By: Mark Fitzgerald A media insurer for the Chicago Sun-Times is asking an Illinois judge to declare that it is not responsible for paying claims or defense costs related to the paper's circulation scandal.
In a 35-page lawsuit filed in the Chancery Division of Cook County Circuit Court, Employers Reinsurance Corp. (ERC) is asking for a declaratory judgment that it has no "duty to defend" the Sun-Times or pay out any claims that might arise from the numerous lawsuits filed by advertisers who claim that as a result of the circulation overstatements, they overpaid for ads. Those lawsuits have been consolidated in a class-action suit.
Among the defendants named in the lawsuit are the newspaper, its sibling Daily Southtown, its parent Hollinger International Inc., former Publisher David Radler, and two former circulation executives, Mark Hornung and Stephen R. Hastings.
Overland Park, Kan.-based ERC, a division of GE's insurance business, said in the motion that it wrote annual "communications liability insurance policies for multimedia" for the Sun-Times between 1995 and 1999. ERC was one of several insurers that wrote policies for the paper at the time. It is not currently an insurer of the Hollinger International paper.
The motion argues that the Sun-Times did not suffer losses covered by the policies during that period.
ERC also says that even if losses could be established during that period, the policy would exclude a payout of "claims for or arising out of any judicially determined dishonest, fraudulent, or criminal act," which it suggested would apply to the circulation overstatement.
The insurer also claims that the Sun-Times violated a condition of the policies that prohibited the newspaper from settling without the company's consent when it negotiated settlements with advertisers.
Last summer, the Sun-Times announced it had discovered a scheme that overstated circulation, which later was determined to exceed actual sales by about 50,000 copies daily. The newspaper has set aside $29 million to cover possible advertiser claims.
An attorney for the newspaper declined to comment on the lawsuit.
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