Insurance

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7^th Circuit Court of Appeals

Case Name: Edward E. Gillen Company et al v. The Insurance Company of the State of Pennsylvania

Case No.: 15-1323

Officials: WOOD, Chief Judge, and EASTERBROOK and HAMILTON, Circuit Judges.

Focus: Insurance

Dispute over who receives money paid to court registry

“The Bank maintains that the Excess Insurer’s payment wasn’t really insurance. Gillen and the Excess Insurer disputed how much (if anything) it owed; they settled for $1.2 million. The Bank wants us to treat this as damages for the bad‐faith denial of insurance coverage, rather than as insurance proceeds. Yet if an insurer wrongfully delays payment, and later makes everyone whole, why would the delay di‐ vert the money to a secured creditor rather than the person who should have received the cash in the first place? “Dam‐ ages” measured by the value of insurance wrongfully delayed are just insurance proceeds by another name. That is not inevitable, but the Bank does not contend that Wisconsin sees a difference. This part of its argument does not rely on any statute or decision from Wisconsin, or any other state for that matter. The federal court’s job in diversity litigation is to predict how the state’s highest court would resolve a legal contention. We are confident that the Supreme Court of Wisconsin would give the beneficiary of an insurance policy (here F&D as Meyne’s subrogee for $800,000) the same rights, whether the payment is called “insurance” or “damages for failure to indemnify on time”. Any amount exceeding the beneficiary’s rights (here the $400,000) is genuine damages subject to a security interest. That’s exactly how the district court apportioned this $1.2 million”

Affirmed

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.