The Central District of California recently rejected an attempt by Federal Insurance Company, a Chubb company, to avoid its duty to defend its insureds in an $8.5 million lawsuit with a former employee.
TriPacific Capital Advisors, LLC acquired Directors and Officers (D&O) coverage from Federal and Employment Practices Liability (EPL) coverage from Travelers Insurance Company. While those policies were in effect, a former TriPacific employee sued the company and its president, Geoffrey Fearns, for a variety of employment-related causes of action concerning his termination and compensation. TriPacific and Fearns tendered notice to both insurers, seeking indemnification and defense costs. Both policies contained a duty to defend. While Travelers agreed to defend under a reservation of rights, Federal denied coverage based on multiple grounds, including its policy’s “other insurance” provision, contending that the provision rendered its policy “excess” to the Travelers policy. Federal also argued that TriPacific had not satisfied the D&O policy’s $150,000 self-insured retention and, thus, coverage had not been implicated, in any event. TriPacific maintained that neither the SIR nor the “other insurance” provision pertained to Federal’s duty to defend and brought suit to enforce the duty to defend.