The Second Department held that an insurer may not recoup defense costs under a reservation of rights unless the insurance policy expressly allows it to do so.
New York s Second Department Splits From First Department - Insurance mondaq.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from mondaq.com Daily Mail and Mail on Sunday newspapers.
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Recoupment of defense costs (defense fees and costs) by insurers in the absence of a duty to indemnify under a liability policy is an unsettled issue in many states. In a
recent decision, a New York intermediate appellate court held that even though there was no duty to indemnify an underlying personal injury action under a CGL policy, the insurer could
not recoup the defense costs it had advanced under a reservation of rights (ROR) letter where the policy at issue provided for a duty to defend but did not contain an express contractual provision allowing for the recoupment of such defense costs. This decision, however, by a court for one of four judicial departments in New York, is contrary to other state and federal decisions allowing recoupment under New York law and should be limited to its facts.
N.Y. Court Takes Contrary Position on Insurers’ Right to Recoup Defense Costs By Eric Stern and Andrew Lipkowitz | January 21, 2021
It has long been understood that under New York law, an insurance company may recoup defense costs paid on behalf of an insured once it has been ultimately determined that there was no coverage in connection with the underlying action, provided that the insurer reserved its rights to seek such reimbursement.
Multiple New York courts at both the trial and Appellate Division levels (New York’s intermediate appellate court), have adopted such a rule. However, a recent decision by the Appellate Division, Second Department in