NU Online News Service, Sept. 16, 2:00 p.m.EDT

A federal court has rejected efforts by the president of a firmwhose tainted peanut butter killed nine people to obtain coverageover the $1 million limit of his company's directors and officersliability policy.

U.S. District Court Judge Norman K. Moon, sitting in Lynchburg,Va., on Sept. 3 granted the insurer–Federal Insurance Company–asummary judgment tossing out claims by Stewart Parnell, president,chief executive officer and a part owner of Peanut Butter Corp. ofAmerica.

Mr. Parnell had entered a counterclaim for legal defenseexpenses outside of the policy's limits. He had also alleged thatFederal had agreed to fund a defense within the policy. The judgefound his claim was implausible, inconceivable and failed to pleadthe prima facie elements for a breach of contract.

Georgia-based PCA was hit with massive lawsuits and a federalcriminal probe after its peanut products infected with salmonellabacteria caused nine deaths and prompted massive recalls lastyear.

After the firm filed for bankruptcy, Federal–anticipating thatclaims would exceed the policy limit–secured an order from thebankruptcy court in Western Virginia permitting the insurer todeposit its policy limit of $1 million with the court.

Mr. Parnell, one of 14 defendants who filed competing demandsunder the policy, was seeking $951,000.

Judge Moon in his decision said there is "no genuine disputethat Federal legitimately fears the risk of multiple lawsuits overthe policy proceeds in this case," noting there are now more than100 defendants.

"The fact that PCA, its executives and its employees are thesubject of so many serious accusations of wrongdoing certainlymakes it 'legitimate' for Federal to fear that there will be claimsthat will easily exhaust the policy limit, and none of thedefendants dispute that contention," he wrote.