The more things change, the more they remain the same. On Feb. 18, 2014, the Court of Appeals reversed itself, vacating a short-lived decision issued eight months earlier, and reinstated the status quo in New York with regard to the consequences of an insurer’s breach of the duty to defend. After a brief period of uncertainty following the decision in K2 Investment Group, LLC v. American Guarantee & Liab. Ins. Co. (K2-I),1 the law in New York returned to its preexisting state with the decision issued in K2 Investment Group, LLC v. American Guarantee & Liab. Ins. Co. (K2-II)2; an insurer’s breach of the duty to defend does not create coverage where none otherwise existed. According to the Court of Appeals in K2-II, even where an insurer has breached the duty to defend, the insurer may properly refuse to indemnify if the claim at issue is barred by an applicable policy exclusion.

The recent decision in K2-II does not alter the landmark Court of Appeals’ decision issued in Isadore Rosen & Sons v. Sec. Mut. Ins. Co. of New York.3 The K2-II decision makes clear that in the absence of a covered loss, the insurer simply has no duty to indemnify. In contrast, under Isadore Rosen, an insurer that breaches the duty to defend a claim for loss that is covered under the policy will be held liable for the insured’s reasonable settlement of that claim—regardless of whether the insurer consented to such settlement.

‘K2-I’

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]