Toys R Us filed a lawsuit last month claiming that Colony National Insurance Co. should be forced to cover a $25 million wrongful death verdict against the retailer. It was alleged that the insurer had refused to help Toys R Us settle with the family of a woman who died using a pool slide sold by the retailer. In the complaint, filed in New Jersey federal court, Toys R Us alleges that Colony breached its contract with the manufacturer of the slide, Manley Toys Ltd. Toys R Us says that it was covered under the policy. But Colony told Toys R Us that it had only agreed to cover Manley’s American subsidiary and that Toys R Us did not qualify as an insured party. Toys R Us alleges in the complaint:
In breach of its duty to exercise good faith in attempting to settle the [wrongful death suit] on behalf of TRU … Colony never offered or made available its policy limit.
The suit comes seven years after a 28-year-old woman died using the Banzai Falls In-Ground Pool Slide sold by Toys R Us. Her family sued Toys R Us for negligently certifying the product and a jury awarded a $25 million verdict. On appeal, the Massachusetts Supreme Judicial Court found that Toys R Us demonstrated a “substantial degree of reprehensibility” when it imported and sold close to 4,000 of the inflatable poolside slides made in China. The slide didn’t meet federal consumer safety laws, though it did include clear warning labels and user instructions indicating it was noncompliant, the appeals court said.
But Toys R Us says Colony should have helped it settle the case like it did with the manufacturer’s subsidiary, potentially avoiding the verdict. Colony paid $800,000 from a $4 million policy to settle the case, according to the complaint. Toy R Us says that once it learned of the wrongful death lawsuit it asked Manley to indemnify and defend it from all liability. Manley allegedly agreed and added Toys R Us as a “certificate holder” to its general liability policy and told Toys R Us that it had an additional umbrella policy with Colony. The complaint alleges that even though the underlying insurer agreed to defend Toys R Us, Colony waited three years before claiming its umbrella policy did not cover Toys R Us. But Colony said it did not agree to insure the manufacturer’s Hong Kong-based parent company, which had agreed to add Toys R Us to its policies.
Toys R Us claims Colony’s policy includes terms that it will “follow the form” of the underlying policy, and that the underlying policy agreed to defend vendors of Manley’s products. Toys R Us is represented by Lisa M. Campisi of Morgan Lewis & Bockius, a firm located in New York City. The case is pending in the U.S. District Court for the District of New Jersey.
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