N.Y. Comp. Codes R. & Regs. tit. 11, § 71.2 – General prohibition.

(a) No liability insurance policy, except as specified in this Part, shall be issued or renewed in this State containing a provision that:
1. (1) reduces the limits of liability stated in the policy by legal defense costs;
2. (2) permits legal defense costs to be applied against the deductible, if any; or
3. (3) otherwise limits the availability of coverage for legal defense costs.
(b) Notwithstanding any other provisions of this Part, no liability insurance policy shall be issued or renewed in this State if it contains the limitations specified in subdivision (a) of this section for:
1. (1) motor vehicle liability;
2. (2) medical malpractice liability, except hospital medical malpractice liability as otherwise permitted by this Part; or
3. (3) any liability risk or coverage subject to section 3425 of the Insurance Law.
(c) No liability insurance policy shall be issued or renewed in this State unless legal defense costs are incident to a claim of legal liability covered under the policy.