Policyholders May Recoup Attorney’s Fees if Their Insurer Fails in Contesting Duty to Indemnify.

The trial court issued a first-of-its-kind ruling, holding that an insurer defending a policyholder in litigation must also reimburse the insured party’s coverage action costs if the insurer loses a legal challenge to its indemnity obligation. 

In a case without clear controlling precedent from the Appellate Division or Court of Appeals, the court noted that other cases have held that this standard and the recovery of attorney’s fees applies when an insurer contests the duty to defend, but no clear precedent extended this to the duty to indemnify. This case did so. 

This decision increases insurance companies’ risk when they decide to deny coverage as they can now be required to pay attorneys’ fees not only when they contest the duty to defend, but also the duty to indemnify. 

_{Case Law Alerts, 1st Quarter, January 2024 is prepared by Marshall Dennehey to provide information on recent developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2024 Marshall Dennehey, all rights reserved. This article may not be reprinted without the express written permission of our firm.}