Pharma entitled to partial reimbursement of defense costs from CNA

In a partial victory for insureds, a federal appeals court on Thursday affirmed a pharmaceutical company is entitled to partial reimbursement of its defense costs from CNA Financial Corp. units, despite a reservation of rights letter.

In 2015, Winder, Georgia-based Winder Laboratories LLC and its manager, Steven Pressman, were sued by Fort Lauderdale, Florida-based Concordia Pharmaceutical S.A.R.L. for falsely or misleadingly advertising two of its products as generic, according to the ruling by the 11th U.S. Circuit Court of Appeals in Atlanta in Continental Casualty Co., Valley Forge Insurance Co. v. Winder Laboratories LLC, Steven Pressman. Concordia is not a party in this lawsuit.

In 2016, CNA units Continental Casualty and Valley Forge agreed to defend Winder subject to a “fairly standard reservation of rights” letter, the ruling said.

“Importantly, however, the letter also included a not-so-standard reimbursement provision” reserving its right to seek reimbursement of defense costs incurred that are not potentially covered by its insurance policy.

In 2019, the insurers sued Winder and Mr. Pressman in U.S. District Court in Atlanta, seeking a declaratory judgment they had no duty to defend or indemnify the insureds and were entitled to reimbursement of legal costs and fees spent in providing a defense.

The district court agreed that under terms of its policy, the defendants were not entitled to total defense costs. But it also ruled they were entitled to reimbursement of legal costs already incurred until that point.

A three-judge appeals court panel agreed. “We have concluded that the insurers no longer have a duty to defend” the insureds. “But that does not mean that the insurers never had a duty to defend at earlier stages of the case,” it said.

Rather, because under Georgia law insurers have a broad duty to defend” when there is even arguably a covered claim, they “had an active duty to defend up until the point when the district court ruled otherwise,” it said, noting the insurance contract “did not contemplate a right to recoupment of the defense costs.”

Attorneys in the case did not respond to requests for comment.