Court rules in Hartford’s favor in ‘insured v. insured’ D&O case

Citing federal court rulings in a related case, the federal appeals court in New York on Monday ruled in favor of a Hartford Financial Services Group Inc. unit in a lawsuit filed by a former company official in a directors & officers liability case revolving around an “insured v. insured” policy exclusion.

Thomas L. Gregory was a former high-level employee of Dunville, Kentucky-based Tarter-Gate Co. LLC, a large farm and ranch equipment manufacturer, according to Monday’s ruling by the 2nd U.S. Circuit Court of Appeals in Thomas L. Gregory v. Navigators Insurance Co.

Tarter had a D&O policy with Hartford unit Navigators that insured the company’s directors and employees, including Mr. Gregory, against any losses arising from lawsuits filed against them in their capacities at the company.

Mr. Gregory was sued in federal district court in Kentucky for allegedly using his position at Tarter to defraud multiple Tarter-family entities, and he asked Navigators to pay his defense costs.

Navigators refused, invoking a clause in the D&O policy that excludes coverage for suits involving at least one insured person against another insured.

Mr. Gregory sued the insurer in U.S. District Court in New York, arguing the insurer was required to cover the portions of his defense costs attributed to an uninsured plaintiff in the case, Dunnville based C-Ville Fabricating Inc.

The district court ruled against Mr. Gregory, and was affirmed by a three-judge appeals court panel.

The appeals court panel cited a ruling against Joshua Tarter, who was a plaintiff in comparable litigation involving Tarter, in which a federal district court in Kentucky held that Navigators was not liable for claims filed by insureds against other insureds under its coverage. The 6th U.S. Circuit Court of Appeals in Cincinnati affirmed the ruling in 2021.

“This Court generally defers to interpretations of state law by the federal court of an appeals covering that state,” the panel said.

“Although the Sixth Circuit’s Tarter opinion is not precedential, given the unique factors in this case – namely, that federal courts more familiar with the state law at issue have already analyzed the exact same Policy in the context of nearly identical claims – we defer to their conclusions,” it said, in affirming the lower court.

Attorneys in the case did not respond to requests for comment.