Gunmaker sues insurer for curtailing defense funding in long-running gun violence case
The underlying lawsuit, which centers on gun violence in Gary, Indiana, started in the late 1990s.
Gunmaker Colt’s Manufacturing Co. sued insurers AIG Specialty Insurance Co. and Pittsburgh-based National Union Fire Insurance Co. in U.S. District Court in Connecticut for an alleged breach of contract after the insurers stopped funding the gunmaker’s legal defense in a case that has been winding its way through the courts for more than two decades.
This complaint was surfaced on Law.com Radar.
The underlying lawsuit, City of Gary, Indiana v. Smith & Wesson, alleged Colt and other manufacturers and distributors of handguns were liable for gun violence in the city. That complaint was filed on Aug. 30, 1999.
The current complaint alleged that Colt gave timely notice of the Gary lawsuit to the defendants. In October 1999, National Union, AIG Entities and the plaintiff entered into a tolling and nonwaiver agreement, “reserving all rights with respect to whether or not various lawsuits, including without limitation the Gary Lawsuit, are covered under the insurance policies,” the complaint said.
Colt also entered into an interim defense funding agreement with National Union, stipulating the insurance company pay the defense costs, the complaint said.
The defense agreement was extended in writing in October 2000 and January 2002, the complaint said. After that “the defense agreement continued to be extended without a writing through at least 2017,” the complaint said.
Up until at least 2017, the complaint said AIG and affiliated entities paid or authorized payments for the defense costs. However, on May 28, 2021, an analyst at AIG Claims Inc. informed Colt that it would no longer pay the defense fees in the Gary lawsuit.
The complaint alleged the “abrupt refusal” to pay the costs is based on a “self-insured retention endorsement” that the defendants allege is part of the insurance policy.
After Colt received this information, it attempted discussions with the defendants, but “those discussions did not lead to an amicable resolution of this dispute,” the complaint said.
“Defendants’ failure and refusal to do so has compelled Colt’s to undertake its defense of the Gary Lawsuit at its own expense and also to incur litigation costs to compel defendants to honor their contractual obligations. Both the defense costs and the litigation costs are ongoing,” the complaint stated.
Colt then notified the defendants on July 31, 2023, that it was terminating the tolling agreement, the complaint said.
The plaintiff, represented by Luma Al-Shibib of Anderson Kill, alleges breach of contract, breach of the implied covenant of good faith and fair dealing and seeks declaratory judgment that the defendants are required to defend Colt in the Gary lawsuit, the complaint said.
Al-Shibib did not immediately respond to a request for comment.
No counsel appeared for the defendants. A spokesperson for AIG did not respond to a request for comment.
The defendants are “liable to Colt’s for damages for wrongful failure to defend, in an amount to be proven at trial together with pre- and post-judgment interest, costs, attorneys’ fees and any consequential damages arising from [the defendant's] breach, including but not limited to Colt’s legal fees and costs, the value of Colt’s lost business opportunities, and any and all sums that Colt’s may be required to pay in damages in the Gary Lawsuit regardless of policy limits,” the complaint said.
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