A long-standing dispute between two insurers over who should have covered defense costs for Moldex-Metric, Inc. has taken another turn, as the California Court of Appeal has ordered a new trial in Truck Insurance Exchange v. Federal Insurance Company.
In a decision filed May 12, 2025, the court reversed part of a lower court ruling and found that Truck Insurance Exchange should get another chance to prove that Federal Insurance Company—part of the Chubb group—fraudulently concealed key facts that led to a $4.86 million settlement in 2013.
The case centers on years of litigation stemming from over 30,000 lawsuits filed against Moldex by plaintiffs who alleged its respirators failed to protect them from inhaling hazardous dusts, including silica and asbestos. Initially, Moldex's primary insurers covered its defense. After those policy limits were exhausted in 2003, Moldex turned to its umbrella and excess insurers—Federal and First State Insurance Company—which began covering defense and indemnity costs.
In 2004, Moldex discovered it was also covered under a primary liability policy issued by Truck Insurance Exchange. Federal then sued Truck in 2007 for reimbursement, arguing Truck’s policy should have responded first. After a trial court ruled in Federal’s favor, Truck settled for $4.86 million in 2013 and dropped its appeal.
Years later, during related proceedings, Federal revealed it had not been obligated to defend Moldex at all under its umbrella policy. It had instead opted to associate in the defense “at its own expense,” as allowed under Section 4(a) of its policy—an important provision that states:
“The Company shall not be called upon to assume charge of the investigation, settlement or defense... but shall have the right... to be associated... If the Company avails itself of such right... [it] shall do so at its own expense.”
Truck argued that this disclosure—made years after the settlement—meant Federal had concealed a material fact. Had it known Federal's defense payments were voluntary, Truck claimed, it never would have reimbursed them.
A 2023 bench trial rejected Truck’s fraud claims. The trial court found that Federal’s statements fell under litigation privilege and only addressed the theory of misrepresentation. But the Court of Appeal ruled that the lower court failed to analyze a distinct and properly presented claim: fraudulent concealment.
The appellate panel found the omission significant, noting that there was no record of Federal ever disclosing its “business decision” to associate in the defense, and no contemporaneous documents to back that explanation. A Chubb executive testified that he could not identify any document from 2003 or 2004 reflecting that decision.
The court held that Truck’s concealment claim should be evaluated on its own merits and was not barred by litigation privilege. Because Truck may not have reasonably discovered the truth during earlier litigation, the matter now returns to the trial court for a focused retrial on the concealment issue.
For insurance professionals, the case offers a potent reminder of how policy language around defense obligations—particularly under umbrella coverage—can carry heavy consequences in multi-insurer disputes. It also underscores the importance of clear, timely disclosure when a carrier voluntarily steps in to defend.
As the case heads back to trial, the industry will be watching closely to see whether Truck can claw back the $4.86 million settlement—and how courts continue to interpret voluntary payments under umbrella policy clauses.
