Delaware court refuses to dismiss life insurer’s suit against AIG, other insurers

A Delaware state court on Thursday refused to dismiss professional liability coverage litigation filed by life insurer Genworth Financial Inc. against nine insurers, led by an American International Group Inc. unit, for their refusal to pay millions of dollars in three class-action settlements.

Richmond, Virginia-based Genworth Financial Corp., a financial retirement and life insurance company, sued the insurers after it refused to provide coverage based on three policy exclusions, according to the ruling by the Delaware Superior Court in New Castle in Genworth Financial Inc. et al. v. AIG Specialty Insurance Co., et. al.

Genworth was seeking coverage for three separate class-action settlements: one for $213 million in cash damage payments, $26.5 million in attorneys fees plus other expenses; a second where the settlement payouts could range between $84 million and $251 million plus $1.3 million in defense costs; and a third that has led to $400,000 in defense costs and is expected to incur a “substantial amount” in damages payments and other costs.

Genworth had $80 million in liability coverage from nine layers of insurance in excess of its $25 million in self-insured retention, with AIG providing the first $10 million layer of coverage.

Other layers were provided by Axis Insurance Co.; Tokio Marine Holdings Inc. unit U.S. Specialty Insurance Co.; Nationwide Mutual Insurance Co. unit Freedom Specialty Insurance Co.; Chubb Ltd. unit Ace American Insurance Co.; CNA Financial Corp. unit Continental Casualty Co.; OneBeacon Insurance Co. unit Atlantic Specialty Insurance Co. and Argonaut Insurance Co.

Insurers refused to pay on the basis of three coverage exclusions: an exclusion for losses arising out of Genworth’s underwriting; one arising out of premiums, return premiums or commissions; and an exclusion for claims arising out of claims reserves.

The court granted Genworth’s motion to dismiss the claims reserves and underwriting exclusions defenses.

“A plain reading of the Claims Reserves Exclusion demonstrates that the provision does not bar Genworth’s claims,” the ruling said.

In ruling on the underwriting exclusion, the decision said, “the Underlying Actions do not involve any allegations attributable to the underwriting of the policies.” 

The court said there are “genuine issues of material fact” on the reserves claim exclusion and denied Genworth’s motion to dismiss it, in also denying the insurers’ motion for summary judgment in the case.

Genworth and AIG attorneys had no comment.