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A federal appeals court has overturned a lower court ruling in favor of a Markel Corp. unit in a case involving a $49.5 million jury verdict, holding its policy’s dishonesty exclusion did not apply.
In 2013, West Chester, Ohio-based ClarkWestern Dietrich Building System LLC filed suit against the New York-based Certified Steel Stud Association, a trade association composed of three entities, all of which are ClarkWestern’s competitors, charging they had disseminated false statements about the company and its products, according to Wednesday’s ruling by the 6th U.S. Circuit Court of Appeals in Cincinnati in Evanston Insurance Co. v. Certified Steel Stud Association Inc. and ClarkWestern Dietrich Building Systems LLC.
The jury returned a $49.5 million verdict against the association. The CSAA’s insurer, Markel Corp. unit Evanston, sought a ruling by the U.S. District Court in Cincinnati that it had no obligation to indemnify CSSA for the damages.
Evanston based its argument on several counts, including that the policy excluded coverage for claims based on dishonest conduct, and that in finding against CSSA, the jury found the association had acted dishonestly.
The District Court ruled in Evanston favor, which was overturned by the 6th Circuit in a 2-1 ruling.
The District Court erred in holding the dishonest acts provision applied, said the majority opinion. The jury “did not find that CSSA acted dishonestly when it committed the unlawful acts,” said the decision. It “did not necessarily determine that CSSA published intentionally false statements,” it said.
In reversing the District Court’s ruling, the court remanded the case “to allow the district court to assess the extent of Evanston’s indemnity obligation.”
The dissenting opinion said, “There is no clear Ohio law on the application of the dishonest-acts exclusion to the coverage and claim at issue here.”
It added, however, “the jury found CSSA’s publication was intentionally false and misleading statement of fact. Such conduct fits within the usual and ordinary meaning of dishonest.”
CSAA attorney Raymond W. Lembke, a Cincinnati-based solo practitioner, said the majority opinion was correct. The dishonesty exclusion is not defined and “we don’t know exactly what the jury was thinking,” he said.
However, “If you’re using the plain language meaning of dishonest, I don’t think they could rely on that exclusion” to deny coverage.
Evanston’s attorney said he was still reviewing the ruling with the insurer.
In June, a federal appeals court affirmed a lower court ruling and held Evanston was not obligated to defend or indemnify a housing corporation under an exclusion in its directors and officers liability policy because of a previous comparable action.
A Markel Corp. unit is not obligated to provide coverage to a railroad worker who developed an occupational disease under his employer’s commercial general policy’s pollution exclusion, says a federal appeals court in upholding a lower court’s ruling.