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Scottsdale must pay $3 million to pension fund: Court

Scottsdale must pay $3 million to pension fund: Court

A federal appeals court has affirmed a lower court ruling that Scottsdale Insurance Co. must pay more than $3 million to a plumbers pension fund under a business and management indemnity policy issued to a real estate fund.

The East Providence, Rhode Island-based Plumbers and Pipefitters Local 51 invested $5 million in the Wellesley Hills, Massachusetts-based Wellesley Advisor Reality Fund I, according to Wednesday’s ruling by the 1st U.S. Circuit Court of Appeals in Boston in Scottsdale Insurance Co. v. Timothy L. Byrne et al.

Scottsdale had issued a policy with a $3 million coverage limit to the investment vehicle, according to the ruling. In 2014, the union filed suit in U.S. District Court in Boston against the fund, charging the fund had “mismanaged and squandered” its investment, according to the ruling.

After a default judgment was entered against the fund, the fund assigned its rights to its insurance coverage to the union.

Scottsdale filed suit in the District Court seeking a declaratory judgment that the claims were not covered under policy exclusions. The District Court held that claims in the case were not “clearly excluded” from coverage under the policy, and at a minimum, the insurer had a duty to defend the fund against those claims, according to the ruling.

It subsequently entered a $3,038,081.10 judgment against Scottsdale, which reflected the $3 million policy limit and post-judgment interest.

On appeal, Scottsdale argued it did not breach its duty to defend under Massachusetts law, and that, even if it did, damages should be limited to defense costs.

A three-judge appeals court panel unanimously upheld the lower court’s ruling, holding “… we see no basis from which to relieve Scottsdale of its obligation to pay the policy limit.”

In December, a federal district court refused to declare Scottsdale had no duty to defend or indemnify a hunting club and its owner in connection with a shooting incident based on the amount being sought by a plaintiff in the case, stating it has no jurisdiction in the litigation. 


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