Colon v. Aetna Life & Casualty Ins. Co., 66 N.Y.2d 6 (1985)
An insurer has a duty to defend a driver in a personal injury action when the complaint alleges the driver operated the insured vehicle with the owner’s permission, even if the insurer believes the driver lacked permission and the jury ultimately finds no permission.
Summary
Colon, while driving a van owned by Palmier Oil and insured by Aetna, caused an accident. The Morris estates sued both Palmier and Colon, alleging Colon had Palmier’s permission to drive. Aetna defended Palmier but denied coverage to Colon, arguing he lacked permission. Colon hired his own attorney. The jury found Colon lacked permission and awarded damages against him only. Colon then sued Aetna to recover his attorneys’ fees. The New York Court of Appeals held that Aetna had a duty to defend Colon because the complaint alleged permission, irrespective of Aetna’s investigation or the jury’s ultimate finding.
Facts
Palmier Oil Company owned a van insured by Aetna. Palmier entrusted the van to its employee, Clark, who was Colon’s half-brother. Colon used the van to deliver a bed, apparently with Clark’s knowledge. Colon was involved in an accident that resulted in fatalities. Aetna investigated and denied coverage to Colon, asserting he lacked Palmier’s permission. The Morris estates sued both Palmier and Colon, alleging Colon operated the van with Palmier’s knowledge and consent.
Procedural History
The Morris estates sued Palmier and Colon. Aetna defended Palmier, but not Colon. The jury found Colon liable but determined he lacked Palmier’s permission. The Appellate Division affirmed this decision. Colon then sued Aetna for attorneys’ fees. Special Term granted summary judgment to Colon on liability, which the Appellate Division affirmed. The Court of Appeals granted leave to appeal.
Issue(s)
Whether an insurer has a duty to defend a driver when the complaint in a personal injury action alleges the driver was operating the insured vehicle with the owner’s permission, even if the insurer reasonably believes the driver lacked permission and the jury ultimately finds that the driver did not have permission.
Holding
Yes, because the insurer’s duty to defend is triggered by the allegations in the complaint, not by the insurer’s independent investigation or the ultimate outcome of the litigation. So long as the complaint alleges facts that, if true, would bring the claim within the policy’s coverage, the insurer must defend.
Court’s Reasoning
The Court of Appeals emphasized the broad nature of the duty to defend, stating, “If, liberally construed, the claim is within the embrace of the policy, the insurer must come forward to defend its insured no matter how groundless, false or baseless the suit may be.” The court distinguished this case from Zappone v. Home Ins. Co., where the issue was the duty to indemnify, not the duty to defend. The court reasoned that effective defense of the driver is in the insured’s interest while the issue of permission remains unresolved. The court also noted the potential for abuse if insurers could deny a defense based solely on their own investigations, potentially leading to more refusals to defend in unclear circumstances. The court suggested that insurers seeking to avoid the duty to defend should obtain a prompt judicial determination on the issue of permission via summary judgment or declaratory judgment. Judge Titone dissented, arguing that the duty to defend only extends to insured parties and that requiring the insurer to defend a stranger to the contract is an overextension of the duty. The dissent also pointed out practical issues such as a conflict of interest. The dissent used hypotheticals like defending a thief, whose implied permission would be to the detriment of the insured. The majority responded, stating, “an attorney for an insured who did not consider such a motion on his own would not be, in the dissent’s phrase, ‘worth his salt’.”