Lionel Freedman, Inc. v. Glens Falls Ins. Co., 27 N.Y.2d 364 (1971)
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An insurer’s duty to defend is broader than its duty to indemnify, but it is not unlimited; it is determined by a reasonable interpretation of the insurance policy and the allegations in the underlying complaint, and it does not extend to groundless or shotgun allegations included solely to trigger coverage.
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Summary
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Lionel Freedman, Inc. sued Glens Falls Insurance Co. seeking a declaration that Glens Falls had a duty to defend it in a negligence action. The underlying negligence claim arose from a fatal accident involving an elevator on Freedman’s premises. Glens Falls refused to defend, arguing the policy didn’t cover elevator-related incidents unless a specific elevator coverage was purchased, which Freedman didn’t do. The New York Court of Appeals held that Glens Falls did not have a duty to defend because the primary allegations in the complaint related to elevator misuse, which was excluded from the policy’s coverage. The court refused to allow a patently groundless allegation regarding the first-floor hallway to create a duty to defend.
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Facts
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Lionel Freedman, Inc. (Freedman) leased part of a building. Freedman held a Manufacturers’ and Contractors’ Liability Policy with Glens Falls Insurance Co. (Glens Falls), covering premises-operations but excluding elevators unless separately covered. An accident occurred when someone fell into an elevator shaft on the premises. A negligence suit was filed against Freedman, alleging negligent operation of the elevator and negligent maintenance of the first-floor hallway.
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Procedural History
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Freedman demanded that Glens Falls defend the negligence action. Glens Falls refused, asserting the complaint’s allegations fell outside the policy’s coverage. Freedman then filed a declaratory judgment action. The Supreme Court determined that the insurer was obligated to defend and granted partial summary judgment. The Appellate Division affirmed. The Court of Appeals reversed, finding no duty to defend and directing summary judgment for Glens Falls.
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Issue(s)
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Whether Glens Falls Insurance Co. had a duty to defend Lionel Freedman, Inc. in the underlying negligence action based on the allegations in the complaint and the terms of the insurance policy.
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Holding
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No, because the primary allegations in the complaint pertained to the negligent operation of the elevator, which was excluded from coverage under the policy unless a separate elevator coverage was purchased, and the single allegation of negligence regarding the first-floor hallway was a