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Hartford Financial Services Group Inc. units are not obligated to reimburse the city of Phoenix for more than $1.4 million in defense costs under terms of its policies in an asbestos case, said a federal appeals court Wednesday, in affirming a lower court ruling.
Hartford units First State Insurance Co., Twin City Fire Insurance Co., New England Reinsurance Corp. and Nutmeg Insurance Co. were sued by Phoenix for breach of contract and bad faith in connection with an underlying personal injury and wrongful death suit filed by Carlos Tarazon and his wife, according to Wednesday’s ruling by the 9th U.S. Circuit Court of Appeals in San Francisco in City of Phoenix v. First State Insurance Co. et al.
Mr. Tarazon was exposed to asbestos through his work as an underground pipe layer in Phoenix from 1968 to 1993 and died from mesothelioma in 2014, according to the ruling.
The city settled his family’s’ claims against it for $500,000 but incurred legal expenses of more than $1.4 million, according to the ruling.
The city filed suit against the insurers in U.S. District Court in Phoenix seeking coverage for its defense costs. A three-judge appeals court panel unanimously affirmed the lower court’s ruling that the city was not entitled to indemnification for these costs.
From July 1981 to July 1985 the city was covered by four successive excess liability policies issued by Hartford, each of which provided $500,000 in liability coverage in excess of a $500,000 self-insured retention, the ruling said. It also purchased three successive umbrella polices covering the same period.
The excess policies’ basic insuring agreement states Hartford “will indemnify the (city) for ultimate net loss in excess of the retained limit (of $500,000),” with ultimate net loss defined to exclude “all loss adjustment expenses,” the ruling said. “The parties agree that defense costs are ‘loss adjustment expenses.’”
“The plain langue of this provision is unambiguous,” said the ruling. “Hartford only has to indemnify the City if the City’s net loss (i.e. not including defense costs) exceeds $500,000,” it said. “The City settled its claim for $500l00 and is not entitled to indemnity,” said the ruling.
“As the City did not exhaust the underlying limit of the Excess Policies, it is not entitled to indemnity under the Umbrella Policies,” said the ruling also, in affirming the lower court’s ruling.
A federal court has certified a class action against a Hartford Financial Services Group Inc. unit over its method of calculating payment for a fire loss.