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Note: When residents of a Colorado multi-unit residential complex sued Trammell Crow Residential Company (Insured), American Protection Insurance Company (Insurer) did not assist in its defense. After settling the action, Insured sued Insurer for breach of its duty to defend. The U.S. District Court for the Northern District of Texas, Boyle, J., granted Insurer's motions for summary judgment.

One issue before the court was Insurer's drawing of USD 31,516.00 on a standby LC provided to cover deductible expenses in order to pay litigation expenses.

The Judge ruled that the insurance policy entitled Insurer/Beneficiary to draw on the LC for litigation costs up to the deductible amount. The Judge found that the language of the policy defined claim expenses in such a way that included litigation expenses incurred by either Insurer or Insured when litigating claims related to the Insurer. The Judge also stated that the court had previously determined that Insured had not yet reached the deductible amount and that Insured was therefore collaterally estopped from raising the issue again. Therefore, because the policy defined claim expenses to include litigation expenses, and Insured had not yet reached the deductible, the Judge ruled that the policy entitled Insurer to draw upon the LC for litigation costs.

[JEB/so]

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