HNRK Coverage Corner

On August 29, 2019, the California Supreme Court issued a decision in Pitzer College v. Indian Harbor Ins. Co., Case No. S239510, ruling (in response to a certified question from the Ninth Circuit) that New York’s no-prejudice rule—under which a first-party insurer can avoid coverage based on delayed notice without showing prejudice—is contrary to a “fundamental public policy” of California.

Unlike the majority of states, New York common law does not require an insurer to demonstrate prejudice to disclaim coverage based on late notice by the insured. As previously ...

On September 10, 2019, Judge Reiss of the WDNY issued a decision in Korn v. Federal Ins. Co., Case No. 1:17-cv-00188, ruling that an insurance carrier providing a defense to the insured in a criminal prosecution had no obligation to “monitor” the fees incurred by defense counsel to ensure that the coverage was not exhausted prior to trial.

Korn, an insured brought breach of fiduciary duty and breach of contract claims against a liability insurer, alleging that the insurance company failed “to monitor his criminal defense attorneys, audit the legal fees they incurred, and ...

On August 30, 2019, Justice Masley of the New York County Commercial Division issued a decision in Otsuka Am., Inc. v. Crum Forster Specialty Ins. Co., Index No. 650463/2019, ruling that coverage opinions prepared by outside counsel for an insurer are discoverable, explaining: 

In the context of insurance, the payment or rejection of claims is a part of the regular business of an insurance company. Consequently, documents prepared in the ordinary course of an insurance company’s investigation to determine whether to accept or reject coverage and to evaluate the extent of a ...

On August 26, 2019, Judge Caproni of the SDNY issued a decision in Spandex House, Inc. v. Hartford Fire Ins. Co., Case No. 18-CV-8367 (VEC), enforcing an IP exclusion in a CGL policy that circumvented the “entire action” rule by precluding both defense and indemnity coverage for an otherwise-covered “advertising injury” claim if that claim was joined with any IP claim unconnected to advertising. As Judge Caproni explains, under a duty to defend policy, “if a lawsuit contains a mix of allegations covered by an insurance policy and other allegations falling outside the ...

On July 25, 2019, Justice Crane of the New York County Supreme Court issued a decision in American Empire Surplus Lines Ins. Co. v. Burlington Ins. Co., 2019 NY Slip Op 32221(U), holding that a CGL carrier was required to provide a defense to an additional insured for a personal injury claim, but concluding that, absent a showing of prejudice to the insured, the insurer’s delay in issuing a reservation of rights letter was not a basis to impose a duty to defend.

New York permits an insurer to assume the defense of its insured subject to a reservation of rights, thus allowing the insurer the ...