Dryden Mutual found a workers'-comp exclusion, disclaimed, and walked away without ever testing the question in court. A New York appellate panel ruled the walk itself forfeited any right to contest the $2.84 million judgment that followed.
The number was $2,841,782, and Dryden Mutual Insurance Company never argued against a dollar of it. On June 5, the Appellate Division, Fourth Department in New York told the carrier why. It had chosen to walk away from a defense without ever asking a court whether it could. That choice cost it the right to be heard on the damages at all.
The underlying fight started with an injured worker and a contractor named Cory Lisinski, who did business as CNL Construction and Maintenance. When the claim landed on Dryden Mutual's desk, the carrier read its policy, found a workers'-compensation exclusion, and disclaimed. It sent its letter, declined to defend, and treated the matter as closed.
What Dryden Mutual did not do is the move that mattered. It never filed a declaratory-judgment action to test the disclaimer before a judge. It assumed the exclusion was good and acted as if the question were settled. It was not settled. It was only unasked.
With no defense behind him, Lisinski was exposed. A default judgment followed, and the number attached to it was $2,841,782. The judgment then traveled, as these judgments do, through an assignment to Louis Shattuck, who stepped into the claimant's shoes and came for the carrier that had refused to show up.
By the time Dryden Mutual wanted to contest the size of the award, the court had a one-word answer. No. An insurer that disclaims and refuses to defend without first seeking a declaratory judgment, the Fourth Department held, forfeits the right to contest both liability and damages. The carrier had spent its objections before it ever made them.
The doctrine here is older than the case, and that is what makes the result so unforgiving. New York has long required an insurer that wants out of a defense to litigate its way out. The clean path is the declaratory-judgment action, where the carrier puts the exclusion in front of a judge and asks whether the duty to defend applies. Skip that step, gamble on being right, and the coverage question collapses into a single narrow inquiry. A carrier in Dryden Mutual's position is left to argue only one thing, whether the disclaimer itself was valid. Everything downstream of that, the liability finding and the dollar figure, is closed.
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Read that against what Dryden Mutual was hoping for. The playbook it ran is a familiar one. Disclaim now, save the defense cost, and if a judgment lands later, fight the number then. The damages, the theory goes, can always be argued down on the back end. The Fourth Department took that back end away. There is no later fight. There is only the disclaimer, and if the disclaimer fails, the carrier owns the judgment whole.
There is no later fight. There is only the disclaimer, and if the disclaimer fails, the carrier owns the judgment whole.
The exclusion may even have been a strong one. A workers'-compensation carve-out is the kind of provision carriers win on regularly. But the court's ruling does not turn on whether Dryden Mutual was right about coverage. It turns on the order of operations. A carrier that is confident in its exclusion has every reason to prove it in a declaratory action, where being right ends the case. A carrier that disclaims unilaterally is betting that no one will ever make it answer. When someone does, the strength of the exclusion is the only card left, and it has to carry the entire $2.84 million.
The bad-faith piece sharpens the edge. The court did not stop at the forfeiture. It also let claims of bad faith survive, the kind built on a gross disregard of the insured's interests. That keeps the door open to exposure beyond the policy limit, the extracontractual territory where a number stops being capped by the contract. A carrier that walks away cleanly and quietly can find that the walk itself becomes the evidence.
What lands hardest is how avoidable the whole thing was. Dryden Mutual did not lose because its lawyers misread a clause or missed a deadline. It lost because it treated a contestable coverage position as a decided one and never gave a court the chance to agree. The declaratory-judgment action is not an afterthought in New York. It is the price of contesting coverage at all, and the carrier declined to pay it.
The assignee walked away with a judgment the carrier never tested. Shattuck holds a number that Dryden Mutual cannot touch, built on a default the carrier created by staying home. In New York, the carrier that refuses to fight in the right forum does not get to fight in any forum. It only gets the bill.
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