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INSURED’S REFUSAL TO COOPERATE WITH INSURER RELIEVED INSURER OF LIABILITY FOR DEFAULT JUDGMENT AGAINST THE INSURED.

The Second Department, reversing Supreme Court’s judgment after a bench trial, determined defendant insurer demonstrated the insured refused to cooperate with the insurer’s defense in this oil-spill case, relieving the insurer of liability for the default judgment against the insured:

An insurer that seeks to disclaim coverage based on its insured’s alleged noncooperation is required to demonstrate that “it acted diligently in seeking to bring about its insured’s cooperation, that its efforts were reasonably calculated to obtain its insured’s cooperation, and that the attitude of its insured, after the cooperation of its insured was sought, was one of willful and avowed obstruction'” … . The insurer has a “heavy” burden of proving lack of cooperation … . The inference of noncooperation must be “practically compelling” … .

Based on the evidence adduced at trial, we find that American States met its heavy burden of proving that its insured breached the subject policy by failing to cooperate in the defense of the underlying action. American States made diligent efforts, through written correspondence, numerous telephone calls, and a visit to the insured’s home, that were reasonably calculated to bring about the insured’s cooperation. Further, its insured’s attitude, after his cooperation was sought, was one of willful and avowed obstruction. Among other trial evidence, there was testimony from an investigator who met with the insured at the insured’s home. The investigator testified that the investigator told the insured that the insured risked losing coverage under the policy if the insured refused to cooperate. The insured, while acknowledging that he knew that he had attorneys defending him and that a default judgment could be entered against him if he failed to appear at a deposition, made statements to the effect that he would cooperate only if he were paid for certain work he claimed to have performed, and that the plaintiff could “just get in line” were it to obtain a judgment against him. West St. Props., LLC v American States Ins. Co., 2017 NY Slip Op 03555, 2nd Dept 5-3-17

 

INSURANCE LAW (INSURED’S REFUSAL TO COOPERATE WITH INSURER RELIEVED INSURER OF LIABILITY FOR DEFAULT JUDGMENT AGAINST THE INSURED)/DISCLAIMER (INSURANCE LAW, REFUSAL TO COOPERATE IN DEFENSE, INSURED’S REFUSAL TO COOPERATE WITH INSURER RELIEVED INSURER OF LIABILITY FOR DEFAULT JUDGMENT AGAINST THE INSURED)

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