Great American unit prevails in case related to sale of Mexican facility
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A Great American Insurance Group unit has prevailed in insurance coverage litigation over the sale of a facility that was allegedly overrun by a Mexican drug cartel.
Los Angeles-based AKN Holdings LLC purchased a manufacturing facility in Reynosa, Mexico, from Waltham, Massachusetts-based Thermo Fisher Scientific Inc. only to discover it was overrun by a drug cartel, according to Friday’s ruling by the 9th U.S. Circuit Court of Appeals in San Francisco in AKN Holdings LLC v. Great American E&S Insurance Co.
Despite suing Thermo Fisher for fraudulent concealment, AKN sold the facility to Monterrey, Mexico-based FINSA Portafolios S.A. de C.V. without revealing the cartel problem, the ruling said.
In 2017, FINSA sued AKN in U.S. District Court in Los Angeles for breach of contract and fraud-related claims.
AKN requested that Great American unit Great America E&S Insurance Co. defend it under its private equity liability insurance policy, which provided coverage for liability arising from any “wrongful acts,” the ruling said.
Great American refused to defend AKN, citing a policy exclusion that applied to any claims arising from any actual or alleged breach of contract, unless liability “would have attached even in the absence of such contract or agreement.”
AKN filed suit against the insurer in U.S. District Court in Los Angeles, which granted the insurer’s motion to dismiss the case.
A three-judge appeals court panel affirmed the ruling.
“FINSA’s claims ‘arise from’ an ‘alleged breach of a written contract or agreement’ within the broad interpretation that this language is afforded under California law,” the ruling said. “Accordingly, Great American had no duty to defend the FINSA Action.”
Attorneys in the case had no comment or did not respond to a request for comment.
