Insurer Must Pay For Cost Of Suing
NU Online News Service, Aug. 18, 9:43 a.m. EDT?A Federal appeals court has affirmed the obligation of an insurer to not only defend its policyholder, but also pay the expenses it cost to sue the same insurer when it refused to cover the claim.[@@]
The decision of the Fifth U.S. Circuit in New Orleans affirms the finding of a U.S. District Court jury in Houston that the American Home Insurance Company, a subsidiary of New York City-based AIG, breached its duty when it denied a claim of its client, the United Space Alliance, the NASA prime contractor for Space Shuttle Operations.
United Space Alliance was sued for breach of contract when it dismissed a sub-contractor, who then sued for not only breach, but also claims of defamation and other personal injury-related charges.
American Home denied the claim, asserting it was not responsible for breach of contract disputes. But a jury in the federal court in Texas disagreed and awarded United Space Alliance a multimillion-dollar judgment.
United Space then engaged the law firm of Howrey Simon Arnold and White to sue American Home for the cost of not only the underlying claim in Florida, but also the action in Texas suing its insurer.
Los Angeles-based attorney Curtis Porterfield said he believed the right of the insured to recover as damages not only the defense fees of the underlying counsel in the original case, but also the fees and costs incurred by the insured in the coverage case set a precedent in Texas law.
The original jury award for United Space Alliance was $2,029,625, which has grown by interest due on the outstanding amount. Because the Court of Appeal has sent the damages portion back for further proof, attorneys said it could mean the amount could go higher.
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