Key Takeaway
Analysis of attorney fee recovery in no-fault insurance declaratory judgment cases, examining when insureds can recover fees when defending against insurer DJ actions.
This article is part of our ongoing attorney fee coverage, with 16 published articles analyzing attorney fee issues across New York State. Attorney Jason Tenenbaum brings 24+ years of hands-on experience to this analysis, drawing from his work on more than 1,000 appeals, over 100,000 no-fault cases, and recovery of over $100 million for clients throughout Nassau County, Suffolk County, Queens, Brooklyn, Manhattan, and the Bronx. For personalized legal advice about how these principles apply to your specific situation, contact our Long Island office at (516) 750-0595 for a free consultation.
Fiduciary Ins. Co. of Am. v Medical Diagnostic Servs., P.C., 2017 NY Slip Op 03888 (1st Dept. 2017)
“While an insured party may recover attorneys’ fees where it successfully defends against its insurer’s action seeking a declaratory judgment that it has no duty to defend or indemnify its insured (see Underwriters Ins. Co., 3 NY3d at 597; Mighty Midgets v Centennial Ins. Co., 47 NY2d 12, 21 ), “he reasoning behind is that an insurer’s duty to defend an insured extends to the defense of any action arising out of the occurrence, including a defense against an insurer’s declaratory judgment action” (Underwriters Ins. Co., 3 NY3d at 597-598). Here, plaintiff owes defendant Star no duty to defend, as Star is merely seeking reimbursement for chiropractic services rendered to the claimant in this no-fault action. While Star was assigned the claimant’s rights for such reimbursement, the claimant was merely the injured party in the taxi at the time of the accident, and plaintiff owed no duty to defend the claimant. Star, as assignee of the claimant’s rights, could acquire no greater rights than its assignor (see New York & Presbyt. Hosp. v Country-Wide Ins. Co., 17 NY3d 586, 592 ), and did not acquire any right to a defense from plaintiff. Thus, the court properly held that Star was not entitled to attorneys’ fees in this case.”
What if Plaintiff owed a duty to defend the Assignor, i.e., Assignor was the driver of the taxi. The record on appeal shows otherwise. Does that change the scenario notwithstanding the fact that “Star is merely seeking reimbursement for chiropractic services rendered to the claimant in this no-fault action”? I throw it out there because the decision is ambiguous. “ speaks with a forked tongue.”
Legal Significance
The First Department’s decision clarifies that the right to recover attorney fees in insurance declaratory judgment actions is tethered to the insurer’s duty to defend, not merely to the outcome of the coverage dispute. This holding rests on sound doctrinal foundations established in Mighty Midgets v Centennial Ins. Co. and Underwriters Ins. Co., which recognize that when an insurer sues its own insured to avoid coverage, forcing the insured to defend effectively violates the insurer’s duty to defend.
However, healthcare providers in the no-fault context occupy a fundamentally different position. As assignees of first-party no-fault benefits, they acquire only the injured party’s right to reimbursement for medical expenses—they do not acquire any right to a defense from the insurer. The assignment of benefits does not transform the provider into an insured entitled to liability coverage; it merely gives the provider standing to collect payment for services rendered.
The court’s reasoning follows the principle that “an assignee can acquire no greater rights than its assignor,” as established in New York & Presbyt. Hosp. v Country-Wide Ins. Co. If the injured passenger had no right to a defense from Fiduciary (because they were merely a passenger, not a party whose liability was insured), then Star as assignee could not acquire such a right through the assignment.
Jason Tenenbaum’s observation about the decision’s ambiguity is astute. The court states two potentially distinct rationales: (1) Star acquired no right to a defense because its assignor had no such right, and (2) Star is “merely seeking reimbursement for chiropractic services” rather than defending against a liability claim. The hypothetical posed—what if the assignor was the taxi driver entitled to a defense—highlights this ambiguity. Would a provider’s status change if the assignor happened to be a covered party under the liability policy?
Practical Implications
For healthcare providers, this decision forecloses attorney fee recovery in most no-fault declaratory judgment actions. Providers should factor in the inability to recover fees when deciding whether to actively defend against such actions or to default and rely on the carrier’s inability to establish its case through admissible evidence alone.
For insurance carriers, the decision removes a significant financial disincentive to bringing declaratory judgment actions against healthcare providers. Carriers can now pursue coverage determinations through declaratory judgment actions without facing the prospect of paying the provider’s attorney fees if the action is unsuccessful.
The decision also raises strategic questions for providers facing declaratory judgment actions. If attorney fees are unavailable, providers must weigh the cost of defense against the value of the underlying claims. In many cases, particularly those involving modest claim amounts, the economics may favor allowing the carrier to proceed uncontested while reserving the right to challenge any adverse ruling through appeal or collateral attack.
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Legal Context
Why This Matters for Your Case
New York law is among the most complex and nuanced in the country, with distinct procedural rules, substantive doctrines, and court systems that differ significantly from other jurisdictions. The Civil Practice Law and Rules (CPLR) governs every stage of civil litigation, from service of process through trial and appeal. The Appellate Division, Appellate Term, and Court of Appeals create a rich and ever-evolving body of case law that practitioners must follow.
Attorney Jason Tenenbaum has practiced across these areas for over 24 years, writing more than 1,000 appellate briefs and publishing over 2,353 legal articles that attorneys and clients rely on for guidance. The analysis in this article reflects real courtroom experience — from motion practice in Civil Court and Supreme Court to oral arguments before the Appellate Division — and a deep understanding of how New York courts actually apply the law in practice.
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Frequently Asked Questions
How are attorney fees awarded in no-fault cases?
Under 11 NYCRR §65-4.6, if a no-fault claimant prevails at arbitration or in court, the insurer may be required to pay attorney fees. The fee schedule is set by regulation — typically 20% of the first $2,000 recovered and 10% of amounts above that, with a minimum fee. These fees are separate from and in addition to the benefits recovered.
Can I recover attorney fees in a personal injury lawsuit?
In New York, each party typically pays their own attorney fees (the "American Rule"). Exceptions exist in certain statutory claims — for example, employment discrimination cases under federal or state law may include fee-shifting provisions. In personal injury cases, the attorney fee is usually a contingency percentage agreed upon with the client.
What is the fee schedule for no-fault arbitration?
The fee schedule under Regulation 68 (11 NYCRR §65-4.6) provides for a reasonable attorney fee based on the amount recovered. The schedule is designed to ensure claimants have access to legal representation while keeping fees proportional to the recovery. Disputes over the amount of attorney fees can be resolved by the arbitrator or court.
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About the Author
Jason Tenenbaum, Esq.
Jason Tenenbaum is the founding attorney of the Law Office of Jason Tenenbaum, P.C., headquartered at 326 Walt Whitman Road, Suite C, Huntington Station, New York 11746. With over 24 years of experience since founding the firm in 2002, Jason has written more than 1,000 appeals, handled over 100,000 no-fault insurance cases, and recovered over $100 million for clients across Long Island, Nassau County, Suffolk County, Queens, Brooklyn, Manhattan, the Bronx, and Staten Island. He is one of the few attorneys in the state who both writes his own appellate briefs and tries his own cases.
Jason is admitted to practice in New York, New Jersey, Florida, Texas, Georgia, and Michigan state courts, as well as multiple federal courts. His 2,353+ published legal articles analyzing New York case law, procedural developments, and litigation strategy make him one of the most prolific legal commentators in the state. He earned his Juris Doctor from Syracuse University College of Law.
Disclaimer: This article is published by the Law Office of Jason Tenenbaum, P.C. for informational and educational purposes only. It does not constitute legal advice, and no attorney-client relationship is formed by reading this content. The legal principles discussed may not apply to your specific situation, and the law may have changed since this article was last updated.
New York law varies by jurisdiction — court decisions in one Appellate Division department may not be followed in another, and local court rules in Nassau County Supreme Court differ from those in Suffolk County Supreme Court, Kings County Civil Court, or Queens County Supreme Court. The Appellate Division, Second Department (which covers Long Island, Brooklyn, Queens, and Staten Island) and the Appellate Term (which hears appeals from lower courts) each have distinct procedural requirements and precedents that affect litigation strategy.
If you need legal help with a attorney fee matter, contact our office at (516) 750-0595 for a free consultation. We serve clients throughout Long Island (Huntington, Babylon, Islip, Brookhaven, Smithtown, Riverhead, Southampton, East Hampton), Nassau County (Hempstead, Garden City, Mineola, Great Neck, Manhasset, Freeport, Long Beach, Rockville Centre, Valley Stream, Westbury, Hicksville, Massapequa), Suffolk County (Hauppauge, Deer Park, Bay Shore, Central Islip, Patchogue, Brentwood), Queens, Brooklyn, Manhattan, the Bronx, Staten Island, and Westchester County. Prior results do not guarantee a similar outcome.
