Dempsey v. Associated Aviation Underwriters

Chester and Helen Dempsey (plaintiffs) sued Cessna Aircraft Company (Cessna) (defendant) in state court following a Cessna accident that injured Chester. The Dempseys were represented by an experienced aviation litigator, who was well known to Cessna and strongly disliked by Cessna’s insurer, Associated Aviation Underwriters (insurer) (defendant). Although Cessna had not yet met its nine-figure deductible and was paying for the lawsuit, the insurer was involved in the litigation. The case settled with Cessna paying the Dempseys $300,000. After the settlement was finalized, the Dempseys learned that one of the insurer’s employees (defendant) might have deliberately hidden a Cessna document during the lawsuit that Cessna had been required to disclose and that would have significantly raised the value of the Dempseys’ claim. The Dempseys did not give the $300,000 back to Cessna and ask to have the settlement agreement rescinded, i.e., undone. Instead, the Dempseys filed a new lawsuit against Cessna, the insurer, and the employee in federal court, seeking $25 million in damages for the allegedly deliberate fraud and dishonesty during the settlement process. Cessna, the insurer, and the employee filed motions to dismiss the claims. The insurer and the Dempseys’ attorney also each filed sanctions motions against each other, claiming that the other was making frivolous filings.