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Intel files $50m suit against insurance firm

Tags:
Practices,
Consumers,
Coverage,
American

Dawn Kawamoto CNET News

Published: 02 Feb 2009 17:32 GMT

Intel has filed a $50m lawsuit against insurance carrier American Guarantee and Liability Insurance, alleging breach of contract.

The alleged breach involves the insurance firm's failure to pay for Intel's legal defence related to antitrust lawsuits filed by rival AMD and consumers.

Intel, in the lawsuit filed last week in the US District Court for Northern California, alleges that American Guarantee did not step up to the plate and begin paying for the chip giant's legal costs after it had exhausted $66m (£46m) in insurance policies provided by two other insurance carriers.

The chipmaker, which holds a $50m policy with American Guarantee, purchased several layers of comprehensive liability insurance from a variety of insurance companies from April 2001 to April 2002. Beginning in mid-2005, chip rival AMD and consumers filed lawsuits against Intel, alleging that the chipmaker engaged in anticompetitive conduct and unfair business practices in the sale, promotion and marketing of its microprocessors.

According to Intel's lawsuit, Old Republic Insurance provided $16m in comprehensive liability insurance as the first line of defence, and XL Insurance America provided a second layer of $50m in coverage under a commercial umbrella policy.

American Guarantee, Intel alleges, had an obligation to begin paying toward Intel's defence costs once the other two policies were exhausted. Intel's policy with American Guarantee calls for $50m in total defence and or indemnity coverage.

In Intel's lawsuit against American Guarantee — referred to below as AGLI — the chip giant states: "The complaints in the AMD litigation, allege, among other things, that during the AGLI policy period of 2001 to 2002, Intel engaged in unfair business practices and anticompetitive conduct in its sale, promotion, and marketing of its microprocessors. Accordingly, these allegations trigger the potential for coverage under the 'Advertising Liability' provision of the AGLI policy."

The chip giant further notes in its complaint: "Despite the clear potential of covered liability presented by the AMD litigation, AGLI summarily denied coverage leaving Intel to defend itself in the AMD litigation without the benefits owned under the AGLI Policy."

Intel is asking the court to find that American Guarantee has a duty to defend Intel in the AMD litigation, as well as pay out $50m in damages plus interest.

American Guarantee declined to comment.

But in a lawsuit American Guarantee filed in the Delaware Chancery Court last week against Intel and the other insurance carriers, American Guarantee alleged: "In response to Intel's tender, American Guarantee sent multiple letters to Intel seeking information necessary to assist in its evaluation of Intel's coverage claim. Although Intel has supplied certain information to American Guarantee, most of the information requested has not been provided."

"Upon information and belief, Intel has also tendered the AMD Actions to certain of the Defendant Insurers. American Guarantee has requested that Intel provide it with the coverage positions of all other defendant insurers but does not know whether Intel has provided full and complete information in response to this request."

A trial date in AMD's lawsuit against Intel is set for February 2010. The two parties currently have depositions under way, said representatives for both Intel and AMD.

Considering the vast majority of civil cases ultimately reach a settlement, the Intel and AMD case has the potential to follow a similar path.

However, it is likely too early in the game for an immediate settlement, given that the parties are gathering more information via depositions.

"Settlements usually happen when all the chess pieces are on the table and everyone knows what they're looking at," said Chuck Mulloy, an Intel spokesman.

An AMD spokesman said his company is looking for more than a check from Intel.

"Any settlement we would consider would have to include an end to any business practices that are at the heart of our case," said Michael Silverman, an AMD spokesman. "A check is not enough."