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November 21st, 2009 - Lloyd’s Appeals Ruling on Colombian Drug Eradication Liability
By Andrew Frye
November 21, 2009
Lloyd’s of London underwriters appealed a Delaware court’s ruling that assigned them liability for legal costs tied to more than 3,000 people seeking damages from a U.S.-sponsored plan to eradicate drugs in Colombia.
The Lloyd’s underwriters, who wrote insurance for DynCorp International Inc. as it sprayed drug crops from the air starting in 2000, said in their Nov. 19 appeal that coverage was for “aircraft hazards” and doesn’t extend to chemical exposure claims. A Delaware state court judge in Wilmington ruled Nov. 9 that the insurers had a duty to defend DynCorp in the lawsuits.
“The court misapprehended the very nature of the insurance procured through the policies: aviation liability insurance,” the appeal said. “Companies seek aviation liability insurance to cover the risk of injuries to aircraft and persons aboard, not chemical-exposure claims.”
DynCorp, which flies the aerial spraying operations under contract for the U.S. Department of State, is defending itself in lawsuits filed on behalf of three Colombian provinces and about 3,250 individuals. The suits, consolidated into a single case in U.S. District Court in Washington, contend Falls Church, Virginia-based DynCorp violated international and Colombian law, and accuses the company of trespassing, assault and negligence.
Delaware Judge Jan Jurden earlier issued an order of summary judgment, ruling that the Lloyd’s underwriters were required under the policies they sold to DynCorp to defend the company or pay its legal costs in the cases.
“The court finds that the policies provide plaintiffs coverage and defense for bodily injury or property damage” under certain conditions, which DynCorp met, the judge wrote. “Defendant insurers have a duty to defend.”
“We think we were absolutely upfront and transparent about what the insurance was covering,” said Douglas Ebner, a spokesman for DynCorp. “We’re paying for this and we should be receiving it.”
The State Department provides DynCorp with indemnification, “subject to available funding,” according to the firm’s third- quarter regulatory filing.
DynCorp also trains security forces in countries such as Iraq and services aircraft, weapons and other support equipment. The company’s largest shareholder is private-equity firm Veritas Capital Management, with a 38 percent stake as of Aug. 5, according to Bloomberg data.
Lee Ann Zondag, a spokeswoman for Lloyd’s, said the company doesn’t comment on pending litigation. Jason Donner, the chief financial officer for Veritas, referred questions to DynCorp’s Ebner.
DynCorp is represented by Potter Anderson & Corroon LLP and Anderson Kill & Olick PC. The Lloyd’s underwriters have Christie Pabarue Mortensen & Young PC and Locke Lord Bissell & Liddell LLP as counsel.
The case is DynCorp v. Certain Underwriters at Lloyd’s, London, 08c-09-218 JRJ, Delaware Superior Court, New Castle County (Wilmington).