(Article from Insurance Law Alert, September 2024)
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Holding
A Connecticut district court granted a professional liability insurer’s summary judgment motion, finding that a subpoena issued to the policyholder did not constitute a “claim” under the policy and that the insurer therefore had no duty to pay the costs incurred in responding to it. Steadfast Ins. Co. v. Shambaugh & Son, L.P., 2024 U.S. Dist. LEXIS 165096 (D. Conn. Sept. 13, 2024).
Background
The dispute arose out of multidistrict litigation (“MDL”) alleging damage based on the release of aqueous film forming foam (“AFFF”), a fire suppressant. Shambaugh was not named as a defendant in the MDL, but was served a subpoena which called for the production of documents concerning Shambaugh’s status as a distributor of AFFF. Additionally, Shambaugh was provided a chart created in connection with the MDL that listed 123 entities, including MDL defendants as well as other non-defendant manufacturers and distributors of AFFF, and that identified Shambaugh as an entity “potentially affiliated” with the defendants. A column in the chart with the heading “Likely Role in the Litigation” stated that “Upon information and belief, Shambaugh & Son LP was a distributor of 3M AFFF products from approximately 1955 to 2000.”
Steadfast denied coverage for the costs of responding to the subpoena, arguing it was not a “Claim,” defined by the policy as “a demand received by an Insured seeking a remedy and alleging liability or responsibility on the part of the Named Insured for loss.” In ensuing litigation, the court granted Steadfast’s motion for summary judgment.
Decision
The court rejected the assertion that the subpoena and chart together alleged liability and responsibility on the part of Shambaugh. The court explained that even assuming that both documents state or suggest that Shambaugh distributed products containing AFFF, such statements do not rise to an “allegation of liability or responsibility for loss.” In so ruling, the court rejected Shambaugh’s argument that the designation of “distributor” implied strict product liability. Further, the court held that while the information requested in the subpoena might give rise to a future allegation of liability, the request for documents itself is not an allegation.
Shambaugh also contended that the subpoena alleges “responsibility for a loss” because it required Shambaugh to incur attorneys’ fees and costs in order to comply with it. Rejecting this argument, the court explained that incurring expenses is not the same as alleging responsibility for a “loss,” which is defined by the policy to include several categories of payments, none of which encompass attorneys’ fees not authorized by Steadfast.
Comments
While other courts have ruled that a subpoena does constitute a “claim,” those rulings were driven by the particular factual circumstances as well as applicable policy language. For example, the court distinguished cases in which “claim” was defined to include any demand for non-monetary relief. Similarly, the court distinguished cases involving policies that included a duty to defend, which only required a potential for coverage in order for defense obligations to be triggered.