39 N.Y.2d 875 (1976)
An insurer’s duty to defend is broader than its duty to indemnify, requiring a defense if there’s any possible factual or legal basis for indemnification under the policy.
Summary
Spoor-Lasher Co., a general contractor, sought a declaratory judgment that its insurer, Aetna, was obligated to defend and indemnify it in a third-party action brought by the Poughkeepsie Urban Renewal Agency. The agency’s claim stemmed from damages during a modernization project. The Court of Appeals held that while a determination on indemnification was premature, Aetna had a duty to defend Spoor-Lasher because there was a possible basis for indemnification under the policy’s hold-harmless provision or other provisions. The court emphasized that the duty to defend is broader than the duty to indemnify, serving as a form of “litigation insurance.”
Facts
Roe and Kenney sued the Poughkeepsie Urban Renewal Agency for damages incurred during a downtown modernization project. The Agency then filed a third-party claim against Spoor-Lasher Co., the general contractor. Spoor-Lasher, in turn, initiated an action seeking a declaration that its insurer, Aetna Casualty and Surety Co., was obligated to defend it in the third-party action and to cover any potential judgment. The insurance policy included a hold-harmless provision mirroring one in the construction contract between Spoor-Lasher and the Agency.
Procedural History
Spoor-Lasher sought summary judgment declaring Aetna’s obligations. Aetna cross-moved for summary judgment, arguing it had no duty to defend or indemnify. The Appellate Division’s order was appealed to the Court of Appeals.
Issue(s)
Whether Aetna had a duty to defend Spoor-Lasher in the third-party action brought by the Poughkeepsie Urban Renewal Agency, and whether Aetna had a duty to indemnify Spoor-Lasher for any potential judgment in that action.
Holding
1. Yes, Aetna had a duty to defend Spoor-Lasher because there was a possible factual or legal basis upon which Aetna might eventually be obligated to indemnify Spoor-Lasher under a provision of the insurance policy.
2. No, a determination as to Aetna’s obligation to indemnify Spoor-Lasher was premature and must await the resolution of the underlying claim.
Court’s Reasoning
The court reasoned that the obligation to defend is broader than the obligation to indemnify. Even if Spoor-Lasher’s liability might not be based on the hold-harmless provision, there could be other policy provisions that trigger coverage. The court stated, “A declaration that there is no obligation to defend could now properly be made only if it could be concluded as a matter of law that there is no possible factual or legal basis on which Aetna might eventually be held to be obligated to indemnify Spoor-Lasher under any provision of the insurance policy—the duplicate hold-harmless provision or possibly some other provision.” The court found that the record did not allow for such a conclusion. The court noted the duty to defend presents an aspect of “litigation insurance”. (Cf. International Paper Co. v Continental Cas. Co., 35 NY2d 322.) The determination of the duty to indemnify was premature because the basis for Spoor-Lasher’s liability to the Urban Renewal Agency was not yet determined. The court remitted the matter to the Supreme Court for entry of a judgment consistent with its memorandum, compelling Aetna to defend Spoor-Lasher while deferring the indemnification decision.