Intel, AGLI Sue Each Other Over Defense Obligations

Microprocessor maker Intel Corporation has filed a $50 million lawsuit against insurer American Guarantee and Liability Insurance Company (AGLI) alleging that AGLI breached contract by failing to defend Intel in a court action.

But AGLI countersued, claiming it has not received necessary information from Intel to evaluate the claim.

In its complaint filed in the United States District Court, Northern District of California, Intel explains that it has been a defendant in suits brought against it by competitor Advanced Micro Devices (AMD) and various consumers, which Intel collectively referred to as "the AMD Litigation."

Intel states that, among the complaints, the AMD Litigation alleges unfair business practices and anticompetitive conduct in the sale, promotion and marketing of Intel's microprocessor during the AGLI policy period of 2001-2002. As such, Intel asserted the "Advertising Liability" provision of the AGLI policy should be triggered, and the insurer should defend Intel.

However, the complaint says AGLI denied coverage and refused to provide a defense for Intel. "Without AGLI's assistance, Intel has been defending itself in the AMD Litigation despite the fact that it purchased coverage from AGLI to cover such costs," Intel's complaint states.

Intel noted that it had bought several layers of comprehensive liability insurance from various insurers through broker Marsh. Throughout the litigation process in the AMD Litigation, Intel said it has already exhausted an $11 million retention and a $5 million fronting policy issued by Old Republic Insurance Company, as well as a $50 million commercial umbrella policy issued by XL Insurance America Inc.

The AGLI policy, Intel said, was a following form excess liability coverage and "contains the same terms and conditions" as the XL policy. The AGLI policy "provides $50 million in total defense and/or indemnity coverage in excess of $66 million," the complaint states.

Intel said it is seeking damages for "no less than $50 million, plus interest."

AGLI filed a separate lawsuit in Delaware Superior Court alleging it has not received requested information from Intel that it needs to evaluate the coverage claims.

The complaint states, "Notwithstanding numerous requests by American Guarantee…Intel has failed to provide sufficient information to enable American Guarantee to fully evaluate Intel's claims for coverage."

Intel, in turn, amended its lawsuit, asserting that AGLI breached a "Standstill and Confidentiality Agreement" between the companies by publishing an Intel trade secret in its complaint.

AGLI is a member company of Zurich North America. A spokesman for Zurich said he could not comment on the actions, as the matter is under litigation.

Chuck Mulloy, a spokesman for Intel, said the suits filed represent two opposing views, and the courts will now decide whether the Intel or AGLI lawsuit takes precedent.

Regarding the AMD Litigation, Mr. Mulloy said trial is scheduled for either February or March of 2010. Noting the magnitude of the case, he said the parties have exchanged the electronic equivalent of 200 million pages of information and 1,100 hours of depositions. Expert testimony on the case is expected to occur sometime this summer, Mr. Mulloy said.