A jury will decide if the relationship of a unit of Berkshire Hathaway Inc. with a troubled German insurer renders it immune from liability in a lawsuit filed by Ford Motor Co. The case involves the alleged obstruction of $20 million in insurance payouts for product liability claims against Ford. The automaker had filed suit seeking to recover damages. U.S. District Judge Robert E. Payne denied Ford’s motion for summary judgment on National Indemnity Co.’s “agency defense.” The insurer claimed it can’t be held liable for directing HDI-Gerling, a financially strapped German insurer, to deny $20 million worth of claims under policies issued to Ford.
The argument by National Indemnity that Ford is stopped from contesting the payouts also survived as a result of the court’s ruling. Ford had previously stated that it wanted disputed and non-disputed claims to be paid all at once, which created a problem in this case for the automaker. Judge Payne ruled that both the Defendants’ affirmative defenses present “genuine disputes of material facts which must be resolved by the jury.”
National Indemnity was accused of trying to avoid its obligations under a $500 million reinsurance contract with HDI-Gerling, which had issued a series of stop-loss policies to Ford between 1995 and 2003. According to allegations in Ford’s suit, National Indemnity recently agreed to reinsure HDI-Gerling’s obligations in exchange for a $360 million premium – or “float” – on which National Indemnity’s parent Berkshire Hathaway hoped to make money by investing. In the late 1990s, Ford began receiving notices that Firestone tires on some of its Explorer models were malfunctioning at certain speeds. By 2002, the company is said to have incurred more than $680 million in settlements, verdicts and other litigation expenses related to the defects. Ford turned to HDI-Gerling for coverage, only to find out that in 2011 National Indemnity had taken over HDI-Gerling’s claims-handling responsibilities and was denying certain of Ford’s claims for reimbursement en masse.
HDI-Gerling filed for arbitration to resolve the dispute, Ford considered that a general denial of its claims and filed suit. The claims by Ford against National Indemnity included tortious interference with contract and violation of Virginia’s business conspiracy statute. Judge Payne had dismissed the conspiracy claims earlier after holding that the suit was controlled by Michigan law. But the judge refused to dismiss Ford’s claim for tortious interference and ruled that National Indemnity’s actions were not constitutionally protected activity under the Noerr-Pennington doctrine. Under the judge’s last order, National Indemnity will be permitted to argue at trial that it was acting as HDI-Gerling’s agent pursuant to the reinsurance agreement. If the jury finds that to be true, then National Indemnity could not have tortiously interfered with HDI-Gerling’s contracts as a matter of law.
National Indemnity will be allowed to argue that Ford is prohibited from challenging the HDI-Gerling coverage denials because of an email in which the automaker agreed it should not be made. National Indemnity cannot argue that Ford deceived HDI-Gerling into issuing the policies in the first place. Judge Payne agreed with Ford that National Indemnity lacks standing to assert a so-called rescission claim and granted summary judgment on that defense. Still pending is Ford’s request for sanctions against National Indemnity for its allegedly evasive conduct during discovery. Judge Payne heard oral arguments on that motion in July and a ruling could come any day.
Sources: Andrew Scurria and Law360.com
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