A federal appeals court upheld a lower court’s ruling in favor of an Axa XL unit in a dispute with a benefits administrator over an arbitration award.
San Mateo, Calif.-based FCE Benefit Administrators Inc. sued Axa XL unit Indian Harbor Insurance Co. in U.S. District Court in San Francisco for coverage under an errors and omissions policy the insurer had issued, according to Friday’s decision by the 9th U.S. Circuit Court of Appeals in San Francisco in FCE Benefit Administrators Inc. v Indian Harbor Insurance Co .
FCE argued that Indian Harbor violated its policy by refusing to reimburse it beyond a $3 million per claim limit for defense costs and damages stemming from a $5.7 million arbitration award against FCE, the ruling said.
Indian Harbor sought reimbursement, claiming that FCE owed it several hundred thousand dollars that the insurer had paid over and above the $3 million limit.
The district court ruled in favor of the insurer and was upheld by a three-judge appeals court.
“The trial court correctly held that the policy̵7;s $3 million per claim limit applies to the defense costs and damages arising from the underlying proceeding against FCE,” the ruling said.
The policy has two limits per liability: a $3 million limit for acts committed before June 6, 2017, and a $5 million limit for all claims based on acts committed after that date, it said. The policy also considers two or more claims arising from the related facts to be a single claim, it said.
The underlying arbitration was a single proceeding, brought by two related insurance companies, arising out of related claims, the ruling said.
And because this claim arose at least in part from errors and omissions committed by FCE prior to June 6, 2017, the $3 million limit per claim applies, it said.
The panel also said it agreed with the lower court that Indian Harbor is entitled to summary judgment on its counterclaim for reimbursement. “The California Supreme Court has recognized that an insurer’s payment of defense costs and damages in excess of what is required under a policy may entitle the insurer to reimbursement of the excess amount,” it said.
Attorneys in the case did not respond to requests for comment.