Bad faith is the unreasonable failure of an insurance company to honor the terms of an insurance policy and deal with a policyholder in good faith. Insurance companies who are found to have acted in bad faith can be liable for punitive damages in addition to contract damages. Some states have bad faith statutes called "Unfair Insurance Claims Practices Acts."
ACE Unit Sues Former Clients over Patent Suit Squabble
August 7th, 2013 - Illinois Union Insurance Co. has sued two former policyholders in an effort to secure a court order that it has no duty to defend them in a massive patent liability lawsuit.
The ACE Group unit asked a federal court in Philadelphia to declare that it has no duty to defend Teva Pharmaceutical Industries Ltd. and Teva Pharmaceuticals USA Inc.
On June 1st, 2002, Illinois Union sold a $5 million excess liability policy to Teva USA. A year later the policy was endorsed to include its parent company, Israel-based Teva Pharmaceutical Industries Ltd.
On May 24th, 2004, drugmakers Wyeth and Altana Pharma AG filed a patent infringement suit against Teva USA in federal court in New Jersey. They claimed that German-based Altana held the patent for pantoprazole sodium, the active ingredient in an anti-ulcer drug, Protonix. that was exclusively marketed by Wyeth.
A jury found in April of 2010 in favor of Wyeth. Yet Illinois Union contended that it was not until August of 2011 - seven years after the complaint was first filed - that Teva’s insurance agent notified the carrier of the Wyeth claim.
Illinois Union asked the court to rule in its favor on the grounds that Teva gave untimely notice of the lawsuit, in contravention of language in the policy requiring timely notice. The insurer also wanted a declaration that Teva is estopped from obtaining coverage, by virtue of an email its authorized agents sent to Illinois Union, representing that no claims pertinent to the policy had been filed as of June 1, 2007.
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