Chubb On The Hook For Kozlowski Legal Fees

The decision, by State Supreme Court Justice Helen Freedman, found that under a directors & officers policy the company issued to Tyco, the underwriter is responsible for covering his and other company executives' defense fees.

Federal filed suit against Tyco and its officers after it rescinded the policy and returned the premium to Tyco.

Mr. Kozlowski and Mark H. Swartz, Tyco's former chief financial officer, are being tried in Manhattan state court on charges of securities fraud, conspiracy, grand larceny and falsifying business records.

Judge Freedman ruled that Federal, which sought severability of the policy because of the accused wrongdoing by Mr. Kozlowski, was still responsible for covering his legal costs until it can show a legal ruling that shows he violated the law.

If Federal can show a legal ruling, the judge said, the company would then be entitled to recover the legal fees, she said.

Judge Freedman did not rule on the amount of defense costs Federal would have to pay Mr. Kozlowski but said in her decision that if an agreement could not be reached, a "hearing may be necessary."

Besides the criminal case, which is expected to go to the jury shortly, there are also security fraud charges pending against Mr. Kozlowski. His legal fees are expected to run into the millions of dollars.

A spokesman for Chubb said the company could not comment at this time.