Twin City Fire Insurance Co. v. Ben Arnold-Sunbelt Beverage Company

Joyce Anglin was sexually harassed by Harvey Belson (defendant), then-president and chief executive officer (CEO) of Ben Arnold-Sunbelt Beverage Company of South Carolina (Ben Arnold) (defendant), owned by Sunbelt Beverage Company (Sunbelt) (defendant). Anglin sued Belson, Ben Arnold, and current president and CEO, William Tovell (defendant), asserting claims against (1) Belson for intentional infliction of emotional distress, false imprisonment, assault and battery, civil conspiracy, and defamation; (2) Tovell for intentional infliction of emotional distress and civil conspiracy; and (3) Ben Arnold for intentional infliction of emotional distress, negligence, false imprisonment, defamation, negligent hiring, retention, and supervision, and wrongful discharge. Ellen White sued making similar claims. Ben Arnold had general-commercial-liability policies from Twin City Fire Insurance Company (plaintiff) and Hartford Casualty Insurance Company (plaintiff), covering $1 million in personal-injury claims, including defamation and false imprisonment, but excluding the other lawsuit claims. Following a reservation-of-rights letter explaining the noncovered claims, the insurers retained Robert McKenzie to represent the defendants. The defendants rejected McKenzie, citing a conflict of interest, and sought to continue with their own firm, consulted 14 months earlier. The insurers proposed joint representation, which the defendants rejected, excluding the insurers from the litigation and settlement while amassing $1.4 million in legal fees. The insurers filed a declaratory-judgment action arguing they had no duty to indemnify because the defendants breached their contractual duty to cooperate. The defendants counterclaimed, and cross-motions for summary judgment followed. The district court found for the insurers as to Ben Arnold, Sunbelt, and Tovell, and concluded Belson was entitled to a separate insurer-funded defense attorney but not indemnification. The defendants appealed.