Court rules for Arch in coverage dispute with TV manufacturer

A federal appeals court Monday affirmed a lower court ruling in favor of Arch Insurance Co. in litigation filed by a television manufacturer, although on different grounds than the lower court’s.

Arch issued an insurance policy to Irvine, California-based Vizio Inc. that provided excess coverage to Hartford Financial Services Group Inc. unit Navigators Insurance Co.’s primary policy, according to the ruling by the 9th U.S. Circuit Court of Appeals in San Francisco in Vizio Inc. v. Arch Insurance Co.

Navigators, which is not a party in the litigation, provided $5 million in primary coverage. The Arch policy followed form to the Navigators policy.

After consumers action lawsuits were filed in connection with its Smart TV products, Vizio notified both Navigators and Arch of its potential insurance claims, according to the ruling.

Arch requested more information, while Navigators denied coverage, citing a policy exclusion. Vizio never provided Arch with any substantive updates about the litigation, while Arch did not convey a coverage decision, although internal records show it decided to deny coverage. About two years later, without seeking or receiving Arch’s consent, Vizio settled the litigation for $17 million.

Vizio sued Arch for coverage in U.S. District Court in Los Angeles. The district court ruled that Vizio had not properly notified Arch of its claim after the underlying coverage was exhausted.

A three-judge appeals court panel said the Arch policy did not require that notice of a claim follow the underlying Navigators policy’s exhaustion. However, it affirmed the lower court’s ruling on the basis that Vizio did not comply with the coverage’s consent provision before settling the underlying litigation.

“Vizio argued that it was not required to obtain Arch’s consent,” the ruling said.

The panel disagreed. Following form excess policies have the same terms and conditions as the underlying policy, “so the Navigators Policy‘s consent provision is incorporated into the Arch Policy,” it said in affirming the lower court.

Attorneys in the case did not respond to requests for comment.