In 2016, General Cable Corporation (a Kentucky based manufacturer and distributor of cable and wire) resolved a parallel DOJ and SEC enforcement action concerning conduct in Angola, Bangladesh, Indonesia, Thailand, China, and Egypt by agreeing to pay approximately $75 million. (See here for the prior post).
Recently, General Cable filed a civil lawsuit against Scottsdale Indemnity Company (Nationwide) alleging that the insurer has failed to provide coverage for settlement payments and defense costs associated with the Foreign Corrupt Practices Act and related matters.
The complaint alleges in pertinent part:
“Scottsdale issued to General Cable two excess insurance policies for consecutive policy periods (2011-2012 and 2012-2016) claims-made Directors and Officers Liability Policy (the “D&O Policy”).
[…]
[I]n September 2012, following an internal audit, General Cable determined that certain foreign subsidiaries potentially engaged in conduct that exposed it to liability under the FCPA, and subsequently reported it to the SEC and DOJ. From August 2014 to July 2015, the SEC issued multiple subpoenas to the General Cable and individual executive employees. General Cable settled the SEC and DOJ investigations into FCPA violations for over $75 million.
Two lawsuits arose from the FCPA investigation, which were consolidated and transferred to the Eastern District of Kentucky, styled under the caption In re General Cable Corporation Securities Litigation, Case No. 17-CV-00025 (E.D. Ky.) (“Doshi II”). This case was dismissed, not appealed, and therefore final. General Cable alleges to have paid more than $31 million in losses related to the FCPA investigation and more than $800,000 in defense expenses.
General Cable alleges a coverage dispute between the primary insurer (Travelers) and the first excess insurer (Old Republic Insurance Company, hereinafter “Old Republic”) … Mediation was scheduled to occur between General Cable, Travelers, and Old Republic, in March of 2020. Upon information and belief, this mediation never occurred.
[…] General Cable is (1) entitled to coverage for settlement payments and defense costs and expenses under the Policies issued by Scottsdale; (2) that Scottsdale has anticipatorily breached the Policies by failing to provide coverage.”
Elsewhere, the complaint alleges:
“General Cable timely tendered its claim for coverage as to the FCPA Matters to the Underlying Insurers and Nationwide through a series of notices and/or documentation.
In response, the Underlying Insurers and Nationwide issued to General Cable a series of letters purporting to reserve rights and provide their respective coverage positions.
As is relevant here, Travelers and Old Republic dispute whether the 2011-2012 Tower or the 2012-2016 Tower of coverage applies to the FCPA Matters. The dispute over which tower applies, in turn, gave rise to a dispute over the amount of FCPA- related costs Travelers paid under the 2011 Travelers Policy to create a “gap” between the “proper” exhaustion of the 2011 Travelers Policy and the Old Republic Policy.
General Cable’s substantial losses for the FCPA Matters are in excess of the policy limits provided by the Underlying Insurers’ policies in both the 2011-12 and 2012-2016 Towers. Therefore, regardless of whether the proper tower of coverage attributable to the FCPA Matters is the 201 1-2012 Tower or the 2012-2016 Tower, Nationwide’s coverage is implicated.
General Cable, Travelers and Old Republic engaged in negotiations regarding the dispute over which tower of coverage applies to the FCPA Matters and provide coverage for General Cable’s FCPA-related loss beginning in 2019. To that end, General Cable, Travelers and Old Republic entered into a tolling agreement and agreed to engage in meditation. That mediation was scheduled to take place on March 20, 2020, at the outset of the COVID-19 pandemic, and was therefore cancelled due to the implementation of governmental “stay at home” orders and travel restrictions.
Once the March 2020 mediation was cancelled due to COVID-19 restrictions, General Cable made efforts to reschedule. As part of those efforts, General Cable communicated with Nationwide on several occasions to secure Nationwide’s acknowledgment of coverage for the FCPA Matters, and its agreement to participate in the rescheduled mediation along with Travelers and Old Republic, including written exchanges in late 2021 providing Nationwide with the parties’ mediation statements so that Nationwide could evaluate and consider its participation.
However, as of January 2022, Nationwide had neither acknowledged its coverage obligation, nor agreed to participate in the mediation. Accordingly, on January 18, 2022 General Cable again wrote to Nationwide demanding that Nationwide acknowledge its obligation to cover the FCPA Matters. […].
To date, Nationwide has failed to accept coverage or otherwise participate in negotiations or potential mediation with respect to its obligations.”
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