A Pennsylvania Federal District Court applying Pennsylvania law found Travelers Casualty Co. was liable for $15.3 million in pre-judgment interest for its failure to indemnify its policyholder for settlements associated with 31,000 asbestos claims.

The interest was in addition to $21 million in actual damages that were previously agreed upon by the parties in a joint stipulation. Travelers originally denied General Refractories Co.’s (“GRC”) claims, but in a previous ruling, the court held that the asbestos exclusions in the Travelers policies were ambiguous as to whether they applied to asbestos-containing products versus the mineral asbestos. Therefore, the court held that the exclusion must be construed in favor of coverage for the policyholder.

As to interest, GRC asserted it was entitled to 6% statutory interest pursuant to Pennsylvania law, whereas Travelers argued that no interest was owed. Travelers argued that it owed no interest because GRC had agreed to pay each settled claimant 4% interest and that this interest was included in the stipulated $21 million in damages. Travelers additionally argued that GRC had no right to recover any interest in excess of the policies’ limits of $21 million. Alternatively, Travelers argued that the pre-judgment interest should be calculated at 4% because using 6% would give GRC a windfall. The district court disagreed, finding that there was a fundamental difference between Travelers’ obligation to indemnify GRC for losses and interest related thereto under the terms of the policy and Travelers’ obligation to pay GRC interest on money that it withheld from GRC in breach of the insurance contracts. The court also found that because Travelers was not a party to the policyholder’s agreements with underlying claimants to pay 4%, it was not entitled to their benefits. The district court additionally rejected Travelers’ assertion that the policyholder was being provided “double recovery” by receiving reimbursement of the 4% and the 6% pre-judgment interest, finding that essentially all of the funds recovered by GRC will eventually find their way to the underlying claimants. Thus, the court found that Pennsylvania’s statutory entitlement to 6% pre-judgment interest applied. Gen. Refractories Co. v. First State Ins.  Co., No 2:04-cv-03509, (E.D. Pa. Sept. 9, 2015)