Daniel Gerber and Kimberly Whistler on the broad duty to defend potentially becoming broader by including uninsured years and considerations of Federal Court Jurisdiction
One of the fundamental principles recognized in New York regarding insurance coverage is that the duty to defend is greater than the duty to indemnify. The First Department recently expanded this already broad rule by holding insurers, who may have only provided coverage for a small percentage of time, will ultimately be found to cover years the insured did not otherwise have insurance. Moreover, the insured may avoid contributing to defense costs for years it was uninsured.
Coverage expert Daniel Gerber, a partner in the New York lawfirm of Goldberg, Segalla LLP, along with his colleague attorney Kimberly Whistler, discusses the issues relating to costs to be borne by insurers in litigation that involves multiple occurrences over a span of many years within the context of State of New York Liquidation Bureau v. Generali Insurance Company, a decision that could shape the sharing of costs in these cases, which often are often costly in both time and money.
Gerber and Whistler write: “In the end, the First Department’s majority completely rejected the arguments made by Generali. Although not explicitly stated, it is arguable that the decision weighed so heavily in favor of the Liquidation Bureau, in part, because of Generali's refusal to defend the insured and/or otherwise participate in the action. The court seemed to suggest, that Generali gambled and lost and, therefore, could not seek to limit its exposure after the underlying case was resolved.”
With respect to the dissent, the authors state that “The dissent found Generali’s argument that the determination to be uninsured was a conscious one and should therefore provide that its own liability is limited to its actual time on the risk persuasive. Moreover, the judges rejected the Liquidation Bureau’s argument that contribution can no longer be obtained from the insured because it was no longer a viable entity based on the fact the insured was viable for fourteen months after the declaratory judgment was commenced. As such, the Liquidation Bureau had an opportunity to seek contribution.
The authors also offer various practice tips, with special emphasis on the Generali dissent.