Frankart Distribs., Inc. v. Federal Ins. Co.
Issue Discussed: Waiver of Defenses
Submitted by Aluyah I. Imoisili, Claire-Lise Y. Kutlay*
Date Promulgated: August 22, 1985
Frankart Distribs., Inc. v. Federal Ins. Co., 616 F.Supp. 589 (S.D.N.Y. 1985)
Court: United States District Court, Southern District of New York
Issues Decided: Whether an insurer waives its right to challenge a duty to defend by assuming defense of a claim.
A furniture distributor sued its insurer for attorneys’ fees it incurred litigating a fraud action the insurer refused to defend. Both parties moved for summary judgment. The furniture distributor contended that the insurer waived its right to claim that it had no duty to defend by initially stating in correspondence that it would assume defense of the fraud action.
The district court sided with the insurer and held its failure to deny the alleged duty to defend did not act as a waiver because the duty to defend is an issue regarding the existence or nonexistence of coverage and cannot be created by waiver. Essentially, the court held, the insurer’s initial statements that it would assume the defense did not waive the insurer’s right later to claim that it had no obligation to defend.
Under New York law, an insurer does not waive its right to assert that it had no duty to defend a claim by initially assuming defense of the claim.
* Aluyah I. Imoisili is a Partner and Claire-Lise Y. Kutlay is an Associate at Greenberg Gross LLP, where they specialize in commercial litigation and arbitration.