Tuesday, November 24, 2009

In DJ Action Plaintiff Cannot Recover Costs of Defendant's Appeal. Appeal does not Cast Plaintiff in "Defensive Posture"

Thomas Johnson, Inc. v. State Ins. Fund
--- N.Y.S.2d ----, 2009 WL 3790596
N.Y.A.D. 4 Dept.,2009.

This case involved whether the trial court erred in granting the plaintiff judgment declaring that defendant was obligated to pay all costs and fees incurred by plaintiff in the defense of an appeal taken by defendant in connection with a declaratory judgment action. The State Fund argued that the trial court erred in ordering reimbursement of plaintiff’s costs and attorneys fees given that it was plaintiff who commenced the declaratory judgment action citing the well settled rule that “an insured may not be awarded attorney fees incurred in the prosecution of a declaratory [judgment] action against the insurer to determine coverage” ( Penn Aluminum v. Aetna Cas. & Sur. Co., 61 A.D.2d 1119, 1120, 402 N.Y.S.2d 877), unless the insured was “cast in a defensive posture by the legal steps an insurer takes in an effort to free itself from its policy obligations” (Mighty Midgets v. Centennial Ins. Co., 47 N.Y.2d 12, 21, 416 N.Y.S.2d 559, 389 N.E.2d 1080). The Fourth Department was not swayed by appellant’s argument that it was cast in a defensive posture by defendant’s appeal (see generally Crouse W. Holding Corp. v. Sphere Drake Ins. Co., 248 A.D.2d 932, 670 N.Y.S.2d 640, affd. 92 N.Y.2d 1017, 684 N.Y.S.2d 480, 707 N.E.2d 435).