The Court of Appeals of New York Grants Reargument in K2
In what appears to be a rare occurrence, on Tuesday, September 3, 2013, the Court of Appeals of New York granted an insurer’s motion for reargument in connection with the hotly contested June 2013 decision in K2 Investment Group, LLC, et al. v. American Guarantee & Liability Insurance Co., --- N.E.2d ----, 2013 WL 2475869 (N.Y. June 11, 2013).
In what many consider to be a change in New York law, in its June 11, 2013 decision in K2, the Court of Appeals of New York held that an insurer that breaches its duty to defend “may not later rely on policy exclusions to escape its duty to indemnify the insured for a judgment against him.” The June 11 decision left many questions unanswered and, according to a brief filed by American Guarantee & Liability Insurance Company, misapprehended and failed to properly consider the effect of prior NY precedent, creating an inconsistency in the law regarding the circumstances in which an insurer that improperly failed to defend its insured could challenge its duty to indemnify based on policy exclusions. American Guarantee contends that the Court misapprehended the decision in Lang v. Hanover Insurance Co., 3 N.Y.3d 350 (N.Y. 2004) and Servidone Construction Corp. v. Security Insurance Co., 64 N.Y.2d 419 (N.Y. 1985), both which, in essence, allow an insurer to rely on policy exclusions as a defense to its duty to indemnify, where the insurer improperly failed to defend its insured.
The Court of Appeals has not yet set a date for reargument, which will likely take place in 2014.