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Member, Beacon International Group, Ltd.
PHILADELPHIA--Adelphia Communications Corp.'s directors and officers liability insurer must advance $1.5 million in defense costs to a group of former executives of the bankrupt cable television provider, regardless of recision proceedings brought by the insurer, a federal judge ruled.
Judge Michael M. Baylson of the U.S. District Court for the Eastern District of Pennsylvania said that the insurer, Associated Electric & Gas Insurance Services Ltd., must pay each of the five Adelphia executives $300,000 for defense costs under the terms of the policy.
The executives are all currently the subject of several civil suits, and two face criminal proceedings over fraud charges.
According to the ruling, the insurer's contention that it had unilaterally rescinded the policy based on allegedly fraudulent coverage applications does not absolve AEGIS from its obligation to pay the defense costs of John J. Rigas, the former chairman of Adelphia, and other former directors and officers of the company. The fraud case is pending, and the directors and officers must be presumed innocent until proven guilty, the court ruled.
Judge Baylson also rejected Hamilton, Bermuda-based AEGIS' argument that various exclusions in the policy permitted the insurer to withhold the defense costs. The judge ruled that the exclusions either did not apply or were ambiguous and, therefore, should be interpreted in favor of the policyholder.