duty to defend
Contractors Insurance No Comments

No matter how hard we try, or how hard we believe, there will always be a flaw in our court systems. Where there is a law there is a loop hole, and where there is a court there is the opportunity for human error. New York’s highest court was forced to review and amend its decision regarding a liability claim filed by Jeffrey Daniels of Garden City, New York.

Duty to Defend

Daniels, a lawyer and a real estate principal at Goldan LLC, was accused of malpractice, and when he went to American Guarantee and Liability Insurance Co., from whom he had previously procured liability insurance, his claim was denied. During the first court proceeding, plaintiffs ATAS Management Group, K2, and South Jordan claimed to have made loans totaling $2.83 million to Goldan LLC. Daniels was to secure the loans with mortgages, but his company never repaid the loans and the mortgages were never recorded.

In their original ruling, the New York State Court of Appeals stated that, “by breaching its duty to defend Daniels, American Guarantee lost its right to rely” on policy exclusions to deny coverage. The Garden City lawyer won the first round in his fight to recover a $2 million policy limit but American Guarantee was quick to appeal the Court’s decision.

The Result

The result was a drastic shift in the ruling due to an apparent blunder by the Court. The shift came after the Justices were presented with a case that had addressed similar themes in 1985. Servidone Construction Corp v. Security Insurance Co. of Hartford proved that an insurer could utilize policy exclusions to compensate the insured for a judgment against him. The decision mirrors a similar stance taken in several other states, which increased the legitimacy of the courts flip-flopping.

“The reversal keeps NY in line with the predominant rule nationally regarding coverage exclusions,” NY based NY Insurance Association,” said the Court in a public statement. No doubt Daniels was made distraught by the decision, losing such a large sum of money after winning it would be a painful experience for anyone. Another facet to the case was the Court fears that its previous ruling would have, “greatly increased litigation costs for the entire NY court system and led to inevitable delays for injured parties.”