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The insurer is not obliged to pay for extra contractual damages



A federal appeals court has overturned a lower court ruling that an insurer is not liable to pay a policyholder more than $ 2.8 million in extracurricular damages in a lengthy coverage dispute involving writing markers.

Monday's decision of the 7th American Circuit Court of Appeals in Chicago Creation Supply Inc. v. Selective Insurance Co. of the Southeast reflects a "decade-long three-way battle" between Selective Insurance, a unit in Branchville, New Jersey-based Selective Insurance Group Inc., and Minooka, Illinois-based Creation Supply Inc., the ruling said.

The issue in this case was "the narrow question" of whether CSI was properly awarded additional contractual damages under Illinois law, the decision said.

CSI, which imports and sells writing markers, was sued by a competitor in Oregon Federal Court in 201

2 for alleged sales of copycat products. CSI turned to its insurance company, Selective, for a defense, but Selective refused "for what the district court here considered dubious reasons," the decision said.

Selective then sued CSI in Illinois State Court for a declaration that it was not guilty. CSI an obligation to defend. While the Illinois action was pending, the CSI ruled the Oregon action in 2013 without money, and an injunction requiring it to stop selling the alleged counterfeit markets, the decision said. the company owed a defense in the Oregon action, and it was later upheld by a state appeals court, the decision said.

While the State of Illinois action was still pending, the CSI brought an action in this case before the U.S. District Court of Chicago under Section 155 of the Illinois Code of Conduct, which allows an insured to seek extra contractual damages from an insurance company in any of three cases. issues that remain unresolved: the insurer's liability under the insurance the amount of the loss to be paid under the insurance; or if there was an unreasonable delay in resolving a claim.

The district court found that CSI's refusal to defend Oregon or to provide insurance coverage was "annoying and unreasonable" and justified $ 2.8 million in section 155 damages.

The judgment was set aside by a unanimous panel of three Judges' Court of Appeal. None of the threshold issues that must remain unresolved for a section 155 requirement remain, it said.

"Selective is alleged to have failed to pay on time for a judgment it is alleged to have failed in time to resolve a claim " it stated, for example, to reverse the decision of the lower court and reconsider the goal.

Lawyers in the case did not comment on the verdict.

Last week, a federal appeals court reversed a lower court ruling that a subcontractor's policy required a selective entity to defend or indemnify the contractor. Catalog

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