Pre-Judgment Interest Above Policy Limits Recoverable Under Pennsylvania Law

General Refractories Company (GRC) has been named as a defendant in over 30,000 asbestos lawsuits since 1978. In 2002, GRC tendered to it excess carriers, including Travelers Casualty (Travelers) and Surety Company (formerly The Aetna Casualty and Surety Company) under a 1985-86 policy. Travelers denied coverage under an asbestos exclusion.  GRC proceeded to settle many of the underlying claims and pursued coverage from Travelers.  In March 2015, the United States District Court ruled that the asbestos exclusion was unenforceable, leaving only a calculation of damages under the policy.  The parties stipulated to damages in the amount of the combined policy limits of $21 million, but had a disagreement over whether GRC was entitled to prejudgment interest about the policy limits under Pennsylvania law.

The court held: “Because GRC made a demand for payment under the policies no later than June 10, 2002, and the settlement amounts owed by GRC to the underlying claimants were fully liquidated, certain, and readily ascertainable during 2003 to early 2004, GRC lost the use of that money and is legally entitled, as a matter of right, to prejudgment interest.”  The Court rejected the argument that prejudgment interest above the policy limits is not recoverable: “Travelers and GRC are in a direct contractual relationship, and the policies establish the extent of Travelers’ duty to indemnify GRC. As plainly stated in the insuring agreement, Travelers agreed to indemnify GRC against loss or damage ‘arising out of an accident or occurrence’ and ‘on account of any one accident or occurrence’– in this case, the claimants’ bodily injury resulting from exposure to one of GRC’s refractory products. The ‘sums’ insured are those that GRC is ‘legally obligated to pay’ to third persons – here, the claimants. In contrast, Travelers’ liability for prejudgment interest does not arise out of, is not ‘on account of,’ and does not in any meaningful sense result from the claimants’ bodily injury. Instead, Travelers’ liability for prejudgment interest is a consequence of its refusal to indemnify GRC against the underlying claims.”

Read the full decision here.