Sonic Automotive appeals ruling favoring insurers in anti-theft product case

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Sonic Automotive Inc. is appealing a decision that left two insurers off the hook for its tab in defending class-action claims of fraud and intentional wrongdoing in selling an anti-theft window-etch product.

Last month, in Sonic’s suit against garage carrier CorePointe Insurance Co. and umbrella carrier Great American Assurance Co., U.S. District Judge Susan Dlott ruled that the policies covered claims only for negligence, errors and omissions.

At issue are two class-action cases.

One suit alleged that Sonic was aware that the etch products it sold were “largely valueless, ineffective against vehicle theft and unconscionably overpriced” in violation of the Truth in Lending Act and Florida’s installment sales and unfair trade practices laws.

The other suit involved Sonic’s sale of etch products and alleged violations of the North Carolina deceptive trade practices law, breach of contract and unjust enrichment.

Sonic denied wrongdoing but settled the two cases for about $11 million total, according to court documents.

CorePointe, which was called Chrysler Insurance Co. in the early 2000s when the etch suits were filed, initially covered defense costs in the Florida suit but later denied coverage after concluding that “Sonic’s fraudulent misrepresentations and non-disclosures were done intentionally ... as a pattern and practice of doing business,” Dlott’s decision said.

Sonic’s lawsuit demanded damages of about $8 million that Sonic claimed to have spent on unreimbursed attorney fees and legal costs to defend the class-action suits.

In her decision, Dlott, who sits in Cincinnati, said neither class-action suit accused Sonic of “negligent conduct or errors or omissions. Rather, the plaintiffs alleged that Sonic engaged in intentional conduct” that is excluded from insurance coverage.

Sonic’s May 7 notice of appeal to the Sixth Circuit U.S. Court of Appeals did not state the grounds on which it is challenging Dlott’s decision.

Barry Buchman, a lawyer for Sonic in Washington, D.C., said his client has no comment on the decision.

Alan Levy, a New York City lawyer for CorePointe, said his client also had no comment.

In addition to the claims against CorePointe and Great American, Sonic also sued garage liability insurer Lumbermens Mutual Casualty Co. and umbrella carrier Universal Underwriters Insurance Co. Lumbermens is in liquidation, and Universal settled for an undisclosed amount.

You can reach Eric Freedman at freedma5@msu.edu.

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