The New York Appellate Court recently revisited one of its previous insurance coverage decisions, holding that an insurer that failed to notify its insureds of their right to select independent counsel of their choosing, paid for by the insurer, in a case involving coverage conflicts, was in violation of New York’s deceptive practices statute, warranting attorney’s fees.

In its first decision, Elacqua v. Physicians’ Reciprocal Insurers, the Appellate Court held that, because the coverage dispute involved both covered and non-covered claims, the plaintiff insureds had a right to a defense of all the underlying claims against them by independent counsel of their choosing, at the insurer’s expense, and that the insurer had an affirmative obligation to inform the insureds of those rights.

The case was thereafter remanded, and the insureds added a claim for violation of New York’s deceptive acts and practices statute, N.Y. Gen. Bus. Law § 349, which allows a prevailing plaintiff to recover attorneys fees. The trial court entered judgment in favor of the insurer on the statutory claim, and the insureds appealed.

In the second decision, Elacqua v. Physicians’ Reciprocal Insurers, the Appellate Court reversed, finding that the insurer’s practice was “consumer-oriented” within the meaning of the statute, and that actual, if not necessarily pecuniary, harm was caused by the insurer’s practice of failing to notify insureds of the right to paid independent counsel of their choosing in cases of coverage conflicts. The case was remitted for a trial on damages.