Recent Developments in New York Insurance Law: Part Two

Last week, we identified several recent New York court decisions that make life harder for insurers. Now, a few that favored insurers:

On March 6, 2014, Justice Friedman of the New York County Commercial Division issued a decision in CMS Life Insurance Opportunity Fund, L.P. v. Progressive Capital Solutions, LLC, 2014 NY Slip Op. 30592(U), granting a defendant’s insurer’s motion to intervene and vacate the default judgment issued against the insured, noting that that “it cannot seriously be argued that [the insurer] is not an interested party.”

On February 26, 2014, Justice Schweitzer of the New York County Commercial Division issued a decision in Orient Overseas Associates v. XL Insurance America, Inc., 2014 NY Slip Op. 30488(U), finding that bad faith claims handling was not a cause of action under New York law. Rather, he held that such a claim would be “duplicative of [a] breach of contract” claim that could, in appropriate circumstances, include a demand for consequential damages.

Similarly, on February 18, 2014, the New York Court of Appeals issued a decision in K2 Investment Group, LLC v. American Guarantee & Liability Ins. Co., 2014 NY Slip Op. 01102, reversing on reargument a decision issued last year that held that “when a liability insurer has breached its duty to defend its insured, the insurer may not later rely on policy exclusions to escape its duty to indemnify the insured for a judgment against him” (emphasis added) and now holding that “the insurer may rely on policy exclusions that do not depend on facts established in the underlying litigation” (emphasis added), to justify its failure to defend an action.

We welcome suggestions regarding court decisions, upcoming oral arguments or other developments in the area of litigation in the Commercial Division of the New York State Courts or the Eastern District of New York that we should blog about.

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