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The Collaborative Clearinghouse for Lawsuits and Other Claims Against ACE Group Insurance Companies

Westchester Client Claims Insurers Approved Coverage, then Ducked Bill

September 23rd, 2013 - An Alabama company has sued two ACE Group units for their alleged failure to pay for its defense in lawsuits that the insurers said they would cover.

Great Southern Wood Preserving Inc., of Abbeville, Alabama, sued Westchester Fire Insurance Co and Westchester Surplus Lines Insurance Co. in U.S. District Court in Alabama. It alleged that the insurers breached their contract, which was contained in two comprehensive policies sold to Great Southern in 2003 and 2004.

Starting in 2011, Great Southern was sued in the Virgin Islands by multiple plaintiffs who alleged that lumber products sold to end users in that U.S. territory experienced premature rotting and decay. Great Southern produces pressure treated lumber products that are sold through retail home centers.

In one of the suits, the Whitecap case, Great Southern said it was contacted on June 21st, 2011, by a claims handler with ACE North American Claims. In her email, the claims handler reportedly said, “Westchester Fire Insurance Co. is willing to participate in the defense of (Whitecap) currently pending in the Virgin Islands.” She further said that if the company had incurred defense costs to date, “I can reimburse my share.”

The company and insurer allegedly agreed to a 50 percent reimbursement, and so far Great Southern said it has notified Westchester of bills amounting to more than $1 million. Great Southern has repeatedly asked for reimbursement, but said that “Westchester still has not paid one penny of these defense costs.”

Westchester further agreed to contribute $50,000 toward settlement of the Whitecap suit, but so far has refused to make good on that pledge, according to the suit.

Similarly, Great Southern said it received assurances by Westchester that it would pay defense costs in at least eight other lawsuits pending against the company in the Virgin Islands, but no actual payments have been made. Great Southern said Westchester did not reserve its rights, and it was not until August 6th that it notified its client that it would not pay past defense costs in four of those actions.

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