U.S. Underwriters v. City Club Hotel

The Court of Appeals recently accepted these certified questions from the Second Circuit of Court of Appeals:

1. Whether, in a case in which an insurance company has brought a declaratory judgment action to determine that it does not have obligations under the policy but has defended in the underlying suit, a defendant prevailing in the declaratory judgment action should be awarded attorneys’ fees expended in defending against that action? 2. Whether, in the special circumstances of this case, attorneys’ fees should be awarded to one or more of the defendants?

These questions reexamine the Court of Appeals’ holding in Mighty Midgets, Inc. v Centennial Ins. Co., 47 NY2d 12 (1979) (great case name, great decision). Mighty Midgets held that a party which institutes a declaratory judgment action to determine its rights may not recover attorneys’ fees for commencing that action and settling the insured’s rights.