Photo: Jason Doiy

The U.S. Court of Appeals for the Second Circuit on Tuesday reversed a $64 million jury verdict in a long-running reinsurance dispute over asbestos liability, ruling that Fireman's Fund Insurance Co. was not obligated to cover costs that were allegedly in excess of its policies.

The decision, from a three-judge panel of the Manhattan-based appeals court, wiped out a 2017 verdict by a federal jury in the Northern District of New York, which awarded Utica Mutual Insurance Co. $35 million in breach-of-contract damages, plus more than $29 million in prejudgment interest, stemming from seven reinsurance contracts that Fireman's Fund issued to Utica Mutual between 1966 and 1972.

Utica Mutual had sought repayment for a 2007 settlement with Goulds Pumps Inc. over primary and umbrella policies and its reinsurance with Fireman's Fund. A federal jury, following a 12-day trial, ruled in favor of Utica on it's breach-of-contract claim, finding that Fireman's Fund had shirked its duty to cover Utica's loses when it failed to pay up in 2009.

Fireman's Fund and its Chaffetz Lindsey attorneys, however, argued on appeal that the umbrella policies applied in excess of the limits explicitly stated on the accompanying schedules. Utica, meanwhile, countered that it had a "reasonable basis" to collect on bodily injury losses that did not exceed the limits because language within the policies required only that certain other limits be scheduled.

In its ruling, the Second Circuit panel said it was "not persuaded" by Utica's reading of the policies, finding that under Utica's approach, the schedules would "serve very little purpose" because "one could read into the schedules limits not otherwise stated, even if doing so would directly contradict language in the umbrella policies."

"Given the unambiguous language in the umbrella policies, Fireman's Fund had no obligation to pay for bodily injury claims that did not exceed bodily injury limits identified in the schedules," Judge Barrington D. Parker of the U.S. Court of Appeals for the Second Circuit wrote on behalf on the panel.

Parker was joined in the ruling by Judges Rosemary Pooler and Reena Raggi.

Peter Chaffetz, a Chaffetz Lindsey founding partner who represented Fireman's Fund on appeal, said Tuesday that the case never should have gone to a jury and that he was "gratified by the Second Circuit's decision.

"This is an important ruling, first because it demonstrates the respect the Second Circuit gives to clear contract language," he said in an emailed statement. "Second, it reinforces the teachings of the Second Circuit and New York Court of Appeals that, even though reinsurance is something of a specialized field, courts should interpret reinsurance contracts as they do any other type of contract."

An attorney for Utica did not respond to an email Tuesday seeking comment on the ruling.

Utica was represented on appeal by William Sneed and Thomas Cunningham of Sidley Austin in Chicago. Fireman's Fund was represented by Chaffetz, Steven Schwartz, Erin Valentine and David Berman of Chaffetz Lindsey in Manhattan.

The case, before the Second Circuit, was captioned Utica Mutual Insurance v. Fireman's Fund Insurance.

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