HNY v AIG - resolute case 1 13 cv 06126

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<ul><li><p>7/27/2019 HNY v AIG - resolute case 1 13 cv 06126</p><p> 1/9</p><p>IN THE UNITED STATES DISTRICT COURTFOR THE NORTHERN DISTRICT OF ILLINOISEASTERN DIYISION</p><p>Fru\EnAUG g I 20t3*ffi8,#IB[*,</p><p>HENNESSY INDUSTzuES, INC., for itself andas successor-in-interest to Ammco Tools, Inc., aDelaware corporation,</p><p>Plaintiff,v.</p><p>NATIONAL UNION FIRE INSURANCECOMPANY OF PITTSBURGH, PA, APennsylvania Corporation,</p><p>l3cv6 126Judge Marvin E. AsPenMagistrate JeffreY Cole</p><p>Defendant.</p><p>COMPLAINTPlaintife Hennessy Industries, lnc., for itself and as successor-in-interest to Ammco</p><p>Tools, Inc., (collectively ooHennessy") by its attorneys, and for its Complaint against DefendantNational Union Fire Insurance Company of Pittsburgh, Pa. ('National Union") states as follows:</p><p>NATURE OF ACTIONl. Hennessy brings this action against National Union pursuant to 2l5ILCS 5/155.</p><p>National Union, itself and through its agent Resolute Management, Inc. ("Resolute"), hasunreasonably and vexatiously refused to pay settlements, attorneys' fees and costs, expertwitness fees, and other defense expenses in connection with underlying lawsuits againstHennessy alleging bodily injury from asbestos exposure.</p><p>2. In 2008, National Union and Hennessy entered into a confidential Cost SharingAgreement ("CSA") further defining the parties' rights and obligations under policies ofinsurance issued and/or sold by National Union to Hennessy. The CSA is governed by Illinoislaw and contains an arbitration provision providing for certain disputes between Hennessy and</p><p>MEI 16349725v.1</p><p>Case: 1:13-cv-06126 Document #: 4 Filed: 08/28/13 Page 1 of 9 PageID #:6</p></li><li><p>7/27/2019 HNY v AIG - resolute case 1 13 cv 06126</p><p> 2/9</p><p>National Union to be submitted to binding arbitration governed by the Federal Arbitration Act, 9U.S.C. Sec. 1.</p><p>3. Pursuant to the procedure outlined in the CSA, Hennessy sent a letter to NationalUnion identiffing numerous disputes involving payments improperly withheld by NationalUnion and other breaches of the CSA and demanding that National Union engage in arbitrationto resolve these disputes. Illinois law forbids the arbitration of bad faith claims under 215 ILCS5i155. See, e.g.,Amerisure Mut. Ins. Co. v. Global Reinsurance Corp. of Am.,399 I11. App. 3d610,619 (Ill. App. Ct. 1st Dist. 2010).</p><p>PARTIES4. Hennessy is a Delaware corporation with its principal place of business in</p><p>Tennessee. Hennessy's corporate headquarters is located in Nashville, Tennessee. Hennessy isthe successor-in-interest to policies of insurance issued in Illinois to Ammco Tools, Inc., whichhad its headquarters in Illinois.</p><p>5. National Union is a Pennsylvania corporation with its principal place of businessin New York, New York. National Union is a member of the AIG Group of insurancecompanies ("AIG") and is licensed by the Illinois Department of Insurance to do business inIllinois.</p><p>JURISDICTION AND YENUE6. This Court has subject matter jurisdiction pursuant to 28 U.S.C. g 1332(a)(1)</p><p>because there is complete diversity between the parties and the amount in controversy exceeds$75,000.</p><p>7. This Court has personal jurisdiction over National Union because it transactsMEl 16349725v.1 -2-</p><p>Case: 1:13-cv-06126 Document #: 4 Filed: 08/28/13 Page 2 of 9 PageID #:7</p></li><li><p>7/27/2019 HNY v AIG - resolute case 1 13 cv 06126</p><p> 3/9</p><p>business in the State, is licensed by the Illinois Insurance Department, and issued contracts toprovide insurance to Hennessy, which, at the time of issuance, had its principal place of businessin Illinois.</p><p>8. Venue is proper pursuant to 28 U.S.C. $ 1391(b)(3) because National Union issubject to personal jurisdiction in this judicial district.</p><p>BACKGROUND9. Underlying plaintiffs have brought hundreds of lawsuits against Hennessy</p><p>alleging bodily injuries from exposure to asbestos in various jurisdictions throughout thecountry.</p><p>10. Those plaintiffs allege exposure to asbestos as a result of the operation of brakeshoe arcing machines and brake drum lathes manufactured by Ammco, Hennessy's predecessorin interest. None of the machines themselves contain asbestos. The use of the brake shoe arcingmachine in conjunction with brake shoes, an unknown percentage of which may have containedasbestos, is alleged to have caused injury.</p><p>11. National Union issued two primary commercial general liability insurancepolicies to Ammco: (1) Policy No.GLA 116-09-93, covering the policy period of August l,1984 to August 1, 1985, with limits of liability of $l million each occurrence and in theaggregate; and (2) Policy No. GLA 117-09-68, covering the policy period of August 1, 1985 toAugust 1, 1986, with limits of liability of $1 million each occurrence and in the aggregate("National Union Policies").</p><p>12. Pursuant to acquisition and merger, Hennessy succeeded to Ammco's rights underthe National Union Policies.</p><p>MEI 16349725v.1 -J-</p><p>Case: 1:13-cv-06126 Document #: 4 Filed: 08/28/13 Page 3 of 9 PageID #:8</p></li><li><p>7/27/2019 HNY v AIG - resolute case 1 13 cv 06126</p><p> 4/9</p><p>13. In April 2008, Hennessy and its primary insurers, National Union and ZurichAmerican Insurance Company, as successor in interest to Zuich Insurance Company, U.S.Branch, entered into the CSA, defining inter alia the rights and obligations of the parties underthe National Union Policies in connection with the underlying asbestos claims.</p><p>14. The CSA contains an arbitration provision, which by its terms and pursuant to lawdoes not include claims brought under 215 ILCS 51155.</p><p>15. In April 2011, National Union and other AIG insurance companies entered into atransaction with National lndemnity Company ("NICO") whereby, according to filings with theSecurities and Exchange Commission, AIG paid NICO $1.65 billion for a reinsurance policy tocover "the bulk of AIG's net domestic asbestos liabilities," valued at $3.5 billion.</p><p>16. Additionally, effective January 1,2011, NICO assumed responsibility for claims-handling related to National Union's asbestos liabilities.</p><p>17. NICO delegated its claim-handling responsibilities to its affiliate, ResoluteManagement, Inc (ooResolute"). Both NICO and Resolute are direct or indirect wholly-ownedsubsidiaries of Berkshire Hathaway.</p><p>18. Since at least April 2011, Resolute has acted as the third-party claimsadministrator of National Union's obligations under the CSA and the National Union Policiesand all communications regarding Hennessy's claims have been with employees of Resolute.</p><p>19. Berkshire Hathaway profits by investing the money paid by AIG to assume theasbestos liabilities and then by delaying payment and/or breaching its insuring obligations.Berkshire Hathaway's Chairman, Warren Buffet, refers to the money NICO owes topolicyholders as the "float."</p><p>MEI 16349725v.1 -4-</p><p>Case: 1:13-cv-06126 Document #: 4 Filed: 08/28/13 Page 4 of 9 PageID #:9</p></li><li><p>7/27/2019 HNY v AIG - resolute case 1 13 cv 06126</p><p> 5/9</p><p>20. In his 2011 letter to shareholders accompanying the 2011 Berkshire HathawayAnnual Report, Buffet described this scheme:</p><p>Our insurance operations continued their delivery of costlesscapital that funds a myriad of other opportunities. This businessproduces "float" - money thqt doesn't belong to tts, but that we getto invest for Berkshire's benefit. And if we pay out less in lossesand expenses than we receive in premiums, we additionally earn anunderwriting profit, meaning thot float costs us less than nothing.</p><p>(Emphasis added).21. Included in the "costless capital" or oofloat" that Buffet refers to is more than $2.5</p><p>million National Union owes under the CSA.22. Before Resolute assumed claims-handling responsibility for National Union's</p><p>liabilities, National Union generally (although not entirely) complied with the CSA. Since April2011, Resolute has caused National Union repeatedly to breach its obligations under the CSA,the National Union Policies and Illinois law.</p><p>23. The breaches include, inter alia,National Union's failure to pay its share ofsettlements payments advanced by Hennessy and subject to reimbursement under the CSA;National Union's wrongful and arbitrary failure to pay a significant portion of the fees ofHennessy's defense counsel, all of who are insurer "panel counsel" selected and approved byZ'xrch and National Union; and National Union's failure to cooperate with Hennessy byproviding usual and customary claims communications, including timely notices of withdrawalfrom cases or denials ofcoverage, loss runs, and defense cost detail.</p><p>24. Hennessy has sent National Union various notices demanding payment as well asa demand for arbitration identifring National Union's breaches and the damages flowing fromthose breaches.</p><p>MEI 16349725v.1 -5-</p><p>Case: 1:13-cv-06126 Document #: 4 Filed: 08/28/13 Page 5 of 9 PageID #:10</p></li><li><p>7/27/2019 HNY v AIG - resolute case 1 13 cv 06126</p><p> 6/9</p><p>COUNT I(Vexatious And Unreasonable Conduct Aeainst National U+ion)25. Hennessy incorporates and realleges the allegations in Paragraphs 1 through 24 as</p><p>and for Paragraph 25, as if the same were fully set out herein.26. 215 ILCS 51155 provides as follows:$ 155. Attorney fees.(1) In any action by or against a company wherein there is inissue the liability of the company on a policy or policies ofinsurance or the amount of loss payable thereunder, or for anunreasonable delay in settling a claim, and it appears to the courtthat such action or delay is vexatious and unreasonable, the courtmay allow as part of the taxable costs in the action reasonableattorney fees, other costs, plus an amount not to exceed any one ofthe following amounts:(a) 60Yo of the amount which the court or jury finds such partyis entitled to recover against the company, exclusive of costs;(b) $6o,ooo;(c) the excess of the amount which the court or jury finds suchparty is entitled to recover, exclusive of costs, over the amount, ifany, which the company offered to pay in settlement of the claimprior to the action.27. Under applicable law, the totality of the circumstances determines whether</p><p>National Union acted vexatiously and unreasonably.28. Viewing the totality of the circumstances, National Union's conduct, through the</p><p>actions of its agent, Resolute, was, and continues to be, vexatious and umeasonable.29. National Union's unreasonable conduct is evidenced by, among other things, its</p><p>and Resolute's flagrant and entirely unjustified refusal to honor its obligations under the NationalUnion Policies, the CSA and applicable Illinois law.</p><p>30. Rather than pay as required under the CSA, National Union Policies andapplicable Illinois law, National Union has forced Hennessy to pay settlements and defense costs</p><p>MEI 16349725v.1 -6-</p><p>Case: 1:13-cv-06126 Document #: 4 Filed: 08/28/13 Page 6 of 9 PageID #:11</p></li><li><p>7/27/2019 HNY v AIG - resolute case 1 13 cv 06126</p><p> 7/9</p><p>and to bring an arbitration as a prerequisite to any recovery.31. There isno bonafide dispute as to National Union's obligations to Hennessy.32. It would defeat the purpose of $ 155 to allow National Union to escape a penaltywhen it has jeopardized the coverage that National Union agreed to provide in the National</p><p>Union Policies and in the CSA.WHEREF'ORE, the plaintiff, Hennessy, respectfully requests that this Court enter</p><p>judgment in its favor and against National Union; award it all of its attorneys' fees, costs andpenalties pursuant to 2l5ILCS 5/155 for National Union's vexatious and unreasonable conduct;and award all other just and proper relief.</p><p>DEMAND FOR JURY TRIALPursuant to Federal Rule of Civil Procedure 38(b), Hennessy hereby demands a trial by</p><p>jury on all issues so triable.HENNESSY INDUSTRIES, [NC., for itselfand as successor-in-interest to Ammco Tools,Inc.</p><p>MEI 16349725v.1 -7 -</p><p>Case: 1:13-cv-06126 Document #: 4 Filed: 08/28/13 Page 7 of 9 PageID #:12</p></li><li><p>7/27/2019 HNY v AIG - resolute case 1 13 cv 06126</p><p> 8/9</p><p>Angela R. Elbert (#6236964)aelbert@ngelaw.comJason A. Frye (#6292848)jfrye@ngelaw.comNEAL, GERBER &amp; EISENBERG, IIPTwo North LaSalle Street, Suite 1700Chicago, IL 60602(312)26e-8000-And-Gita F. Rothschild (Pro Hac Vice pending)Brian J. Osias (Pro Hac Vice pending)MCCARTER &amp; ENGLISH I.IpFour Gateway Center100 Mulberry St.Newark, New Jersey 07102(e73) 63e-7e69</p><p>Dated: August 28,2013</p><p>MEI 16349725v.1 -8-</p><p>Case: 1:13-cv-06126 Document #: 4 Filed: 08/28/13 Page 8 of 9 PageID #:13</p></li><li><p>7/27/2019 HNY v AIG - resolute case 1 13 cv 06126</p><p> 9/9</p><p>NOTIFICATION AS TO AFFILIATESPursuant to Local Rule 3.2 and Rule 7.1 of the Federal Rules of Civil Procedure, Plaintiff</p><p>Hennessy Industries, Inc. respectfully submits this corporate disclosure statement andnotification as to affiliates: Hennessy Industries, Inc. is a wholly-owned indirect subsidiary ofDanaher Corporation. Danaher Corporation is publicly traded.</p><p>Case: 1:13-cv-06126 Document #: 4 Filed: 08/28/13 Page 9 of 9 PageID #:14</p></li></ul>