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An American International Group Inc. unit has been unsuccessful in recouping an $18.5 million arbitration award it paid on behalf of a management services company.
The Michigan Court of Appeals in Troy upheld a lower court decision and ruled against AIG unit Illinois National Insurance Co. in a dispute with New York-based AlixPartners LLP over professional liability insurance coverage, according to Wednesday’s ruling in Illinois National Insurance Co. v. AlixPartners LLC.
According to the ruling, AlixPartners began a relationship with London-based Kingsbridge Capital in 2007 in which AlixPartners agreed to support Kingsbridge in the due diligence process for its acquisition of a German model train company, Märklin & Cie GmbH.
Relying on AlixPartners’ report, Kingsbridge purchased 100% of Märklin’s equity as well as a significant portion of its debt, “anticipating the potential turnaround discussed” in an AlixPartners report, according to the ruling.
However, Märklin did not perform as expected, and Märklin’s CEO suggested AlixPartners return part of its management fees to help the company’s bottom line, which AlixPartners refused, calling the request “absurd,” said the ruling.
A draft arbitration complaint was sent to AlixPartners in July 2009, and AIG was notified of the claim in August 2009, according to the ruling. The dispute led to an arbitration award against AlixPartners of €13,446,000 plus prejudgment interest. Illinois National agreed to refund the award in January 2013, subject to a reservation of rights.
After an investigation, however, AIG said it was not obligated to pay the award because its “claims first made and reported” did not fall within the policy period or extended policy period of its coverage, but earlier during a December 2007 board meeting and in March and April 2008 letters.
It filed suit against AlixPartners. The Michigan state court ruled in AlixPartners’ favor, which was unanimously upheld by a three-judge appeals court panel.
It “was not erroneous for the trial court to conclude that the first time the Kingsbridge claim was made was with the arbitration complaint,” which was within the period covered by one of its policies, the ruling said.
An AIG spokesman had no comment while AlixPartners’ attorney could not be reached.
A Connecticut construction firm must indemnify an Arch Insurance Group Inc. unit for $39.1 million in connection with the building of a minor league baseball stadium, a federal district court has ruled.