| Abstract: | ![]()
A Federal judge in Philadelphia ordered General Star Indemnity Company to pay litigation and settlement expenses incurred by the 12th Street Gym. General Star maintained that the insurance policy sold to the gym excluded all claims arising from sexually transmitted diseases. The gym had to defend itself in a civil lawsuit brought by a client who claimed he was ejected because he had AIDS. When General Star refused to pay to defend the suit or cover judgement, 12th Street Gym sought a declaratory judgement in U.S. District Court to resolve the dispute. After the patron died, his estate reached a settlement with the gym, and while General Star Indemnity agreed to pay defense costs for litigation and advanced the gym the cash for the settlement, it reserved the right to seek repayment once the declaratory judgment was made. In June 1995 a U.S. district judge found in favor of the gym but the 3rd U.S. Circuit Court of Appeals remanded the case for an evidentiary hearing. The judge then determined that the wording of the policy was ambiguous and ruled that the plausible interpretation of the policy would prevail, thereby ordering the insurance company to reimburse the gym for the cost of defending and settling this lawsuit. |
