In an insurance claim suit filed against a non-life insurance company seeking an advance payment of defense cost under a venture capital asset protection insurance policy, the court held the insurance company liable for insurance benefits.¹  Kim & Chang represented the plaintiffs in this case.

Details:

A, an asset manager, purchased a venture capital asset protection insurance policy from B (defendant), a non-life insurer.  Thereafter, C, a buyer who entered into a M&A agreement with a special purpose vehicle established by A (plaintiffs and the insureds), ceased making payments for A’s breach of representations and warranties under the agreement.  

The plaintiffs then filed for an arbitration seeking the payment of the remaining purchase price with the International Chamber of Commerce (ICC).  In response, C filed a counterclaim seeking damages from the plaintiffs for the plaintiffs’ alleged breach of representations and warranties.

There were substantial costs to defend the claim in the arbitration proceedings (i.e., costs and expenses incurred in and outside the court to defend against the claim for damages filed against the insureds), including the plaintiffs’ attorneys’ fees.   The plaintiffs viewed it as an insured event and sought the payment of insurance proceeds, but the defendant refused to pay, based on a number of arguments, including the plaintiffs’ alleged failure to make the necessary notice during the contractually-required period. 

Decision:

The damage claim was large in size and involved various issues relating to the defense cost.  The issues were dealt with in a comprehensive and in-depth manner.  

Based on examination of relevant legal principles and additional fact-finding, our team argued that: (i) the defendant failed to explain the material terms of the policy, in particular, the existence of a notice period and the effect the lapse of such notice period would have on the policy (exemption from payment obligation); (ii) the contractual grounds for exemption were not met; and (iii) the insurance broker was not an agent of the insured.  Consequently, the court held in favor of A, holding the defendant liable for the defense costs.