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AIG wins coverage dispute with Office Depot

Office Depot

An American International Group Inc. unit has ultimately prevailed in coverage litigation with Office Depot Inc. in a whistleblower case it had previously successfully appealed to a federal appeals court.

The U.S. District Court in Pasadena, California, granted AIG unit AIG Specialty Insurance Co. summary judgment and held it was not obligated to cover Boca Raton, Florida-based Office Depot in connection with its alleged overcharging of various California government entities, according to Friday’s ruling in Office Depot Inc. v. AIG Specialty Insurance Co., formerly known as American International Specialty Lines Insurance Co.

The case involved 19 California political subdivisions, on whose behalf the whistleblower originally sued, which intervened in the lawsuit and led to a $77.5 million settlement consisting of payment to the plaintiffs totaling $68.5 million plus $9 million in plaintiffs attorney fees.

After AIG denied coverage, Office Depot filed suit against the insurer, charging breach of contract for failing to defend and indemnify the company.

 In June 2016, the District Court granted AIG summary judgment on the charges alleging breaches of AIG’s duty to defend and indemnify Office Depot, but refused to dismiss a good faith and fair dealing charged.

On appeal, the 9th U.S. Circuit Court of Appeals in San Francisco unanimously overturned the lower court’s ruling that the California False Claims Act precluded coverage, but gave the District Court leave to consider AIG’s alternative arguments based on the insurance policy’s scope for coverage and exclusions.

On remand, the District Court again ruled in AIG’s favor on these bases. “It is clear that the wrongful acts alleged did not first take place during the relevant policy periods,” said the ruling.

The ruling said furthermore that contract, prior acts and government agency policy exclusions preclude coverage.

The court granted AIG’s motion for summary judgment, holding “there is no potential or coverage,” for these reasons.

Office Depot’s attorney had no comment, while AIG’s attorney could not immediately be reached for comment.

AIG units prevailed earlier this month in litigation with a Chubb Ltd. unit over the allocation of a $6 million settlement in an underlying product liability lawsuit involving truck ducts, in a divided appeals court ruling. 





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