Under the terms of most, if not all, liability insurance policies, the policyholder has a “duty to cooperate” with its liability insurer. Although the specific language of the liability insurance policy will vary, most liability insurance policies require the policyholder to assist in the defense of suits triggering the liability insurer’s duty to defend and to assist the insurer in settling such suits and enforcing any right of contribution against third parties. This “duty to cooperate” under liability insurance policies can be contrasted with the broader duty of an insured under most property insurance policies to cooperate in the insurer’s investigation of a claim by, for example submitting a sworn proof of claim or appearing for an Examination Under Oath.
New York courts have recognized there are limits on a liability policyholder’s duty to cooperate, particularly when an insurer has refused to defend the policyholder or has agreed to defend its policyholder under a “Reservation of Rights” whereby the insurer reserves the right to deny coverage.
