Facts

Plaintiff Nu Tech LLC took part in the manufacture of certain cosmetics. It sought to obtain liability insurance from defendant Certain Underwriters at Lloyd's London. In doing so, the plaintiffs utilized insurance brokerage services. In October 2001, the plaintiff filed a Chapter 11 bankruptcy petition. Defendant denied plaintiff insurance coverage.

Lloyd's was accused of engaging in prohibited "post-claim underwriting" to add additional insureds to deliberately trigger the "insured-versus-insured" exclusion.

Plaintiff also sued their insurance broker, Pridemark, for negligence and fraud in connection with the acquisition of the D&O policy. The negligence theory against Pridemark was that Pridemark failed to follow and carry out the instructions of its client as to which members of a limited liability company were to be included as named insureds. As a result, underlying litigation was denied on the basis of the insured v. insured exclusion in Lloyd's policy. Plaintiff allegedly was compelled to file for bankruptcy as a result, plaintiff Trudi Bonnet lost her executive position with Nu Tech and the other two plaintiffs suffered other damages related to Nu Tech's bankruptcy filing. The fraud theory was that one of Pridemark's agents forged two insurance applications and, thereafter, falsely represented that coverage as requested by Plaintiffs was in place. The same damages allegedly resulted, along with a request for punitive damages.

PLAINTIFF'S CONTENTIONS:
Plaintiff claimed that Lloyd's wrongfully denied a defense and indemnity for a lawsuit brought by the heir of the founder of the LLC and by member corporations of the LLC for management misfeasance and equitable relief. Plaintiffs contended that Lloyd's underwriter had named the wrong insured on the policy and further contended that this error was in part caused by the negligence of plaintiff's insurance broker, defendant Pridemark. Plaintiffs alleged that the denial of coverage caused the LLC to file bankruptcy and they sought compensatory damages in excess of $14 million, as well as punitive damages.

DEFENDANT'S CONTENTIONS:
The defendant denied committing any wrongdoing and contended that the plaintiff did not suffer any damages as a result of its refusal to defend the case.

Settlement Discussions

According to defendant Pridemark, settlement demand by plaintiffs' counsel during jury deliberations was $2 million.

Result

After a seven-week trial, the jury rendered a defense verdict for Lloyd's. The jury found that the Lloyd's directors and officers policy, as written by Lloyd's underwriter, did not cover the plaintiffs for the underlying lawsuit. Judgment also for defendant Pridemark. The case against the surplus line brokers, Frederick John Fisher and ELM Insurance Brokers, was severed for separate trial and was ultimately dismissed.