Doyle v. Allstate Insurance
136 N.E.2d 484, 154 N.Y.S.2d 10, 1 N.Y.2d 439 (1956)
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Rule of Law:
An insurer's duty to defend is triggered when a lawsuit against its insured contains allegations that could potentially lead to a covered liability for damages, even if the primary relief sought in the suit is equitable, such as an injunction.
Facts:
- In June 1953, an insurance company issued a 'Comprehensive Personal Liability Policy' to the plaintiff.
- The policy obligated the insurer to pay on behalf of the insured all sums he becomes legally obligated to pay as damages for bodily injury or property destruction, and to defend any suit seeking such damages.
- The plaintiff operated a kennel for dogs on his property, which was covered by the policy.
- In December 1953, the plaintiff's neighbors, Ernest Markle and his wife, sued the plaintiff.
- The Markles' complaint alleged the kennel was a nuisance due to continual barking, which impaired their property's value and injured their health.
- The Markles' suit sought a permanent injunction to stop the kennel's operation and also asked for 'such other and further relief as to the court may seem just and equitable.'
Procedural Posture:
- Plaintiff notified the defendant insurer of the Markle lawsuit and requested a defense pursuant to his policy.
- The defendant refused to defend the action.
- Plaintiff retained his own counsel and successfully defended himself in the Markle action.
- Plaintiff then sued the defendant insurer in the trial court (Special Term) to recover his legal fees.
- Both parties moved for summary judgment.
- The Special Term denied the plaintiff's motion and granted summary judgment to the defendant insurer, dismissing the complaint.
- Plaintiff (appellant) appealed to the intermediate appellate court (Appellate Division).
- The Appellate Division unanimously affirmed the trial court's judgment in favor of the defendant (appellee).
- The state's highest court granted the plaintiff (appellant) leave to appeal.
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Issue:
Does an insurer have a duty to defend its insured in a lawsuit that primarily seeks equitable relief (an injunction), but where the complaint's allegations and general prayer for relief create a possibility that money damages could be awarded?
Opinions:
Majority - Conway, Ch. J.
Yes. An insurer has a duty to defend its insured in a lawsuit primarily seeking equitable relief if there is any possibility that money damages, which would be covered under the policy, could be awarded. The court reasoned that even in an equity action, a court has the power to award money damages in addition to, or in lieu of, the requested equitable relief. The Markles' complaint alleged impairment of property value and injury to health, which could form the basis for a damages award, and their general prayer for 'other and further relief' was broad enough to encompass such an award. Because the policy did not distinguish between damages awarded by a court of law versus a court of equity, the potential for a covered damages award was sufficient to trigger the insurer's duty to defend, regardless of the fact that the suit primarily sought an injunction or was ultimately unsuccessful.
Analysis:
This decision significantly clarifies the breadth of an insurer's duty to defend, establishing that it is broader than the duty to indemnify. It mandates that insurers must look beyond the formal remedy requested in a complaint's prayer for relief and instead analyze the underlying factual allegations to determine if any potential for a covered liability exists. This precedent forces a more comprehensive review of incoming lawsuits by insurers, as the mere possibility of a damages award in an equity suit is sufficient to trigger the costly duty to provide a defense. It reinforces the principle that any doubt about the duty to defend should be resolved in favor of the insured.
