Rights of an Insurer that Provided Defense without Knowledge of True Facts

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In Federated Dep't Stores, Inc. v. Twin City Fire Ins. Co., 28 A.D.3d 32, 807 N.Y.S.2d 62 (2006), the First Department held that the insurer’s assumption of the defense without knowledge of the true facts was insufficient to stop the insurer from successfully disclaiming coverage upon learning the true facts. Since the insurer reserved its rights before disclaiming coverage, the insured’s argument that estoppel prevented the disclaimer failed. Estoppel (a rule that requires fairness and protects one party from being harmed by another party’s voluntary conduct) cannot be used to create coverage where none exists. Any reservation provided by the insurer is sufficient to prevent reliance upon the defense provided by the insurer should the insurer decide to disclaim later.This is a partial part of the post and the full article is only available to subscribers. You can subscribe to “Excellence in Claims Handling” at https://barryzalma.substack.com/subscribe Barry Zalma