The case of P.J.P. Mechanical Corp. v. Commerce and Industry Ins. Co.,—N.Y.S.2d—, 2009 WL 1687773 (1st Dept., June 18, 2009), presents a controversial issue of first impression in New York. It addresses the question “does an insurer have a duty either to fund or to reimburse for separate litigation commenced by its insured, where the responsive pleadings raise an affirmative defense based on a claim of offset?” The First Department affirmed the decision of Judge Karla Moskowitz that no such duty exists.
However, the decision’s real impact will likely result from the unintended consequences of its dual holding, that affirmative defenses that seek to offset damage verdicts are subject to dismissal since they are really counterclaims. Such a proposition if accepted by the trial courts of the First Department, would lead to extreme practical consequences for practitioners of negligence law.
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