Asbestos:  Pennsylvania Federal Court Finds Excess Insurer Has Duty To Defend In Addition To Limits, Even Where Its Policy States Its Duty To Defend Is Not In Addition To Limits

A Pennsylvania federal court, applying Pennsylvania law, refused to reconsider its rulings in a coverage lawsuit holding that Old Republic Insurance Company’s (“Old Republic”) duty to defend Ampco-Pittsburgh Corp. (“Ampco-Pittsburgh”) in underlying asbestos lawsuits is in addition to limits.

In its September 2013 decision, the court held that Old Republic and certain other excess liability insurers had a duty to defend in addition to limits.   In doing so, the court held the Old Republic policy incorporated the terms of an underlying Highlands Insurance Company (“Highlands”) policy, wherein Highlands agreed to defend any suit against the insured for personal injury in the event that “no other insurer has the right and duty to do so.”  The Highlands policy also stated that amounts incurred defending the insured were in addition to the limits of liability.

In its motion to reargue, Old Republic argued that the Highlands policy’s supplemental defense was not incorporated into the Old Republic policy, because the Old Republic policy specifically provided that defense costs were not in addition to limits.  The court rejected this argument, finding that an endorsement to the Old Republic policy controlled.  The endorsement stated that the terms of the Highland policy controlled over any conflicting terms in other policies.  The court held that the reference to conflicting terms in other policies included the Old Republic policy itself.

The court also held that accepting Old Republic’s argument would render the Old Republic policy ambiguous as to the nature of the defense obligation and must be construed in favor of coverage.  Air & Liquid Systems Corp. v. Allianz Underwriters Ins. Co., No. 2:11-cv-00247 (W.D. Penn. August 15, 2014).