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, a judge has ruled.

Manhattan Supreme Court Justice Gerald Lebovits, in a case without a definitive decision from the state's highest court, affirmed that when an insured "is cast in a defensive posture by the legal steps an insurer takes in an effort to free itself from its policy obligations," and the insured party then prevails, the policyholder may recover attorney fees "incurred in defending against the insurer's action."