In general, in the United States, a prevailing party in a lawsuit is not entitled to recover their attorney’s fees unless permitted under a contract or statute. Under New York Insurance Law § 1213(d), a court may award attorney’s fees against an unauthorized out-of-state insurance company under certain circumstances, including if the insurer has failed to make payment according to an insurance policy issued or delivered in New York and the court determines that the failure to pay was unreasonable. However, the statute has a safe-harbor provision that exempts out-of-state insurers from liability for attorney’s fees for certain types of insurance policies, including “personal injury liability” policies, as defined by the statute.
In Liberty Ins. Corp v. Hudson Excess Ins. Co.,1 the Second Circuit interpreted this statutory provision in the context of an insurer vs. insurer coverage dispute. The case arose from an underlying personal injury lawsuit involving a construction site accident in Manhattan, New York. The property owner hired a general contractor to renovate a commercial building, and the general contractor in turn hired a subcontractor to perform certain work. An employee of the subcontractor was injured after he fell from scaffolding. Hudson Excess Insurance Company insured the subcontractor, and Liberty Insurance Corporation insured the owner.
The employee sued the owner and general contractor for personal injuries, and a third-party action was commenced against the subcontractor. In a separate insurance coverage lawsuit, Liberty sued Hudson, seeking a determination that Hudson owed a duty to indemnify the owner as an additional insured under the commercial general liability (CGL) policy issued by Hudson. The district court held after a bench trial that Hudson owed additional insured coverage to the owner because the subcontractor proximately caused the employee’s injuries. The district court further held that Liberty was entitled to attorney’s fees incurred in the coverage lawsuit under New York Insurance Law § 1213.
On appeal, the Second Circuit affirmed the award of coverage in favor of Liberty but reversed the award of attorney’s fees. The court held that Hudson was exempt from paying attorney’s fees by operation of the statutory safe-harbor provision because the Hudson CGL policy constituted “personal injury liability insurance” as defined by the statute. The court reasoned that although the district court’s interpretation of the statute was reasonable, the legislative history reflected that the statute was not intended to exclude the CGL insurer from the safe-harbor provision (and thus was exempt from an award of attorney’s fees).
The Second Circuit’s decision is notable because it involves a statutory provision allowing for attorney’s fees that had never been interpreted in detail by a New York court. The court’s holding clarifies the scope of § 1113(a)(13) (the safe-harbor provision) as being applicable to CGL policies, which are frequently the subject of coverage disputes.
If you have any questions regarding the content of this alert, please contact Michael Lang, associate, at mlang@barclaydamon.com; Tony Piazza or Mark Whitford, Insurance Coverage & Regulation Practice Area co-chairs, at apiazza@barclaydamon.com and mwhitford@barclaydamon.com; or another member of the firm’s Insurance Coverage & Regulation Practice Area.
1Liberty Ins. Corp. v. Hudson Excess Ins. Co., 2025 U.S. App. LEXIS 20550 (2d Cir., August 13, 2025).