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Current Developments in the Commercial Divisions of the
New York State Courts
Posted: July 9, 2017

Insurers’ Repudiation of Liability Relieves Insured of Obligation to Cooperate

On June 27, 2017, the First Department issued a decision in J.P. Morgan Securities Inc. v. Vigilant Insurance Co., 2017 NY Slip Op. 05181, holding that an insurer’s repudiation of liability relieved the insured of its obligation to cooperate with the insurer, explaining:

Defendants’ unreasonable delay in dealing with plaintiffs’ claims under the insurance contracts, consistently stated position that the various regulatory investigations and civil actions concerning plaintiffs’ alleged late trading and marketing-timing transactions did not constitute claims under the contracts, and insistence that in any event disgorgement payments such as those demanded by the regulators were not insurable as a matter of law constitute a denial of liability under the contracts that justifies plaintiffs’ settlement of those claims without defendants’ consent. The record does not support defendants’ contention that plaintiffs breached their obligation to cooperate, but in any event defendants’ repudiation of liability for plaintiffs’ claims also excuses plaintiffs from performance of that obligation. The “reservation of rights” language in defendants’ letters to plaintiffs does not change this result.

(Internal citations omitted).

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