Melissa Murphy-Petros (Of Counsel-Chicago), Jim Thurston (Partner-Chicago) and Paul White (Partner-Los Angeles) prevailed in a coverage action before the Ninth Circuit. The underlying action involved the insured’s sale of a scientific manufacturing facility in Mexico without telling the buyer that the facility had been taken over by the El Chapo drug cartel. The Ninth Circuit affirmed the district court’s grant of our Rule 12(b)(6) motion to dismiss on the basis of the policy’s contract exclusion, finding that the underlying action – which stated claims for fraud – was an action “based on, arising from, or in any way related to an actual or alleged breach of contract.” This decision is important because the underlying action sought damages only for tort claims, and there were no breach of contract claims. Further, certain of the alleged wrongful acts occurred prior to the formation of any contract, yet both courts held the exclusion still had application. Although there was no claim for indemnity, the insured sought $5 million in defense costs.
This appeal has been reported on four times by Law360:
9th Circ. Won't Revive PE Firm's 'El Chapo' Insurance Dispute
Firm Faces Skeptical 9th Circ. In 'El Chapo' Insurance Dispute
Insurer Urges 9th Circ. To Toss Appeal In 'El Chapo' Dispute