...SIXTH CIRCUIT COURT OF APPEALS HOLDS THAT PAYING FULL UNDERLYING AMOUNT MEANS FULL PAYMENT OF UNDERLYING AMOUNT.
Ohio substantive law dictated the outcome in Goodyear Tire & Rubber Co. v. National Union Fire Ins. Co., 2012 WL 4054122 (6th Cir. September 17, 2012), Download Goodyear Tire & Rubber Co. v. National Union Fire Ins. Co. (6th Cir. No. 11.4145, Opinion Filed Sept. 17, 2012) PUBLIC ACCESS. In that case, Goodyear sued for recovery of $30 Million "of legal and accounting costs" which Goodyear incurred in defending class-action shareholder lawsuits and an SEC investigation of alleged securities violations.
Goodyear sued for Coverage of these costs from two Insurance Companies, National Union and Federal. National Union had issued a policy to Goodyear with an aggregate liability limit of $15 Million and a $5 Million self-insured retention. Federal had issued Goodyear an "excess" policy above the National Union policy and above the SIR, with limits of $10 Million.
The Federal excess policy further provided that the face amount of the underlying National Union policy had to be paid out in full before the Federal policy incepted or attached:
Coverage hereunder shall attach only after [National Union] shall have paid in legal currency the full amount of the Underlying Limit [i.e., National Union's policy limit of $15 million] for such Policy Period.
Goodyear Tire & Rubber Co. v. National Union Fire Ins. Co., 2012 WL 4054122 *1 (6th Cir. September 17, 2012). [Emphasis and bracketing by the Sixth Circuit Court of Appeals.]
National Union settled with Goodyear by paying Goodyear $10 Million, not the full $15 Million policy limit on the National Union policy. Accordingly, the express language of Federal's policy was not met and for that reason alone, the Sixth Circuit held, Federal had no Coverage for the costs claimed as covered damages by Goodyear under Federal's policy. Goodyear Tire & Rubber Co. v. National Union Fire Ins. Co., 2012 WL 4054122 *1-*2 (6th Cir. September 17, 2012).
The decision taken on appeal to the Sixth Circuit from the Northern District of Ohio was rendered one year ago, on September 18, 2011. It is addressed in an interesting article posted on October 3, 2011 on "The Insurance & Regulatory Report" blog.
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