Attorneys from Hunton Andrews Kurth LLP’s Insurance Coverage practice group contributed to the Firm’s Recall Roundup by weighing in on a recently-filed product contamination insurance coverage dispute, Lake Country Foods, Inc. v. Houston Casualty Co., No. 18-CV-734 (E.D. Wis. filed May 11, 2018), where Lake Country Foods seeks an order permitting it to keep $1.2 million already paid by its insurer and requiring the insurer to provide coverage for the a product contamination claim involving alleged salmonella contamination of powdered whey protein processed in one of LCF’s facilities.
A Georgia district court recently denied an insurer’s attempt to recoup defense costs, holding that even where the court previously determined that coverage was barred under the policy’s pollution exclusion, the insurer could not “rewrite the record” or clarify its “defective” reservation of rights letters to show that it fairly informed the policyholder of its coverage position, which is a prerequisite to recoupment of defense costs.
Congratulations, your cracker-jack defense team just won the underlying case. They also just lost your insurance coverage and you now must repay millions of dollars of defense costs. Seem odd? Not according to the Second Circuit in Petroterminal de Panama, S.A. v. Houston Cas. Co., No. 15-2941-cv (2d Cir., Sept. 8, 2016).