Intel sues insurer for failure to cover legal costs

Intel filed a lawsuit against an insurer over failure to cover legal fees on an antitrust lawsuit filed by rival chipmaker Advanced Micro Devices.

In the suit, filed last week and amended on Wednesday, Intel accused the American Guarantee and Liability Insurance Company (AGLI) of breach of contract for failing to provide a defense fund to fight an antitrust case filed by AMD and related cases filed by other entities.

AGLI was obligated to cover “reasonable” costs related to the litigations, but failed to do so even though Intel provided related legal documents, Intel said in court documents.

Intel has been covering the costs on its own, it said in the documents.

Intel is seeking US$50 million and additional damages from the insurance company. It has also asked the court to rule that AGLI has a duty to cover litigation costs. The case was filed in the U.S. District Court for the Northern District of California.

Intel purchased multiple insurance policies to cover lawsuit costs between April 2001 and April 2002. It bought a $16 million policy from Old Republic Insurance Company (ORIC), a second $50 million policy from AGLI to cover total defense or indemnity coverage, and a third $50 million policy from XL Insurance America. Intel exhausted the ORIC and XL Insurance policies, while AGLI failed to cover legal costs.

AMD alleged that Intel engaged in unfair business practices and anticompetitive conduct in the sale, promotion and marketing of microprocessors, according to court documents. AMD first filed an antitrust case against Intel in June 2005, alleging Intel of anticompetitive behavior between 2001 and 2002, when Intel held the AGLI policy to cover legal costs.

AMD’s trial against Intel is scheduled for February 2010, said Michael Silverman, an AMD spokesman. Intel faces around 80 associated class-action cases in the U.S., Intel spokesman Chuck Mulloy said. He declined further comment on the case.

AGLI does not comment on ongoing litigation, said Steve McKay, a company spokesman.

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