A waterfront development company has largely prevailed in a coverage dispute over defense costs with an insurer, according to a federal district court ruling.

Washington, D.C.-based Hoffman Madison Waterfront LLC had filed suit against Columbus, Ohio-based Rockhill Insurance Co., a unit of state Automobile Insurance Co., over an agreement related to payment of defense costs, according to Monday’s ruling by the U.S. District Court for the District of Columbia in Rockhill Insurance Co. v. Hoffman-Madison Waterfront Co.

Rockhill had issued a “lessor’s risk” commercial liability insurance policy insuring the Municipal Fish Market in Washington. The insurer filed suit in September 2018 seeking a declaration it does not owe a duty to defend Horizontal REIT Leaseholder LLC and a number of its affiliate identities, including HMW, in connection with a civil suit filed against the developer defendants by commercial tenants located in the southwest waterfront area in the District of Columbia, according to the ruling.

The plaintiffs in that litigation alleged the defendants’ major redevelopment project along the southwest waterfront disrupted their businesses and breached their lease agreements, according to the ruling.

Rockhill had agreed to defend HMW and WHRL subject to a reservation of rights, according to the ruling.

The court issued several rulings in its complex decision.  Among those in favor of the tenants, it held that a trespass count in the litigation filed against the defendants contains allegations that potentially arise from the “wrongful entry into, or invasion of the right of private occupancy” provision in the policy.

The court “finds that the insured defendants have met their burden of showing that the underlying complaint comes within the policy’s grant of coverage, and now Rockhill bears the burden of showing that an exclusion under the Policy applies,” says the decision.

The court did not rule on Rockhill’s contention it is entitled to reimbursement for at least 50% of all defense costs since affiliate Fish Market REIT, which is not considered an insured, was added as a party to the underlying litigation, and that the unit be defended going forward by separate counsel at its own cost.

The ruling said it “finds that Rockhill has not supplied the Court with evidence that would enable it to determine whether it is factually possible to allocate defense costs between the insured and non-insured defendants.

“And it certainly has not supplied evidence to justify its 50% figure,” said the ruling. It added it will deny this portion of its motion “without prejudice or reconsideration based on an additional submission.”

Attorneys in the case could not be reached for comment.

In July, a federal appeals court said a lower court interpreted Rockhill’s   professional liability insurance policy’s faulty workmanship exclusion too broadly, in overturning a District Court ruling in the insurer’s favor.