A pair of insurers that said they were prepared to defend a group of policyholders in a property-damage case but didn’t have to indemnify them in the event of a judgment or settlement received tough pushback from a New York Supreme Court judge this week.
Acting Supreme Court Justice Gerald Lebovits in a Nov. 27 ruling said the insurers were acting prematurely in seeking to get out of a duty to indemnify a group of policyholders involved in a property damage case and, in a precedent-setting move, required them to pay the policyholders’ legal costs on the coverage action.
“It would appear to follow straightforwardly … that the [policyholders are] entitled to attorney fees,” the judge said.
In granting the Crystal companies’ request for attorneys’ fees, the judge affirmed state law entitling a policyholder to the fees when it’s put in a defensive position by the insurer trying to get out of its policy obligations and the insurer loses.
The question of whether policyholders are entitled to attorneys’ fees in a situation like one involving the Crystal companies, in which the insurer isn’t trying to get out of defending the companies but rather trying to get out of the duty to indemnify them, isn’t addressed, the judge said.
Since the insurers have put the policyholders in a defensive position on the matter, and they lost, he said, the same entitlement should apply.
“The Crystal entities may enter a supplemental judgment for the amount of their reasonable attorney fees, with the amount of those fees to be determined by motion made on notice,” the judge said.
The Crystal companies were represented by Keith McKenna and Chelsea Ireland of Cohen Ziffer Frenchman & McKenna.
The Utica companies didn’t immediately respond to a request for comment.
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