A unit in the Great American Insurance Group has won disputes over insurance coverage over the sale of a facility alleged to have been run over by a Mexican drug cartel.
Los Angeles-based AKN Holdings LLC bought a manufacturing facility in Reynosa, Mexico, from Waltham, Massachusetts-based Thermo Fisher Scientific Inc., only to discover it had been run over by a drug cartel, following Friday’s decision by the 9th U.S. District Court in San Francisco i AKN Holdings LLC v. Great American E&S Insurance Co.
Although AKN sued Thermo Fisher for fraudulent concealment, AKN sold the plant to Monterrey, Mexico-based FINSA Portafolios SA de CV without revealing the cartel problem, it said in the judgment.
In 2017, FINSA AKN sued in the US District Court in Los Angeles for breach of contract and fraud-related claims.
AKN requested that the large American unit Great America E&S Insurance Co. would defend it under its private equity liability insurance, which provided coverage for liability arising from all “wrongdoing”, the judgment said.
Great American refused to defend AKN, citing a policy exclusion that applied to all claims arising from actual or alleged breach of contract, unless liability “would have been anchored even in the absence of such contract or agreement.”
AKN brought an action against the insurer at the US District Court in Los Angeles, which upheld the insurer’s request to write off the case.
A panel of three judges confirmed the decision.
“FINSA’s allegations” arise from “an alleged breach of a written agreement or agreement” within the broad interpretation given to this language under California law, “the ruling said. “Therefore, Great American had no obligation to defend the FINSA campaign.”
Lawyers in the case had no comments or did not respond to a request for comment.