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High-net-worth insurer sues to recover monies paid in Alan Dershowitz defamation settlement

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High-net-worth insurer sues to recover monies paid in Alan Dershowitz defamation settlement

is suing a unit of Hanover Insurance Group Inc. over whether both of thecompanies' policies should share primary status in connection with ahigh-profile settlement of defamation claims entered in April by AlanDershowitz.

Thewell-known attorney and law professor had been accused of defamation inconnection with public statements he made in response to allegations that heand certain other prominent men had performed sexual acts with a woman who hadbeen pursuing civil charges against former high-net-worth investment adviserJeffrey Epstein, a Dershowitz client, when she was a minor. The woman'sattorneys, Bradley Edwards and Paul Cassell, accused Dershowitz of defamingthem as part of an alleged "massive public media assault" on theirreputation and character.

Termsof the settlement, in which Edwards and Cassell expressly acknowledged that ithad been a mistake to have brought the sexual misconduct claims againstDershowitz, were confidential. White Plains, N.Y.-based PURE, Hanover and athird insurance company not named in the complaint purportedly provided unspecifiedamounts of defense and indemnity payments in connection with the settlement.

PURE,which focuses on high-net-worth personal lines business, issued a high-valuehomeowners policy to Dershowitz for a 12-month policy period ending Sept. 1,2015. The policy offered per-occurrence liability coverage with a $500,000limit.

Accordingto a court exhibit, Hanover's Massachusetts Bay Insurance Co. allegedly issued abusiness owners policy to Dershowitz for a 12-month period ended April 9, thatprovided business liability coverage of $1 million per occurrence up to a $2million aggregate limit.

PURE'soutside legal counsel notified Hanover of the company's coverage position andintent to recover the alleged damages it suffered in letters dated May 24 andJuly 6. The letters, each of which threatened litigation, insisted that"it is clear" that the Hanover policy was "expresslyprimary" with respect to the Dershowitz matter and that PURE's policy wasexcess in nature.

Thesecond letter referenced an alleged voicemail message in which a Hanoverrepresentative purportedly indicated that there had not been a reservation ofrights regarding the issue and that Hanover does not believe Florida recognizesa right of contribution between insurers.

AHanover spokeswoman declined to comment.

PUREresponded to the position by arguing that it had not received a copy of thebusiness owners policy until just over one month prior to the date that thesettlement was reached and that the insurer "did not have the opportunityto assert this issue until the case was almost settled." The companyargued that doing so at a "sensitive time risked upending a difficultsettlement in a controversial, high profile case in a manner contrary to ourinsured's interests."

RegardingHanover's assertion of the Florida uniform contribution statute, PURE agreedthat the state law does not recognize a right of contribution — but onlybetween co-primary insurers, not in instances where there are multiple layersof coverage. PURE's legal counsel pointed to a federal court's opinion in a2006 Florida dispute between units of American International Group Inc. and to support thecompany's position.

"Unlikethe right of contribution which typically applies to permit an allocation ofloss between co-primary insurers or obligors, the right of equitablesubrogation allows the entire loss to shift, typically from an excess carrierto a primary one," the U.S. District Court for the Southern District ofFlorida found in that case. PURE filed its complaint in the same court.

Apparentreferences in the letters to the amount PURE contributed to the settlement wereredacted and, in PURE's claim for equitable subrogation, it is seekingreimbursement of that amount as well as recovery of costs associated withpursuing the matter against Hanover.