Beef Products Inc. filed a multibillion defamation claim in South Dakota following a series of ABC News reports on lean beef trimmings, otherwise known as pink slime. Partway through the trial in June, Disney settled the case. The terms were confidential, but in August, the company disclosed a legal expense of $177 million, most of which was attributed to the settlement.
Since then, AIG and Disney have been fighting over whether the settlement should be covered by Disney’s $25 million insurance policy. Last week, Disney sued AIG in federal court, seeking to force the insurer into arbitration in Los Angeles.
On Thursday, AIG laid out some of its argument as to why the claim should not be paid. According to the suit, the policy requires that ABC obtain written approval from outside counsel before broadcasting its report.
“The reason for this is obvious,” argues AIG’s attorney, Michael J. Bowe of Kasowitz Benson Torres LLP. “If an insured consults outside counsel concerning potentially defamatory statements prior to making them, the insured will be less likely to engage in conduct that gives rise to liability.”
Though some portions of the complaint are blacked out, it appears that AIG’s contention is that ABC did not get the required advance blessing from its attorneys. It appears that Disney’s counter-argument is that it was not “commercially reasonable” or normal industry practice to obtain written permission from outside lawyers.
A Disney spokesman said, “Rather than honor the terms of the insurance policy it sold us, AIG has chosen instead to evade those terms and attack its customer. We will vigorously pursue our right to recover.”