American Legacy Foundation v. National Union Fire Ins.
(D.C. Delaware, July 9, 2009)
The District Court of Delaware held that the plaintiff was not entitled to defense costs associated with a declaratory judgment action it commenced involving a Master Settlement Agreement (MSA) involving several tobacco companies. Arguing the plaintiff was disseminating “false and misleading” information, one tobacco company threatened legal action against the plaintiff, including claiming that it breached the MSA “vilification” provision. The plaintiff, in turn, commenced a declaratory judgment action and the tobacco company asserted several counterclaims, which were limited to the MSA breach. The district court held the plaintiff adopted the MSA and, as a result, was open to suit for its breach. Despite the fact the plaintiff ultimately prevailed in defending the counterclaims, the court held because the claims stemmed from contractual liability thereby absolving the insurer of a duty to reimburse defense costs.
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By Kimberly E. Whistler