New York, NY (Sept. 12, 2007) - In a ruling upholding the broad duty of an insurance company to protect its policyholders against liability claims,  Justice Helen Freedman of the New York Supreme Court ruled on August 10, 2007 that National Union Fire Insurance Company, a division of AIG, must advance defense costs to the Trustees of Princeton University.

Reiterating Justice Freedman's prior, April 10, 2007 Order in  The Trustees of Princeton University vs. National Union Fire Insurance Company of Pittsburgh, PA and American International Group, Inc. [Index No. 650202/06] the August 10, 2007 decision states:Princeton correctly points out that National Union was obligated to pay the Defense Expenses as Princeton incurred them, and is not entitled to defer payment until after allocation. An insurer who covers an insured's defense expenses is entitled to distinguish between covered and non-covered claims. However, an insurer must pay all the defense costs as the insured incurs them, unless they can be allocated as incurred. Although the Policy does not cover some of the claims asserted against Princeton in the underlying action, both the covered and uncovered claims were defended in a single action, and defendants have not made any showing that an apportionment is feasible. Moreover, the Defense Expenses far exceeded the Coverage Limit, and apportionment is unlikely to affect National Union's ultimate financial obligation. Accordingly, National Union is directed to pay Princeton the Coverage Limit forthwith without prejudicing its right to seek recoupment.Partial summary judgment was granted on the first cause of action in the amount of $9,606,481.93.  Post-judgment interest after the date of entry together with costs and disbursements to be taxed by the Clerk upon submission of an appropriate bill of costs, has also been ordered. The Court further held that while Princeton may be entitled to prejudgment interest, that interest cannot be calculated at this judgment and "a determination is deferred on that amount."  On September 10, 2007 a judgment in the amount of $9,607,021.93 was entered against National Union.The underlying decision, granting partial summary judgment to the Princeton trustees, denied the two core coverage defenses advanced by National Union, Princeton's D&O insurance carrier. On the first issue Judge Freeman ruled that the so-called "insured versus insured" exclusion applies to only two of twelve claims in the underlying action; that "the insurer must advance costs for both covered and non-covered claims where defense costs may not be practically apportioned" (p. 10); and that since Princeton's defense costs have already exceeded policy limits, "apportionment is unlikely to affect the insurer's ultimate financial obligation" (p. 11).Secondly, Judge Freedman rejected National Union's attempt to cap its coverage of defense costs at $5 million on the grounds that a policy endorsement limited coverage for defense against claims seeking equitable or injunctive relief (as opposed to those seeking monetary damages) to $5 million. Judge Freedman noted that "the equitable relief sublimit does not apply to the claims seeking money damages or return of funds, and that "Plaintiffs [in the underlying action] themselves added claims for substantial monetary relief" (p. 11).  Judge Freedman concluded, "Neither the 'insured versus insured' exclusion nor the equitable relief sublimit apply to the claims seeking to recover more than $100 million from Princeton" (p. 12).Robert M. Horkovich and William G. Passannante of Anderson Kill & Olick, P.C. represent Princeton.About Anderson Kill & Olick, P.C.Anderson Kill & Olick, P.C. was founded in 1969 on the principles of integrity, excellence in the practice of law, and straightforward solutions to complex legal issues.  Anderson Kill practices in the areas of Bankruptcy & Restructuring, Corporate & Commercial Litigation, Corporate & Securities, Employment & Labor Law, insurance Recovery, Intellectual Property, Product Liability, Real Estate, Tax, and Trusts & Estates.  The firm's senior attorneys maintain national and international practices from offices in New York, Chicago, Greenwich, Newark, Philadelphia and Washington, D.C.For further information, please contact:William G. Passannantewpassannante@andersonkill.com(212) 278-1328