9 Key NY Insurance Cases Of 2014

Originally published by Law360, January 15, 2015

In 2014, New York courts developed significant legal precedent in a broad array of insurance coverage issues, including broker liability, allocation, data breach, right to attorneys' fees, discovery and bankruptcy. In the coming year, policyholders, insurance companies and brokers will grapple with these legal developments and New York courts will surely be given ample opportunities to analyze and review the new insurance law created by the 2014 rulings discussed below.

1. Zurich American Insurance Company v. Sony Corporation of America

   On a national level, this is perhaps the most important insurance coverage case of 2014. Around 1974, the insurance industry added personal and advertising injury coverage to comprehensive general liability policies. This coverage included injury arising out of the publication of material that violates a person's right of privacy. For the past decade, this language has been subject to raging litigation across the country over whether violations of the Telephone Consumer Protection Act are "published" within the meaning of personal and advertising coverage.

   In Zurich v. Sony, the battleground has shifted to coverage for data breaches. Millions of Sony customers' personal information was compromised. This resulted in over 50 class actions, which were multidistricted in California. Sony's primary insurance companies, Zurich American Insurance Company and Mitsui Sumitomo Insurance Company of America, sued Sony in New York. The court found that there was no coverage because there was no publication. The court reasoned that publication required an affirmative action by the policyholder and not an act by a third party. Since Sony's system was hacked, the court held that Sony did not transmit the information to a third party and was not entitled to coverage.

2. K-2 Investment Group LLC v. American Guarantee & Liability Insurance Company

   This is perhaps the most perplexing of the 2014 insurance coverage decisions. The New York Court of Appeals initially held that if an insurance company wrongly denied its duty to defend, it was stopped from later asserting coverage defenses. However, the court then agreed to a rehearing. On reconsideration, the court fully reversed itself. It found that it had overlooked controlling precedent, and on the basis of stare decisis, reversed its earlier decision. The precedent was Servidone Constr. Corp. v. Security Ins. Co. of Hartford, 64 N.Y. 2d 419 (1985). The court ultimately ruled that the insurance company was not barred from relying on policy exclusions as a defense to the coverage suit.

3. Keyspan Gas East Corporation v. Munich Reinsurance America Inc.

   In an environmental cleanup insurance coverage action, the New York Supreme Court held that Keyspan was entitled to a pro rata "time on the risk" allocation, because the incurred...