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Patricia O'Connell
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Laura Foggan Comments on Duty to Defend Ruling by New York Court of Appeals

July 1, 2013

Laura A. Foggan, chair of Wiley Rein’s Insurance Appellate Group, was quoted by Law360 in a June 28 article about last month’s ruling by the New York Court of Appeals that if an insurer breaches its duty to defend, it cannot rely on policy exclusions to avoid indemnification.

In K2 Investment Group v. American Guarantee & Liability Insurance Co., the court ruled that because American Guarantee had violated its duty to defend, it could no longer hold up policy exclusions to avoid covering a $3.1 million malpractice judgment—even if those exclusions would otherwise have saved it from covering an underlying judgment or settlement.

The decision is a major one because it is a sharp departure from the view that insurers that breach their defense obligations are responsible only for covering defense costs or damages directly caused by the breach, Ms. Foggan told Law360.

“Denying the insurer the right to rely on policy exclusions is overbroad and unfairly punitive,” Ms. Foggan said. “Adequate remedies exist at law for an insurer's breach of contract.”