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Policy provisions preclude coverage in settlement of class claims

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Because the “voluntary payment” and “legally obligated to pay” provisions precluded coverage, a trial court properly entered partial judgment in favor of an insurer of a distillery involved in a settlement over damages caused to nearby buildings by the distillation process.

Pernod Ricard USA operated the Seagram Lawrenceburg Distillery, which became embroiled in a class-action lawsuit with neighboring property owners, including William Klepper, over damages caused by ethanol released in the air, which made mold grow on building exteriors. The property owners also alleged nuisance, negligence, trespass and illegal dumping.

Pernod was insured by XL Insurance America and by ACE American Insurance under a commercial general liability policy. ACE’s policy included a “legally obligated to pay” provision and a “voluntary payment” provision, which said no insured should voluntarily make a payment, assume obligation or incur any expense without ACE’s consent.

ACE initially did not contribute to Pernod’s defense, but later reimbursed XL for costs. The property owners, XL and ACE entered into settlement negotiations, but ACE declined to contribute $1 million toward a settlement, offering only $250.000. At a second mediation attempt, ACE left before it was over. XL and Pernod agreed a $5.2 million judgment would be entered against the distillery, with Pernod contributing $1.2 million, XL contributing $1 million and ACE contributing the remaining $3 million under the insurance policy.

Eventually the case made it to a special master, who concluded the “legally obligated to pay” and “voluntary payment” defenses were available to ACE because it provided a defense under a reservation of rights. The special master also found Pernod breached its obligation by entering the agreed judgment without the consent of ACE. The trial court declined to enter a final judgment on all issues, only the six ruled on by the special master.

The Court of Appeals unanimously held that ACE did not abandon Pernod or breach the policy.

“ACE may rely on the Policy’s ‘voluntary payment’ and ‘legally obligated to pay’ provisions, and those provisions preclude coverage under the Policy. To hold otherwise, would, effectively require us to write the ‘voluntary payment’ and ‘legally obligated to pay’ provisions out of the Policy, which we cannot do. We recognize and understand the dissent’s concerns. We simply believe that the rationale in (American Family Mutual Insurance co. v. C.M.A. Mortgage Inc.), the fact that ACE did not abandon Pernod or breach the Policy, and the extended analysis we have provided guide us to this result,” Judge Michael Barnes wrote in William Klepper, on behalf of himself and all others similarly situated v. Ace American Insurance Company, 15A05-1212-CC-645.

Judge Terry Crone disagreed with the majority that ACE may avoid the settlement agreement based on the “voluntary payment” and “legally obligated to pay” provisions.

“An insurer who defends an insured under a reservation of rights should not be able to use those policy provisions as both a shield and a sword,” he wrote. “Courts should not reward insurers for putting their insureds in a perilous position, nor should they penalize insureds for trying to protect themselves.”
 

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  1. A traditional parade of attorneys? Really Evansville? Y'all need to get out more. When is the traditional parade of notaries? Nurses? Sanitation workers? Pole dancers? I gotta wonder, do throngs of admiring citizens gather to laud these marching servants of the constitution? "Show us your billing records!!!" Hoping some video gets posted. Ours is not a narcissistic profession by any chance, is it? Nah .....

  2. My previous comment not an aside at court. I agree with smith. Good call. Just thought posting here a bit on the if it bleeds it leads side. Most attorneys need to think of last lines of story above.

  3. Hello everyone I'm Gina and I'm here for the exact same thing you are. I have the wonderful joy of waking up every morning to my heart being pulled out and sheer terror of what DCS is going to Throw at me and my family today.Let me start from the !bebeginning.My daughter lost all rights to her 3beautiful children due to Severe mental issues she no longer lives in our state and has cut all ties.DCS led her to belive that once she done signed over her right the babies would be with their family. We have faught screamed begged and anything else we could possibly due I hired a lawyer five grand down the drain.You know all I want is my babies home.I've done everything they have even asked me to do.Now their saying I can't see my grandchildren cause I'M on a prescription for paipain.I have a very rare blood disease it causes cellulitis a form of blood poisoning to stay dormant in my tissues and nervous system it also causes a ,blood clotting disorder.even with the two blood thinners I'm on I still Continue to develop them them also.DCS knows about my illness and still they refuse to let me see my grandchildren. I Love and miss them so much Please can anyone help Us my grandchildren and I they should be worrying about what toy there going to play with but instead there worrying about if there ever coming home again.THANK YOU DCS FOR ALL YOU'VE DONE. ( And if anyone at all has any ideals or knows who can help. Please contact (765)960~5096.only serious callers

  4. He must be a Rethuglican, for if from the other side of the aisle such acts would be merely personal and thus not something that attaches to his professional life. AND ... gotta love this ... oh, and on top of talking dirty on the phone, he also, as an aside, guess we should mention, might be important, not sure, but .... "In addition to these allegations, Keaton was accused of failing to file an appeal after he collected advance payment from a client seeking to challenge a ruling that the client repay benefits because of unreported income." rimshot

  5. I am not a fan of some of the 8.4 discipline we have seen for private conduct-- but this was so egregious and abusive and had so many points of bad conduct relates to the law and the lawyer's status as a lawyer that it is clearly a proper and just disbarment. A truly despicable account of bad acts showing unfit character to practice law. I applaud the outcome.

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