In a recent opinion addressing cross‑motions for summary judgment, a Pennsylvania state court set forth a clear holding that policyholders may recover post-judgment interest under excess liability insurance policies only when the policy language expressly says so—and only when the stated conditions are met. The decision underscores the importance for policyholders to thoroughly examine the defense and payment provisions outlined in their insurance policies.

The coverage dispute in Federal Express Corp. v. National Union Fire Insurance Co. of Pittsburgh, Pa., et al., arose from an incident that occurred in 2011 when an automobile accident involving a FedEx driver resulted in a $165 million verdict against FedEx. The judgment was later affirmed on appeal. FedEx sued its excess insurers for their refusal to pay the more than $200 million in post-judgment interest that accrued during FedEx’s appeal.

The court reviewed the National Union policy and determined that the policy provisions regarding the payment of interest are unambiguous and must be enforced as written. National Union’s excess policy, whose terms were largely followed by the Great American and Liberty Mutual excess policies, identified two specific scenarios in which interest obligations could arise beyond limits:

1. When the insurer assumes the defense of a suit against the insured, triggering supplementary payment obligations; and
2. When the insured does not appeal a judgment in excess of the retained limits, but the insurer elects to do so, in which case the insurer may become liable for court costs, expenses, and interest associated with that appeal.

The court found that, because neither scenario occurred here, neither condition was satisfied. FedEx appealed the underlying judgment, not the insurers, and none of the insurers ever assumed the defense. The court agreed with the insurers that their payment obligations as they relate to the post-judgment interest under the policies’ “Defense Provisions” and “Appeals” clause were not triggered.

FedEx argued that the insuring agreement, which obligated the insurer to pay sums the insured became legally obligated to pay as damages, should encompass interest. The court rejected that argument, concluding under the policy language at issue in that case that the insuring agreement was expressly subject to the policy’s definition of “Loss.” “Loss” was limited to amounts paid as judgments or settlements and, only in narrow circumstances, defense expenses if specifically designated in the Retained Limits. Because the applicable Retained Limits did not include defense expenses, interest could not be recharacterized as covered damages. In reaching its conclusions, the court emphasized that the “‘polestar’ in interpreting an insurance policy ‘is the language of the insurance policy itself.’” The court’s conclusions on how the excess insurance policy language at issue should apply underscores the importance of reviewing policy provisions at the time of purchase to ensure that pre- and post-judgment interest—which can be considerable—is covered. 

The court also addressed FedEx’s argument that National Union breached the policy by failing to pay promptly, thereby allowing additional interest to accrue. The policy required payment “promptly” once the amount of loss was determined. Payment within seven days, the court held, satisfied that obligation as a matter of law. Notably, the court observed that the outcome might have differed had the policy required payment “immediately.”

In an interesting turn, however, despite holding that National Union did not breach the policy, the court declined to dismiss FedEx’s promissory estoppel and statutory bad faith claims against National Union. The court reasoned that those claims focused on alleged deficiencies in National Union’s handling of the claims, including communications and conduct during settlement discussions and the appellate process. The court’s holding reaffirmed that statutory bad faith under 42 Pa. C.S.A. § 8371 is not limited to coverage denials. Because the record at issue reflected disputed issues of material fact regarding National Union’s conduct, both claims were left for resolution at trial, serving as a good reminder that there are rare instances where a bad faith case survives despite losing the coverage argument.