DuPont Settlement Weeds Out Some Lawsuits
A U.S. District Court judge for the Eastern District of Pennsylvania has approved a multimillion-dollar class-action preliminary settlement of lawsuits filed by those who purchased or used Imprelis, an herbicide that was designed by DuPont Co. to kill unwanted weeds while leaving other vegetation undamaged.
There are "at least tens of thousands of class members" covered by the Feb. 11 settlement agreement that provides for removal and replacement of damaged trees as well as tree maintenance and incidental damages for property owners equal to 15 percent of the total value of other payments and services that the property owner was provided.
For individuals or entities that used Imprelis on customers' properties, or golf courses, the settlement provides for compensation for customer-site visits, field work and other expenses, as well as reimbursement for time and expenses up to $2,000 maximum reimbursement.
The settlement does not prevent individual claims against the company, which already has set aside $750 million, as of year-end 2012, for claims related to the use of the herbicide. "While there is a high degree of uncertainty, total charges could range as high as $900 million," according to the company's financial statement.
Those amounts reflect claims paid directly by DuPont -- which has recalled Imprelis -- and don't include costs resulting from litigation, according to Bloomberg.
The company's financial statements also noted that its insurance program had a $100 million deductible, with a limit of $725 million for costs and expenses in excess of the $100 million.
The settlement also includes payment of attorney's fees up to $7 million.
Scorecard: Total cost of claims related to a recalled DuPont herbicide could range up to $900 million, before adding on costs associated with litigation and settlements.
Takeaway: The settlement program "appears to reflect a meaningful attempt to make property owners quite close to whole for the damage caused to them," according to the federal judge approving the settlement.
Insurer Has No Duty to Defend
A U.S. District Court judge for the Northern District of California ruled an insurer did not breach its contract when it stopped defending an insured after winning in court -- in a decision that was later overturned.
In 2000, Convolve Inc. and Massachusetts Institute of Technology filed a lawsuit against Seagate Technology Inc., which triggered the obligation of National Union Fire Insurance Co. to defend. That litigation resolved in favor of Seagate, at which point National Union stopped defending its insured.
Even though that court judgment was subsequently reversed on appeal, the federal court judge held there was no breach of National Union's insurance contract for its denial to defend.
In rejecting Seagate's motion for the insurer to pay about $20 million, or for five more years of legal defense, the judge ruled that the "initial decision in the insurer's favor does provide insulation against a further claim of breach of contract."
The ruling noted that no prior legal decisions have been produced that are "directly on point [of the specifics of this case], and the Court's own research has not revealed any."
Scorecard: National Union Fire Insurance Co. did not have to pay about $20 million, or for five years of legal fees while an appeal was ongoing.
Takeaway: The decision insulates insurers from a breach of contract claim while also saving them the expense of paying for defense costs while an appeal is ongoing.
Alabama Court Asked to Undo Generics Ruling
Pharmaceutical companies urged Alabama's Supreme Court to throw out its own decision that ruled brand-name drug-makers "may be liable -- seemingly indefinitely -- for injuries caused by products that [they] neither made nor sold," according to legal documents filed by Wyeth, Pfizer Inc. and Schwarz Pharma Inc.
The state high court ruled on Jan. 11 that a plaintiff could sue Pfizer, Schwartz and Wyeth (a Pfizer subsidiary) for injuries allegedly caused by a generic version of Reglan, a heartburn medication.
"The decision here is extraordinary by any measure," according to the pharmaceutical companies' request for an oral argument on the case, which argues the prior decision "overlooks longstanding Alabama law in numerous important respects.
The company argued that "unfairly saddling brand-name drug manufacturers -- and all manufacturers doing business in Alabama -- with open-ended liability for their competitors' products based on such a sharp (and unexplained) break from preexisting Alabama law contravenes due process principles."
In the Alabama Supreme Court's opinion, it had ruled that "it is not fundamentally unfair to hold the brand-name manufacturer liable for warnings on a product it did not produce because the manufacturing process is irrelevant" since the warnings and any alleged misrepresentations are "drafted by the brand-name manufacturer and merely repeated by the generic manufacturer."
Scorecard: The plaintiff will be permitted to sue the pharmaceutical companies for injuries caused by generic drugs, unless the state court reverses its decision.
Takeaway: Alabama could become a new center for lawsuits for pharmaceutical cases, and the decision may affect other manufacturers, such as the automobile aftermarket parts.
Insurers File on Text-Spamming Suit
National Union Fire Insurance Co. and American Home Assurance Co. asked a U.S. District Court for the Western District of Kentucky to release them from defending Papa John's in two class-action lawsuits about unsolicited text messages.
The class-action lawsuits, filed in Washington and Virginia, claim Papa John's violated the federal Telephone Consumer Protection Act by sending thousands of unsolicited text messages advertising its products.
The Act calls for $500 in damages for each violation.
The insurers argue that the allegations in those lawsuits do not trigger the insurers' duty to defend "because neither suit seeks damages for 'property damage' caused by an 'occurrence' or 'personal and advertising injury'; as those terms are defined in the policies," according to the lawsuit.
The insurers also argue the allegations in the class-action lawsuits do not constitute "personal and advertising injury" and that, in any event, there is an exclusion in the coverage for sending or transmitting information in violation of the law.
Papa John's recently appealed to the 9th U.S. Circuit Court of Appeals a Washington district court ruling that certified a national class consisting of anyone in the United States who received "at least one unsolicited text message" sent to their cell phone that marketed a Papa John's product or service.
Scorecard: At $500 per violation, the potential damages could be huge, depending on exactly how many unsolicited text messages were sent.
Takeaway: Text spamming is a relatively new ground for potential legal action, with most previous case law applying to telephone calls or facsimiles.
Pitching Ace Permitted to Use D&O Policy
A bankruptcy judge agreed to allow Curt Schilling to use his defunct video-game company's
$10 million insurance policy to cover defense costs, after he and three executives were sued by Rhode Island after defaulting on a $75 million loan.
The order authorized Starr Indemnity and Liability Co. to pay defense costs, pursuant to an insurance policy issued to Schilling's 38 Studios, which filed for Chapter 7 bankruptcy in June 2012.
The Rhode Island Economic Development Corp., which provided the loan to entice the company to relocate from Massachusetts, filed suit in November, claiming it was misled about the risks involved in the company's work.
The company was founded in 2006, two years after the former All-Star pitcher helped the Boston Red Sox win a World Series title.
Scorecard: Starr Indemnity has agreed to provide a defense to Schilling and his company's executives, up to the policy's $10 million limit.
Takeaway: Insurance policy proceeds do not constitute property of the estate for bankruptcy proceedings.
ANNE FREEDMAN. Please feel free to send tips about legal decisions that impact the insurance industry to email@example.com.
April 12, 2013
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