AIG unit not entitled to $3M in interest from real estate firmPosted On: Jun. 26, 2019 2:25 PM CST
An American International Group Inc. unit is not entitled to almost $3 million in prejudgment interest from real estate firm Cushman & Wakefield Inc., in complex coverage litigation involving the real estate firm’s professional liability insurance policies, said a federal district court, in a ruling Tuesday.
The basis of Tuesday’s ruling by the U.S. District Court in Chicago in Cushman & Wakefield Inc. vs. Illinois National Insurance Co. et al. is an April ruling in the case.
Chicago-based Cushman & Wakefield, the world’s largest privately held commercial real estate services firm, according to court papers, was sued in connection with its real estate appraisals. It had a tower of coverage involving several excess insurers.
In April, the District Court found that AIG unit Illinois National was entitled to reimbursement of amounts paid in excess of its $23 million policy limit for the relevant policy year.
Illinois National then moved for a $2.8 million prejudgment interest award for the amount it overpaid, according to the ruling. The District Court refused.
“Because there was no ‘breach of performance of a contract’ or ‘an act or omission depriving or otherwise interfering with …property’ Illinois National is not entitled to mandatory prejudgment interest from Cushman,” said the ruling, in citing the primary policy.
The ruling said this is consistent with policy reasons. Awarding prejudgment interest to an insurer recovering defense costs “would, at least to a certain degree, disincentivize insureds from exercising their rights,” said the ruling in quoting an earlier case.
“Further, had Illinois National wanted to ensure payment from Cushman of prejudgment interest on amounts in excess of its $23 million limit, it could have contracted for the payment of such interest,” the ruling said.
The judge set a July 24 meeting to discuss other issues in the case.
Commenting on the ruling, Cushman & Wakefield attorney Natasha Romagnoli, a principal with McKool Smith in New York, said the case is unusual.
“Typically, you wouldn’t expect an insurance carrier who has been found to owe coverage and voluntarily paid more than what it was potentially obligated to pay to turn around and seek money for its insured,” she said, adding the ruling was appropriate.
AIG’s attorney could not immediately be reached for comment.
An AIG 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.