Mr. Bunim said insurers currently lose 65-70 percent of their cases, so that going to court was "worth taking the chance." Now, however, the playing field "has changed, it's leveled, and it's not worth taking the chance any more," he said.

Insurers that do take the chance and lose, he continued, "are going to have to reimburse the insured for costs of people like me who defend these insureds."

While the news is good for insurance buyers, it will affect insurers. "Insurers are going to have to think twice now as to whether or not they want to seek to disclaim coverage, because they are going to know that if they do and they are unsuccessful, they are going to have to reimburse the insured for attorney's fees," he said.

Mr. Bunim said in the future insurers will most likely be "a lot more hesitant and perhaps give the insureds that which they bought, which is coverage and defense. They'll have to be 100 percent sure, virtually, that they will prevail before running into court."

Mr. Bunim remarked that insurers previously had nothing to lose and would initiate declaratory judgment actions to disclaim coverage. "In many situations the insured couldn't afford to fight them, so they would walk away?and the insurance company would win, because they would get a default judgment," he said.

Now, it's a different story. "This changes the playing field, so to say," he noted, adding that with the new ruling insurers stand to lose millions annually, "unless they stop the practice and stop bringing actions to disavow coverage. It's going to change the way insurers do what they do."

New York had "never opined on that, though many other states had," Mr. Bunim said, adding, "In the lower courts?the state courts of New York?some had said they do get reimbursed, some had said no, and the lower federal courts had all said no they don't get reimbursed."

According to court documents, an injured construction worker brought a personal injury action against the insured in November 2000. Even though the insurer previously had identified its policyholder as "the insured," it disclaimed coverage with respect to the claims, based on the employee exclusion clause of the policy, but still provided a defense in the underlying action.

The insured, "who prevails in an action brought by an insurer seeking a declaratory judgment that it has no duty to defend or indemnify the insured, may recover attorneys' fees expended in defending against the declaratory judgment action regardless of whether the insurer provided a defense to the insured," according to the document.

"We answer that question to be affirmative," said Judge G.B. Smith.

The ruling is "the end of the line," Mr. Bunim said. "It doesn't go any further than this."