the case’.
The Court of Appeals’ prior ruling, last June, appeared to hold that when an insurer breaches its duty to defend, that insurer would automatically owe indemnity coverage for which it had never charged a premium for and which the policy never actually covered…
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