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Selmeci and Frantz: Second Circuit Holds that Co-Insurers Must Reserve Rights

October 9, 2018

Judy Selmeci (Partner-New York) argued and prevailed in a case before the Second Circuit Court of Appeals that was briefed by Selmeci and Judith Zuckerman Frantz (Of Counsel-White Plains). The appellate panel unanimously held that the plaintiff insurer waived its claim for coinsurance from our client insurer, having failed to reserve such rights when it agreed to defend an additional insured. Notably, the plaintiff insurer failed to object when defense counsel stated that its acceptance was “without reservation.” The panel concluded that the plaintiff insurer was estopped from allocating the loss on the basis of coinsurance. Noting that the plaintiff insurer was well aware of the terms of its own policy and the contractual obligations of its insured when it accepted coverage, the court held that its statement of coverage defenses was unreasonably late. Finally, the court agreed that both the insured and its liability insurer our client would suffer actual prejudice if the plaintiff insurer could deny coverage after it controlled the defense up to trial, including by avoiding a third-party claim for contractual indemnification. The decision affirmed a 2017 declaratory judgment secured by Frantz in favor of our client in the Southern District of New York.

 

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