INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
Insurer’s information request creates a defense obligation
In 2014, Phillip Riley and his spouse (the Rileys) sued various members of the lumber industry including Koppers Performance Chemicals, Inc., (Koppers). The firm is a New York-based operation that made and distributed wood preservatives. The Rileys alleged that Phillip was exposed to a wood preservative called chromated copper arsenate (CCA) that caused him to develop cancer.
The alleged exposure period, per the Rileys’ complaint, lasted from 1978 through 1992—the time period from Phillip’s birth through his employment with his family’s South Carolina fence-making business, which shared its location with their family’s residence, and it used CCA up until 1992. The lawsuit was filed in South Carolina.
Koppers made its insurer, Argonaut-Midwest Insurance Company (Argonaut), aware of the lawsuit and requested that it provide a legal defense under several commercial general liability policies. Koppers claimed it was due protection from the policies that had, decades earlier, been issued to its predecessor entities.
Argonaut requested additional information from Koppers, and the company provided a copy of Phillip’s deposition. Later, it denied Koppers’ claim, and Koppers settled with the Rileys from its own pocket. Several years later, Koppers sued Argonaut, arguing that it was due a legal defense and recovery for the Rileys’ lawsuit. It also claimed damages from breaches of a duty to defend and to indemnify.
The insurer filed counterclaims that Koppers was not eligible as an insured as well as that misrepresentation and mistakes made the policies unenforceable.
Koppers appealed after a district court ruled in favor of Argonaut.
The higher court, accepting the appeals after establishing it could do so under its diversity jurisdiction, examined Koppers’ several complaints. A jurisdiction matter arose due to the predecessor policies having been issued in Hawaii, as that was the company’s base of operations. Koppers argued that the district court was wrong in deciding that the Argonaut policies’ coverage was limited to Hawaii, that the original complaint did not create a defense duty, and that the insurer had no duty to indemnify.
With regard to restricting coverage to Hawaii, the court found ambiguity. The declarations pages described the predecessor companies along with their Hawaiian addresses. In the court’s opinion, that could be viewed as an indicator that coverage was intended for that state.
However, it also recognized that the policies’ language did not restrict coverage to Hawaii.
It next considered any obligation to defend the claim. The court reviewed several cases it deemed relevant involving appellate-level as well as state supreme court decisions. The court held that the Rileys’ original complaint did not include information that would trigger coverage.
However, it also determined that, once the insurer requested additional information indicating that the chemical exposure may have begun within the CGL policy terms, an obligation to either defend or investigate the need to defend was created.
The court’s determination regarding Koppers’ first two arguments made it unnecessary to consider any coverage obligation. Rather, the court vacated the lower court decision in favor of Argonaut. It then remanded the matter for hearing in alignment with its findings.
Koppers Performance Chemicals, Inc., f/k/a Osmose Wood Preserving Co. of America, Inc., (and other affiliates) v. Argonaut-Midwest Insurance Company, d/b/a Argo Group, and The Travelers Indemnity Co.—U.S. Court of Appeals, Fourth Circuit—No. 23-1732—June 27, 2024.
