ILLUSION HAIR DESIGNERS v. COMMERCIAL U. INS

When an insurer brings a declaratory judgment action to determine its duty to defend and indemnify which is unsuccessful, it must pay the insured for the defense of both the underlying action and the declaratory judgment action (Colon v Aetna Life Cas. Ins. Co., 66 N.Y.2d 6). Furthermore, since a judgment has yet to be entered in this action, defendant has not been prejudiced by any of the proceedings, and the order should therefore stand.

Concur — Rosenberger, J.P., Ellerin, Wallach, Smith and Rubin, JJ.