A Hartford Financial Services Group Inc. unit is not obliged to defend or indemnify a company officer under its directors and officers liability insurance policy based on the coverage’s “insured vs. insured” exclusion, a federal appeals court said Monday, in affirming a lower court ruling.

Joshua Donald Tarter, who held management responsibilities in a corporation founded and run by his family, Dunnville, Kentucky-based Tarter Cos., together with two others formed a Chinese shell company, Hong Kong QMC Industry Co. Ltd., according to Monday’s ruling by the 6th U.S. Circuit Court of Appeals in Cincinnati in Joshua Donald Tarter v. Navigators Insurance Co.

A lawsuit filed by plaintiffs including other family members charged the three in a lawsuit with selling Tarter Cos. supplies from China at grossly inflated prices and with embezzling Tarter’s trade secrets, according to the ruling.

Mr. Tarter called upon Tarter’s D&O insurer, Hartford unit Navigators, to defend and indemnify him, which the insurer denied based on a policy provision that excludes coverage for any civil proceedings filed against any insured under its policy.

Mr. Tarter filed suit against Navigators in U.S. District Court in Lexington, Kentucky, which ruled in the insurer’s favor, holding the exclusion was inapplicable because one of the plaintiffs in the underlying litigation against Mr. Tarter was an insured under its policy.

The ruling was upheld by a unanimous three-judge appeals court panel. Mr. Tarter argued the insured vs. insured exclusion was inapplicable by “latching on to the fact that one of the named plaintiffs” in the underlying suit “was not an insured party.”

The panel agreed with the lower court, however, that the exclusion was applicable. “In issuing its opinion in this litigation, the district court diligently considered relevant caselaw and ably articulated the reasons why judgment should be entered in favor of Navigators,” it said, in affirming the lower court.

Attorneys in the case did not respond to requests for comment.