Year in Review – Troutman Sanders Insurance Practice Boasts Significant Victories in 2012
2012 marked another successful year for Troutman Sanders’ nationally recognized insurance coverage practice. Our insurance coverage litigators helped our clients achieve success in federal and state courts across the country on a wide range of issues that will have lasting implications for insurers. Some of our significant victories from last year are summarized below. As we begin a new year, we look forward to assisting our clients in their most significant matters and to achieving success in both litigated and non-litigated cases. For additional information regarding our insurance practice, please visit www.troutman.com/insurance.
Appellate Decisions
Ryerson Inc. v. Federal Ins. Co. , 676 F.3d 610 (7th Cir. 2012)
Troutman Sanders represented Federal Insurance Company in a declaratory judgment action in which Ryerson Inc. sought to recoup approximately $10 million paid in settlement and attorneys’ fees incurred in connection with an underlying matter arising out of alleged misrepresentation and fraud. The claimant in the underlying matter alleged that a predecessor of Ryerson, the policyholder, failed to provide accurate information relating to a subsidiary the policyholder sold to the claimant. The policyholder agreed to pay a settlement which was described as a “post-closing price adjustment” and then sought to recoup that amount from Federal. After Federal denied coverage, the policyholder filed an action for breach of contract and declaratory judgment. On behalf of Federal, Troutman Sanders obtained summary judgment at the district court level. On April 12, 2012, the Seventh Circuit affirmed, rejecting the argument that amounts sought by the policyholder constituted covered “loss,” stating that “[i]f disgorging such proceeds is included within the policy’s definition of “loss,” thieves could buy insurance against having to return money they stole. No one writes such insurance, and no state would enforce such an insurance policy if it were written.” The court further determined that the “mend-the-hold” doctrine did not limit the insurer’s defenses to those stated in pre-litigation correspondence with the insured. Troutman Sanders attorneys involved included Eileen King Bower (Chicago), Wallace A. Christensen (Washington D.C.), Christopher H. White (Chicago) and Seth M. Erickson (Chicago).
In re All Cases Against Sager Corp. , 967 N.E.2d 1203 (Ohio 2012)
In Sager Corp., the Ohio Supreme Court ruled in favor of a Troutman Sanders client addressing an issue of first impression. In this case, Troutman Sanders was retained by several insurers to represent their insured and to appeal a ruling by an Ohio state trial court that permitted the filing of lawsuits against dissolved foreign corporations. The client, Sager Corporation, an Illinois corporation, had dissolved in 1998 but had nevertheless been sued by asbestos plaintiffs in Ohio state court. Under Illinois law, Sager Corporation was no longer subject to suit as of 2003. The plaintiffs, however, argued that Ohio law, which has no explicit cut-off for suits against dissolved corporations, should apply. The Ohio Supreme Court disagreed with the plaintiffs, finding that Ohio courts were obligated by the Full Faith and Credit Clause and Due Process clauses of the U.S. Constitution and Ohio choice of law rules to give effect to the laws of sister states barring suits against dissolved corporations under their state law. The court further held that liability insurance policies were not an “asset” that could be attached as means of obtaining jurisdiction absent an underlying tort judgment. The decision is expected to provide guidance to other states considering whether dissolved asbestos defendants remain subject to suit. Patrick F. Hofer (Washington D.C.) argued before the Ohio Supreme Court.
Health Net Inc. v. RLI Insurance Co ., 206 Cal. App. 4th 232 (2012)
The California Court of Appeal affirmed the trial court’s holding that unpaid benefits owed to the policyholder’s beneficiaries were not covered “loss” under a professional liability policy. The policyholder
sought to recover costs incurred in defending and settling numerous lawsuits across the country that alleged, inter alia, that Health Net had underpaid its beneficiary claims. The policyholder’s claimed losses exceeded
$100 million, and the insurer’s exposure was $25 million. Troutman Sanders attorneys involved included Wallace A. Christensen (Washington D.C.), Robert M. Pozin (Orange County), Jennifer Mathis (Orange County) and Melissa
J. Perez (Orange County).
Significant Trial Court Decisions
Colonial Oil Industries, Inc. v. Indian Harbor Ins. Co. , No. 11 Civ. 5018 (DAB), 2012 U.S. Dist. LEXIS 130122 (S.D.N.Y. Sep. 10, 2012)
The U.S. District Court for the Southern District of New York held that there was no coverage under a pollution liability policy to remediate contaminated oil contained in an uncompromised, sealed storage tank. The issue confronting the court was one of first impression. Troutman Sanders attorneys involved included Richard J. Pratt (Washington D.C.) and Daniel W. Cohen (Washington D.C.).
The Illinois Circuit Court for Cook County granted a motion to dismiss brought by Troutman Sanders on behalf of its insurer client in a case where the policyholder sought coverage under a professional liability policy with $10 million worth of exposure. On behalf of the insurer, Troutman Sanders argued that the allegations constituted a single “related claim” that was first made prior to the inception of the policy and also that the allegations against the policyholder did not involve “professional services” within the meaning of the policy. Troutman Sanders attorneys involved included Wallace A. Christensen (Washington D.C.), Christopher H. White (Chicago) and Seth M. Erickson (Chicago).
Petersen v. Columbia Casualty Co. , No. SACV 12-00183 JVS(ANx), 2012 U.S. Dist. LEXIS 120033 (C.D. Cal. Aug. 21, 2012)
Petersen involved an attorney’s attempt to obtain coverage for his former law firm’s suit against him arising out of his alleged violations of his employment agreement. The case involved interpretation of intricate issues regarding the meaning of “Professional Services” as that term is commonly used in professional liability policies and what qualifies as restitution under California law. Ruling in favor of Troutman Sanders’ insurer client, the U.S. District Court for the Central District of California held that the “potential for liability” standard that applies to an insurer’s duty to defend does not apply when determining whether an insurer has a duty to advance defense fees under a policy without a duty to defend. Instead, the court ruled that the policyholder has the burden of establishing that a claim is actually covered before it is entitled to the advancement of such fees. Troutman Sanders attorneys involved included Terrence R. McInnis (Orange County) and William D. Burger (Orange County).
AXIS Reinsurance Company v. Telekenex, Inc. , Case No. 12-2979 SC (N.D. Cal. Dec. 19, 2012)
The U.S. District Court for the Northern District of California granted partial summary judgment in favor of Troutman Sanders’ insurer client, finding that a D&O policy did not cover an underlying $6.5 million judgment entered against the policyholder and others for attempting to raid a competing company in Washington State and intentionally interfering with the competitor’s customer contracts. The court relied on the policy’s exclusion for the gaining of any profit or advantage to which the insured was not legally entitled and, also, California’s statutory willful acts exclusion. Troutman Sanders attorneys involved included Terrence R. McInnis (Orange County), Ross Smith (Orange County) and Steven W. McNutt (Orange County).
Continental Casualty Co. v. Hennessy Industries, Inc. , Case No. 12-CH-17080 (Cook County, Illinois, Chancery Division Nov. 28, 2012)
Hennessy Industries, Inc. filed an action against a number of excess insurers seeking coverage for underlying asbestos claims brought against it, as alleged successor to Ammco Tools, Inc. Hennessy initiated its action in its home state of Tennessee but conceded that Illinois law applied to the policies at issue. On behalf of its clients, Troutman Sanders responded by filing a more comprehensive suit against Hennessy and a number of insurers in the Chancery Division of the Circuit Court of Cook County, Illinois. A forum fight ensued, and the Tennessee Court initially refused to dismiss that action. Troutman Sanders took the lead for insurers in briefing and arguing against Hennessy’s subsequent motion to dismiss the Illinois action wherein Hennessy argued that the Illinois action should be dismissed in deference to the earlier-filed Tennessee Action and that the “Service of Suit” clause in one insurer’s policy prohibited that insurer from bringing a competing action. The Illinois court agreed with Troutman Sanders’ clients and denied Hennessy’s motion to dismiss. The Tennessee Court subsequently reconsidered its initial order and ultimately dismissed that action. The case will now proceed in Illinois state court. Troutman Sanders attorneys involved included Eileen King Bower (Chicago), Seth M. Erickson (Chicago) and William P. Pipal (Chicago).
South Bend v. Affiliated FM Ins. Co, et al. , Case No. 47F12-0606-PL023088 (Ind. Sup. Ct., Marion County, Jan. 26, 2012)
The City of South Bend, Indiana, sued several insurers to execute a $2.7 million “judgment” that it had obtained in a Texas bankruptcy action. The purported judgment was allegedly against non-debtor entities that were insured by Troutman Sanders’ insurer clients. On behalf of those clients, Troutman Sanders moved the Texas bankruptcy court to reconsider its so-called judgment. The court found that South Bend could not execute on its “judgment” because the bankruptcy court lacked authority to enter a judgment against the non-debtors. As a result, South Bend now must prove underlying liability and the applicability of insurance coverage under the policies. Troutman Sanders attorneys involved included Clinton E. Cameron (Chicago), Robert E. Browne, Jr. (Chicago) and Seth M. Erickson (Chicago).
Significant Statute of Limitations Ruling Involving Challenge to Asbestos Settlement
In November 2012, a Troutman Sanders insurer client obtained summary judgment in an action involving thousands of claimants who sought to challenge a prior asbestos settlement. A state trial court held that plaintiffs’ damage claims, which alleged that several insurers made misrepresentations when entering into a settlement with thousands of asbestos claimants, were barred by the statute of limitations. The plaintiffs’ suit (which was filed over ten years after the settlement) focused on the insurers’ allegedly false representations that coverage for the asbestos claims was limited by aggregate policy limits for products/completed operations. In granting summary judgment, the court addressed important limitations issues and upheld the protection afforded to insurers when claimants seek to challenge prior settlements based on untimely claims of misrepresentation or concealment of coverage. Troutman Sanders attorneys involved included John R. Gerstein (Washington D.C.), Tom Blair (Washington D.C.) and Prashant K. Khetan (Washington D.C.).
© TROUTMAN SANDERS LLP. ADVERTISING MATERIAL. These materials are to inform you of developments that may affect your business and are not to be considered legal advice, nor do they create a lawyer-client relationship. Information on previous case results does not guarantee a similar future result.