The Sixth Circuit recently addressed the question of whether an
excess insurer must provide a defense when the primary insurer
fails to do so. In IMG Worldwide v. Westchester Fire
Insurance Company, No. 3836 (6th Cir. July 15, 2014), the
court reversed the decision of a trial court and ordered an excess
insurer to pay nearly $8 million in defense costs. In
reaching this conclusion, the court not only misconstrued the plain
language of the excess policy, but it also misapprehended the
nature and purpose of excess insurance.
IMG Worldwide was a consultant to a failed real estate
development project in Orlando, Florida. Investors sued IMG
and others, alleging the defendants engaged in fraud when they sold
properties with the promise that the properties would be developed
into high-end condominiums. In addition to fraud, the
plaintiffs asserted claims for conversion, theft, and violations of
Florida's Deceptive and Unfair Trade Practices Act.
