Insurer Cannot Avoid Indemnification Duty After Wrongfully Refusing to Defend Case

Policy exclusions that ordinarily would relieve an insurer of its obligation to indemnify a lawyer from a malpractice judgment cannot be invoked if the insurer wrongfully refused to cover the lawyer’s defense to the underlying lawsuit, the New York Court of Appeals declared June 11 (K2 Investment Group LLC v. American Guarantee & Liability Insurance Co., N.Y., No. 106, 6/11/13). “If [a] disclaimer [of coverage] is found bad, the insurance company must indemnify its insured for the resulting judgment, even if policy exclusions would otherwise have negated the duty to indemnify,” the court held in an opinion by Judge Robert S. Smith.