U.S. Underwriters Insurance v. City Club Hotel, LLC
The New York Court of Appeals addressed two certified questions from the Second Circuit regarding an insured's right to recover attorneys' fees. U.S. Underwriters Insurance Company had sought a declaratory judgment against its insureds, City Club Hotel, LLC and Shelby Realty, LLC, to deny coverage for a personal injury claim. The insurer's disclaimer of coverage was found untimely. The Court held that an insured who prevails in an insurer-initiated declaratory judgment action to deny coverage may recover attorneys' fees, irrespective of whether the insurer initially provided a defense in the underlying suit. This decision underscores that the insurer's duty to defend extends to litigation arising from its attempts to avoid policy obligations. The Court answered the first certified question in the affirmative for Shelby.