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Axa wins dispute with benefits administrator over E&O cover

Posted On: Feb. 7, 2023 1:17 PM CST


A federal appeals court affirmed a lower court ruling in favor of an Axa XL unit in a dispute with a benefits administrator over an arbitration award.

San Mateo, California-based FCE Benefit Administrators Inc. sued Axa XL unit Indian Harbor Insurance Co. in U.S. District Court in San Francisco over coverage under an errors and omissions policy the insurer had issued, according to Friday’s ruling by the 9th U.S. Circuit Court of Appeals in San Francisco in FCE Benefit Administrators Inc. v Indian Harbor Insurance Co.

FCE claimed that Indian Harbor breached its policy by refusing to reimburse it beyond a $3 million per claim limit on defense costs and damages arising out of a $5.7 million arbitration award entered against FCE, the ruling said.

Indian Harbor counterclaimed for restitution, claiming FCE owed it several hundred thousand dollars that the insurer had paid beyond the $3 million limit.

The district court ruled in the insurer’s favor and was affirmed by a three-judge appeals court panel.

“The district court correctly held that the policy’s $3 million per-claim limit applies to the defense expenses and damages arising from the underlying proceeding against FCE,” the ruling said.

The policy has two per claim limits on liability: a $3 million limit for acts committed prior to June 6, 2017, and a $5 million limit for any claim based on acts committed after that date, it said. The policy also considers two or more claims arising out of the related facts to be a single claim, it said.

The underlying arbitration was a single proceeding, brought by two related insurance companies, arising from related claims, the ruling said. 

And because this claim arose at least in part from errors and omissions committed by FCE before June 6, 2017, the $3 million per-claim limit applies, it said.

The panel said also agreed with the lower court that Indian Harbor is entitled to summary judgment on its restitution counterclaim. “The California Supreme Court has recognized that an insurer’s payment of defense costs and damages beyond what is required by an insurance policy may entitle the insurer to restitution on that excess amount,” it said.

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