‘K2’ and Consequences of Insurers’ Breach of Duty to Defend

On Feb. 18, 2014, the Court of Appeals reversed itself, vacating a short-lived decision issued eight months earlier, and reinstated the status quo in New York with regard to the consequences of an insurer’s breach of the duty to defend. After a brief period of uncertainty following the decision in K2 Investment Group, LLC v. AmericanGuarantee & Liab. Ins. Co. (K2-I), the law in New York returned to its preexisting state with the decision issued in K2 Investment Group, LLC v.American Guarantee & Liab. Ins. Co. (K2-II); an insurer’s breach of the duty to defend does not create coverage where none otherwise existed. In this New York Law Journal article, SRZ partner Howard B. Epstein and special counsel Theodore A. Keyes discuss how the recent decision in K2-II does not alter the landmark Court of Appeals’ decision issued in Isadore Rosen & Sons v. Sec. Mut. Ins. Co. ofNew York.