AIG unit not obligated to pay interest in dispute with seat-belt maker

An American International Group Inc. unit is not obligated to pay post-judgment interest in products liability litigation filed against a seat belt manufacturer under its excess policy, said a federal appeals court Friday, in affirming a lower court’s ruling.

Penny Louise Bruner was killed when the Jeep Wrangler automobile in which she was riding in the front passenger seat was involved in a rollover crash, ejecting her despite her wearing a seat belt that was designed, constructed and integrated into the jeep by Key Safety Systems, according to court papers.

Her estate filed suit against Key Systems, which changed its name to Auburn Hills, Michigan-based Jayson Safety Systems after its merger with the Takata Corp.

In 2013, a Georgia jury ruled Key Systems was 80% liable in the accident, and the court entered a $3.7 million judgment against Key Systems, according to the ruling by the 6th U.S. Circuit Court of Appeals in Cincinnati in Key Safety Systems Inc. v. AIG Specialty Insurance Co.

AIG Specialty Insurance Co., a unit of New York-based AIG, had issued a commercial excess liability policy to Key Systems providing for coverage above a $2 million self-insured retention.

Although Key System’s self-insured retention had not yet been exhausted, AIG paid 50% of its defense fees and costs incurred to appeal the judgment, which was later affirmed by a state appeals court.

After the Georgia Supreme Court refused to hear the case, Key Systems demanded AIG pay all amounts owed by the company, including all post-judgment interest, in excess of the $2 million self-insured retention under the policy, according to the ruling. AIG denied that it owed any interest attributable to the $2 million self-insured retention.

Keys Systems subsequently paid $2.3 million, of the judgment against it, which included its $2 million self-insured retention, plus $306,808 in interest, according to the ruling, and AIG paid the balance of the judgment entered against the company

Key Safety then filed suit against AIG Specialty in U.S. District Court in Detroit, seeking the post-judgment interest. The District Court ruled in AIG’s favor, which was affirmed by a unanimous three-judge appeals court panel.

“Key seeks to persuade that the policy required AIG to cover post-judgment interest by arguing that such interest is encompassed by the definition of ‘loss,’” said the ruling.

“Key’s argument stumbles out of the gate for several reasons,” including that Georgia’s statute distinguishes interest for judgments said the ruling.

“Inasmuch as AIG neither assumed Key’s defense nor elected to appeal, Key could not look to AIG to pay the interest accrued on its $2 million portion of the judgment here,” the ruling said.

“Insurers may limit the risk they assume and may not be held liable for risks not assumed and for which they did not collect a premium,” the panel said, in affirming the lower court’s ruling.