Insurers not on hook for part of $83M settlement

A federal judge has ruled that two insurers are not obligated to provide coverage for damages the Anheuser-Busch Employees’ Credit Union incurred while defending itself against a consumer class action lawsuit that resulted in an $83 million settlement.

On April 6, U.S. District Judge Catherine D. Perry sided with Travelers Property Casualty Company of America and its subsidiary, The Charter Oak Fire Insurance Company, granting their summary judgment motion in a liability insurance coverage suit brought against them by the credit union.

She ruled that the two insurers, referred to jointly as Travelers, had no duty to defend or indemnify the credit union in a countersuit alleging it improperly noticed vehicle repossessions and reported false or derogatory credit information relating to the repossessions.

The credit union sued Travelers for breach of contract and vexatious refusal in the U.S. District Court for the Eastern District of Missouri in 2018 after Travelers refused to defend and indemnify it in a class action countersuit brought against the credit union by lead plaintiff Daniel P. Wells.

Wells countersued in 2016 after the credit union filed a petition in the St. Louis Circuit Court seeking to recover a deficiency judgment from Wells after it repossessed and sold his vehicle.

Wells’ counterclaims included that the credit union failed to issue Uniform Commercial Code-compliant notices before accelerating the maturity of his and other class members’ unpaid balances, before repossessing their vehicles, before disposing of the vehicles and after the sale of the vehicles.

The class also alleged the credit union reported false or derogatory credit information related to the repossessions to local and national credit bureaus.

St. Louis Circuit Judge Barbara Peebles approved an $83 million settlement between the class and the credit union in July 2018. The agreement included $15.2 million in attorneys’ fees for class counsel from the Onder Law firm. Although the parties agreed to not publicize the settlement, it was included in the case file for the insurance suit.

According to Perry’s order, at the time of Wells’ countersuit, the credit union held two policies issued by Travelers, a commercial general liability policy with a $2 million coverage limit, and a follow-form commercial excess liability policy providing an additional $5 million in coverage.

Perry ruled in part that Travelers was not obligated to provide coverage for property damages stemming from the counterclaimants’ loss of use of their vehicles because the damage was not caused by an accidental “occurrence” that would trigger coverage.

“I agree with Travelers that there was no potential for coverage for any claimed ‘loss of use’ damages under Coverage A because the damages are unavoidably attributable to ABECU’s deliberate vehicle repossessions, and consequently cannot be attributed to any accidental ‘occurrence,’” she said.

David E. Larson of Martin Pringle in Kansas City represented the credit union. Jonathan Shulan of Armstrong Teasdale in St. Louis represented the insurers. Both sides declined to comment.

The case is Anheuser-Busch Employees’ Credit Union v. Travelers Property Casualty Company of America, et al., 4:18-cv-1208.