US Underwriters Ins. Co. v. CITY CLUB HOTEL
The New York Court of Appeals addresses whether an insured who prevails in a declaratory judgment action brought by an insurer to deny coverage may recover attorneys' fees, regardless of whether the insurer provided a defense in the underlying suit. U.S. Underwriters Insurance Company had disclaimed coverage for City Club Hotel, LLC and Shelby Realty, LLC after a construction worker's injury, but still provided Shelby a defense. The insurer then initiated a declaratory judgment action to establish it had no duty to defend or indemnify. The District Court's finding that the disclaimer was untimely and its denial of attorneys' fees were appealed. The Court of Appeals, responding to certified questions from the Second Circuit, affirmed that Shelby, as a prevailing insured, is entitled to recover attorneys' fees because these expenses arose as a direct consequence of the insurer's unsuccessful attempt to disclaim policy obligations. The court explicitly answered the first certified question in the affirmative, while declining to answer the second.