Texas Court Finds Legal Expenses Provision in Insurance Policy Ambiguous

Texas Court Finds Legal Expenses Provision in Insurance Policy Ambiguous

A Texas state court has denied a motion for partial summary judgment in an asbestos insurance recovery dispute to Fireman's Fund Insurance Company (FFIC), enabling ASARCO LLC to pursue a claim for recovery of millions of dollars in legal expenses stemming from asbestos claims.  ASARCO LLC, et al. v. Fireman's Fund Ins. Co., et al., No. 01-2680-D (105th Jud. Dist. Ct. Nueces County Tex., June 20, 2009).

FFIC's motion argued that the policy language "unambiguously" gave it sole discretion to decide if it wished to pay any legal expenses at all.  According to FFIC, legal expenses "incurred by the policyholder will be borne by FFIC only if they are incurred with FFIC's consent."  Judge J. Manuel Bañales of the 105th Judicial District Court of Nueces County, Texas, ruling from the bench, denied the motion.

The ruling preserves for trial the important issue of FFIC's obligation to pay ASARCO's legal expenses, enabling ASARCO to pursue its claim for recovery of legal expenses in excess of policy limits.  It may mean the recovery for ASARCO of millions of dollars of insurance coverage in addition to the $60 million combined limits of the insurance policies that FFIC sold to ASARCO.

The ruling follows a March 11, 2009 ruling from the same court granting partial summary judgment to ASARCO.  In that motion, ASARCO had taken the position that an "asbestosis" exclusion in FFIC's policies bars coverage only for asbestosis claims and does not bar coverage for claims involving mesothelioma, lung cancer, pleural plaques or any other asbestos-related disease.

Rhonda D. Orin, managing partner in the Washington, D.C. office of Anderson Kill & Olick and lead insurance counsel to ASARCO, said, "In March, the District Court ruled that the asbestosis exclusion is unambiguous.  Now the Court has indicated that the "payment of expenses" provision is ambiguous.  Both rulings reflect the fundamental principle that policy language should be enforced as written."

ASARCO, a copper company based in Tucson, Arizona, declared bankruptcy in 2005.  At issue in the coverage action is a determination of insurance coverage for past, present and future asbestos liabilities.
 
Please call or email if you would like to speak to Rhonda D. Orin, managing partner in the Washington, D.C. office of Anderson Kill & Olick and lead insurance counsel to ASARCO.