Orthopedics giant Stryker (NYSE:SYK) is on the hook for a $2 million payment to its insurance company after a court ruled this week that the insurer is entitled to recoup the deductible.

A court ruled this week that XL Insurance America is entitled to the $2 million self-insured retention payment included in its contract with Stryker after exhausting the $15 million limit in the device maker’s insurance policy.

The companies have been battling for years over millions in liability lawsuits over Stryker’s Duracon Uni-Knee implants, which the company bought from Pfizer (NYSE:PFE) for $1.9 billion in 1998. The terms of the acquisition provided that Stryker indemnify Pfizer from future liability lawsuits over Howmedica’s implants.

After problems surfaced with the Duracon Uni-Knee implants, Stryker paid $7.6 million to settle liability lawsuits and sued XLIA and another insurer to cover the costs. Pfizer also got tangled up in patient lawsuits and sued Stryker for its costs.

A court in that Stryker-Pfizer lawsuit awarded the pharmaceuticals giant a $17.7 million decision in April 2005, but XLIA struck a $26 million deal with Pfizer that allegedly left Stryker out in the cold. The settlement wiped out all of Stryker’s insurance coverage and left the company on its own to pay for direct claims.

Stryker took offense at the settlement, saying that XLIA arranged a deal designed to exhaust Stryker’s policy limits. The Pfizer settlement allowed XLIA to avoid involvement in other legal claims, which had by then accrued some significant penalty interest that the insurer would have been on the hook for.

Stryker attempted to filed further complaints against XLIA, but a judge shot down the device maker’s claims of bad faith and promissory estoppel. Another court later upheld that ruling and dismissed XLIA from the case, but denied the insurer’s bid for sanctions against Stryker.