Key Takeaway
Analysis of attorney fee recovery in New York declaratory judgment actions, examining when medical providers and insureds can recover legal costs in no-fault insurance disputes.
Hertz Vehs., LLC v Cepeda, 2017 NY Slip Op 08603 (1st Dept. 2017)
The question left unanswered in Fiduciary was what happens if the Assignor (or EIP) who succeeds on a DJ is a driver, owner or registered user of the vehicle? The Court here is clear.
“The insured in the circumstances described above may recover attorneys’ fees because “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” (U.S. Underwriters, 3 NY3d at 597-598).
There is no such duty in this case, as Innovative is not an insured to which Hertz owes a duty to defend. Although Innovative was assigned the claimants’ rights for reimbursement of no-fault benefits, the claimants were only passengers in the insured vehicle at the time of the accident, and were not parties to whom Hertz owed a duty to defend (Fiduciary Ins. Co. Of Am. v Medical Diagnostic Servs., P.C., 150 AD3d 498 citing U.S. Underwriters, 3 NY3d at 597-598).”
The Court is sympathetic to the medical provider who must expend tens of thousands on a New York County DJ action for billing, often times less than $5,000.00. Therefore, an artificial distinction has been made between someone to whom a defense is owed in a third party action and to someone who a duty to defend and indemnify next exists.
I am learning that most states will award reasonable attorneys fees, regardless of who files a lawsuit, when a Claimant prevails in a coverage dispute adjudicated in the Courts. It appears New York is about 25 % of the way there,
