Michelin awarded over €2m in fraud case

Columbia, South Carolina - A US District Court has ruled that Federal Insurance Co. must pay Michelin North America Inc. nearly $2.5 million (€2.1 milion) in coverage for a theft from the tire maker's retirement fund, doubling the amount Federal originally offered to pay Michelin.

Senior Judge Henry Herlong Jr. of the US District Court for the District of South Carolina issued an order denying Federal's motion to dismiss the case and granting Michelin's motion for summary judgment for Indianapolis-based Federal to pay Michelin an extra $2.46 million on its policy.

In January 2016, Michelin found that fiduciaries of its retirement plan had committed fraud, stealing more than $8 million from the plan.

According to Michelin's complaint filed 19 June with the South Carolina court, the tire maker filed a $5 million claim with Federal, the maximum claim it could make under its policy with the insurer.

"For more than a year following this notification, (Federal) refused to pay any portion of the claim despite continued demands," the complaint said.

"Throughout the process, it became clear that (Federal) looked for reasons not to pay the claim, even though it should have paid the claim immediately," it said.

In April 2017, Federal offered to pay Michelin $2.54 million. Federal claimed that the loss must be granted on a pro-rata basis, considering the policy that Michelin's parent company, Compagnie Generale des Establissements Michelin, had with the American International Insurance Group.

Michelin argued that Federal was required to pay the full claim. In his order, Herlong agreed.

"Federal is essentially asking the court to resolve a dispute between it and another insurance company that is not a party to this action," Herlong wrote.

"The Federal policy is a binding contract between (Michelin) and Federal, the failure to pay the full policy limits constitutes a breach, and the damages are the difference between the amount paid and the full policy limits," he wrote.