Jeld-Wen Battles Insurer for Settlement PaymentJanuary 6th, 2022 by Brigid O'Leary
Six months after settling a class action lawsuit, the fight isn’t over for Jeld-Wen, as the company battles with Travelers Casualty and Surety Co. of America in an effort to make the insurance provider pay the last portion of a $40 million settlement. The insurance company argues that Jeld-Wen’s settlement is for a claim that predates coverage by the manufacturer’s excess policy.
In a Brief to Support a Motion for Summary Judgment filed on December 17 in the U.S. District Court for the Western District of North Carolina, Charlotte Division, Jeld-Wen points out that “[o]ne year after receiving notice of the underlying liability claim” against Jeld-Wen and other “certain individual insureds and on the eve of mediation, Travelers denied its insureds’ request for insurance protection and sued them herein.” Jeld-Wen further states that the denial was on the wrong merits and that it “purchased a $90 million ‘tower’ of directors and officers (‘D&O’) liability insurance” for the time frame running from March 15, 2019, to March 15, 2020. The manufacturer goes on to argue that “[t]he underlying claim is a class action lawsuit commenced on February 19, 2020” and thus falls within the policy period.
In the Brief of Support, Jeld-Wen argues that “Travelers issued the fifth layer of coverage, $10 million in D&O insurance between $40 million and $50 million in the tower. The D&O policies are of the ‘claims-made’ variety, which means they cover lawsuits filed during the policy period. The D&O tower consisted of multiple $10 million coverage layers. The excess layers, that is, layers of coverage above the $10 million primary policy at the base of the tower, are ‘follow-form’ policies. Except where expressly noted, follow-form excess policies provide coverage on the same terms as the primary policy.”
Primary insurer Arch Insurance Company “provides specific and dedicated coverage for securities claims” and has “accepted the Securities Claim for coverage under its 2019-2020 primary policy,” as have other “follow-form excess insurers National Union Fire Insurance Company of Pittsburgh, Pa., XL Specialty Insurance Company, and Starr Indemnity & Liability Company,” according to the brief, which, according to officials for Jeld-Wen, indicates that “Travelers was next in line, but instead of honoring its follow-form promise of coverage, Travelers refused to pay, punching a $10 million hole in the middle of the coverage tower, and instead filed this action to avoid the promised coverage.”
Travelers argues that “the Arch primary policy provides no coverage, theorizing that the 2020 Securities Claim, by which JW Holding shareholders alleged misrepresentations under the Securities Exchange Act of 1934, should be deemed the same claim as price fixing antitrust claims asserted years earlier by direct and indirect purchasers of JW, Inc.’s products under the Sherman Antitrust Act” and that “for insurance coverage purposes, these disparate claims asserted by distinct claimants, seeking distinct remedies, under different statutes, are ‘the same claim’ and deemed to have been made at the same time as the earliest of such claims. Consequently, the Travelers argument goes, the investor misrepresentation claims in 2020 under the Exchange Act are really a 2018 claim, and because Travelers is not in the 2018-2019 D&O coverage tower, the Securities Claim was not made during Travelers’ policy period and Travelers owes nothing in exchange for the premium it received.”
To that, lawyers for Jeld-Wen make four arguments, starting with “securities claims and antitrust claims are nothing alike” and “involve completely different wrongful acts and are asserted by mutually exclusive categories of claimants, shareholders, on the one hand, and purchasers of interior door products, on the other.” They go on to cite the Supreme Court’s decision in Credit Suisse Securities (USA) LLC v. Billing, 551 U.S. 264, 265 (2007) that, ultimately, “these claims cannot coexist.” Their second argument is that “claims involved different plaintiffs. The antitrust lawsuits were asserted by two classes: purchasers of interior molded doors directly from JW, Inc. and purchasers of interior molded doors indirectly from JW, Inc. The Securities Claim was asserted by an entirely distinct category of claimants, purchasers of JW Holding’s publicly traded securities.”
The third argument takes things a step further, noting that “the claims were asserted against different defendants and, more critically, against different insureds,” with the “indirect purchaser antitrust lawsuit” filed against Jeld-Wen and Masonite, “the direct purchaser antitrust lawsuit” filed against JW, Inc., JW Holding, and Masonite, and the securities claim “asserted against Mssrs. Beck, Mallard, Hachigian, Michel, JW Holding, Onex Corporation, Onex Partners Manager LP, Onex Partners III LP, Onex Partners III GP LP, Onex US Principals LP, Onex Partners III PV LP, Onex Partners III Select LP, Onex BP Co-Invest LP, Onex Advisor Subco III LLC, Onex American Holdings II LLC, OAH Wind LLC, BP EI LLC, and BP EI II LLC.”
In the Brief, lawyers for Jeld-Wen also contend that the alleged wrongful acts occurred at different times, with the antitrust lawsuits beginning in 2012, adding that the “Securities Claims could not allege misleading statements in the marketing and sale of publicly traded securities until … January 26, 2017.” They also argue that the claims involved different alleged injuries, with “the antitrust claims alleged collusive price fixing between the Jeld-Wen Entities and Masonite, allegedly resulting in reduced competition and higher prices in the market for interior molded doors” while the “Securities Claim alleged misleading statements to investors during and after JW Holding’s IPO, allegedly resulting in an artificially inflated stock price.” Additionally, the lawyers point out, “[t]he claims also allege different theories of recovery to redress these different harms.”
As such, Jeld-Wen and its counsel argue that with “different plaintiffs, different defendants, different insureds, different alleged conduct at different times, resulting in different alleged harm and different alleged damages redressed by different federal regulatory regimes, the claims cannot fairly be deemed one and the same claim such that Travelers is absolved of its express promise to cover securities claims against its insureds. Premium was paid in exchange for that promise, and Travelers must hold up its end of the bargain.”
The 35-page Brief goes into further detail before requesting the Court grant the Motion for Summary Judgment against Travelers. Stay tuned to [DWM] magazine for more information on this case as it becomes available.