New York Insurers Breaching Duty to Defend May Not Assert Policy Exclusions

July 3, 2013:  New York Insurers Breaching Duty to Defend May Not Assert Policy Exclusions

The most recent article for “Burke’s Law,” a monthly column featured on, reviewed a recent decision from the New York Court of Appeals holding that when an insurer breaches its duty to defend, it may not rely on policy exclusions to avoid its coverage obligations, “even if the exclusions would otherwise have negated the duty to indemnify.”  The decisions marks a turn from New York precedent and sets forth a harsh rule for insurers.

In  K2 Investment Group, LLC v. American Guarantee & Liability Ins. Co., 2013 NY Slip Op 4270, the insurer did not contend the lower courts’ findings that it had breached its duty to defend, but argued that it had no duty to indemnify the insured’s loss because exclusions in the policy precluded coverage.  Faced with the question of whether an insurer that breaches its duty to defend may later escape its duty to indemnify by asserting policy exclusions, the court held that it could not.  According to the court, an insurer that breaches the duty to defend must defend its insured for the resulting judgment.  Previous New York rulings had not supported such a position, and the ruling breaks from the majority of states.  Future cases will likely explore the full scope of the K2 decision, but for now, insurers should approach the duty to defend carefully in light of the new rule.

The article can be read at