Commercial Real Estate Blog by Madison
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Appeals Court Addresses Insurer’s Duty to Defend

By: Debra Smith, Esq., Associate General Counsel, MCRES

In a recent case, K2 Investment Group, LLC, et al. v., American Guarantee & Liability Insurance Company, 21 N.Y. 3d 384, 993 N.E. 2d 1249, 917 N.Y.S. 2d 229 (N.Y. Ct. App. 2013), the New York Court of Appeals addressed the duty of an insurer to defend its insured. Even though this case did not involve title insurance, it will likely be cited in title and other insurance litigation involving the duty an insurance company has to its insured.
In this case, the plaintiffs made loans to be secured by mortgages. Following default, the plaintiffs commenced an action against various parties, including Jeffrey Daniels, a lawyer, for legal malpractice. The insured tendered the claim to his malpractice carrier, American Guarantee & Liability Insurance Company. The complaint contained allegations that the insured was a principal of the borrower. The plaintiffs alleged that the insured failed to record the mortgages and obtain title insurance. American Guarantee denied the claim and did not tender a defense based on a policy exclusion for claims arising out of an insured’s actions undertaken in his capacity as a member or owner of a business enterprise.
Here is the Court’s decision. Continue reading

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