News & Events
Skarzynski Marick Secures Appellate Victory on Duty to Defend Antitrust Lawsuit and Insured’s Claim of Conflict of Interest Requiring Independent Counsel
Skarzynski Marick & Black LLP attorneys Michael Marick, Joel Vander Vliet, and Andrew Candela successfully represented Travelers Property Casualty Company of America on appeal, where the insured, Joseph T. Ryerson & Son, Inc., sued Travelers for breach of contract and various statutory claims-handling claims in connection with two unrelated underlying lawsuits. Joseph T. Ryerson & Son, Inc. v. Travelers Indemnity Company of America, 2020 IL App (1st) 182491. The Illinois Appellate Court’s decision addresses significant issues relating to business disparagement coverage, duty to defend principles, and purported conflicts of interest and policyholders’ demands for their own choice of counsel at an insurer’s expense.
In one underlying lawsuit, a competitor brought antitrust conspiracy and business interference claims against Ryerson, which tendered its defense under its Travelers general liability policy; Travelers denied coverage. In the subsequent litigation between Ryerson and Travelers, Ryerson argued that certain statements which it allegedly made about the underlying plaintiff implicated Travelers’s duty to defend under the policy’s “personal injury” definition, which included the offense of “publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services.” The Illinois Appellate Court held that the alleged statements were made in furtherance of the alleged antitrust conspiracy, did not even potentially allege a trade disparagement offense, and therefore did not trigger Travelers’s duty to defend. The Appellate Court refused to consider deposition testimony from the underlying lawsuit cited by Ryerson, reaffirming the rule that the duty to defend is determined from the factual allegations of the underlying complaint and only under certain very limited circumstances will courts consider information outside of the complaint to establish a duty to defend.
In the second underlying lawsuit, Travelers defended Ryerson under a general liability policy which was subject to a $2 million limit of liability. A $27 million verdict was returned against Ryerson, and judgment was entered. Ryerson argued that because it faced liability of over $27 million, but had only $2 million in Travelers coverage, Travelers faced a conflict of interest, such that Ryerson could retain its own counsel at Travelers’s expense. While no Illinois court has found a conflict triggering a right to independent counsel solely because an insured’s potential liability exceeds the policy limits, Ryerson argued that two federal opinions supported its position. The Appellate Court held, however, that Illinois law does not recognize a conflict of interest implicating a right to independent counsel based on the possibility of a verdict in excess of policy limits, rejecting the federal opinions cited by Ryerson.
In one underlying lawsuit, a competitor brought antitrust conspiracy and business interference claims against Ryerson, which tendered its defense under its Travelers general liability policy; Travelers denied coverage. In the subsequent litigation between Ryerson and Travelers, Ryerson argued that certain statements which it allegedly made about the underlying plaintiff implicated Travelers’s duty to defend under the policy’s “personal injury” definition, which included the offense of “publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services.” The Illinois Appellate Court held that the alleged statements were made in furtherance of the alleged antitrust conspiracy, did not even potentially allege a trade disparagement offense, and therefore did not trigger Travelers’s duty to defend. The Appellate Court refused to consider deposition testimony from the underlying lawsuit cited by Ryerson, reaffirming the rule that the duty to defend is determined from the factual allegations of the underlying complaint and only under certain very limited circumstances will courts consider information outside of the complaint to establish a duty to defend.
In the second underlying lawsuit, Travelers defended Ryerson under a general liability policy which was subject to a $2 million limit of liability. A $27 million verdict was returned against Ryerson, and judgment was entered. Ryerson argued that because it faced liability of over $27 million, but had only $2 million in Travelers coverage, Travelers faced a conflict of interest, such that Ryerson could retain its own counsel at Travelers’s expense. While no Illinois court has found a conflict triggering a right to independent counsel solely because an insured’s potential liability exceeds the policy limits, Ryerson argued that two federal opinions supported its position. The Appellate Court held, however, that Illinois law does not recognize a conflict of interest implicating a right to independent counsel based on the possibility of a verdict in excess of policy limits, rejecting the federal opinions cited by Ryerson.