Insurer Retained Equitable Defense to Rescission of Another Insurer's Policy Despite Insured's Default

In Colony Ins. Co. v. Danica Group, LLC, Colony commenced an action against Danica to rescind Colony's policy based upon material misrepresentations made by Danica during the application process.  Danica defaulted in appearing and Zurich Insurance, a defendant-intervenor, moved to renew Danica's motion to vacate the default.  The Supreme Court upheld the default and Zurich appealed.

On appeal, the First Department affirmed the default, but stated that Zurich nevertheless retained a "potential equitable defense against [Colony's] action to rescind the insurance policies based on [Danica's] misrepresentations, which defense can be raised, along with other equitable defenses against rescission, in the proceedings that are continuing before the motion court."