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Corrected: An earlier version of this story incorrectly referred to Sentry Insurance, which is not connected to any company involved in the dispute.
In the latest development in a long-running dispute, a federal appeals court affirmed a lower court and ruled Monday that a disgruntled policyholder cannot sue a Selective Insurance Group unit’s attorneys, because they had acted in the company’s interests.
The complex dispute’s origins began in 2012, when Minooka, Illinois-based Creation Supply Inc., which imports and sells writing markers, was sued by a competitor in Oregon federal court for allegedly selling copycat products.
CSI turned to its insurer, Selective Insurance Co. of the Southeast, a unit of Branchville, New Jersey-based Selective Insurance Group, for a defense, but Selective refused to do so.
CSI filed suit against the insurer in U.S. District Court in Chicago, which held the company was entitled to $2.8 million in extracontractual damages. But that ruling was overturned by the 7th U.S. Circuit Court of Appeals in Chicago in 2021.
CSI then sued Selective’s attorneys, outside counsel Drew L. Block, inside counsel David Hahn, and George Cherrie, who was Mr. Hahn’s supervisor between March 2014 and September 2015, according to court papers in Creation Supply Inc. v. George Cherrie, David Hahn and Drew L. Block.
The district court in Chicago ruled against Creation, and was affirmed by a three-judge appeals court in the latest ruling in the case. “Corporations may be people…but as legal figments, they act in the flesh and blood world through their agents,” the panel’s ruling said.
“In return, those agents are generally shielded from liability by the corporation for acts undertaken on its behalf,” it said.
“Maybe Selective regrets this mess…But under the business judgment rule, that decision - like whether to deny Creation’s claim – was Selective’s alone.”
Attorneys in the case had no comment or did not respond to a request for comment.