New York Court of Appeals Reverses K2 Decision

February 20, 2014

The New York Insurance Association (NYIA) announced that the Court of Appeals reversed its decision in the case of K2 Investment Group v. American Guarantee & Liability Insurance Company.

The new decision upholds the principle that an insurance policyholder is entitled to all coverage purchased as part of a policy but no additional coverage. NYIA filed an amicus brief in support of this case being reargued. The brief made the point that an insurance company needs to have the ability to uphold a contract as written.

The court decided after the reargument that an insurance company’s failure to defend does not prevent the company from raising legitimate exclusions to coverage. An example of an exclusion is a homeowner running a business out of their house who did purchase insurance beyond their standard homeowners policy that excludes business activities.

“If the Court of Appeals had not reversed course and instead stood by its original decision made last year, there would have been great uncertainty in the New York property and casualty insurance market,” Ellen Melchionni, president of NYIA said. “The reversal keeps New York in line with the predominant rule nationally regarding coverage exclusions. The original decision would have greatly increased litigation costs for the entire New York court system and led to inevitable delays for injured parties.”

Source: NYIA

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