Daily Journal
July 16, 2009

Insurers Ordered to Pay Legal Bills in Bratz Fight

By Jason W. Armstrong
Daily Journal Staff Writer

RIVERSIDE - Embattled MGA Entertainment, which has racked up $100 million in legal bills after several big courtroom losses in its fight with rival Mattel over its Bratz dolls, has convinced a judge to make a pair of insurance companies foot a portion of that bill.

Van Nuys-based MGA persuaded U.S. District Judge Stephen G. Larson on June 24 to grant the toymakers' summary judgment motions to find that two of its insurers, Crum & Forster Specialty Insurance Co. and Evanston Insurance Co., had duties to fund its legal fees despite certain policy exclusions.

Larson found the companies were on the hook for coverage because of claims of product disparagement in the ongoing Mattel-MGA litigation.

The ruling paves the way for a future trial on how much the insurers owe MGA, which has paid a lot of its own defense costs in its fight with El Segundo-based Mattel. MGA's lead attorney in the insurance litigation, Michael J. Bidart, said his client is pleased. "This is a significant development which will open the way for recovery of all past and future damages suffered by MGA," said Bidart, a name partner with Claremont's Shernoff Bidart Darras & Echeverria.

Susan J. Field, a partner with Musick, Peeler & Garrett in Los Angeles who represents New Jersey-based Crum & Forster, could not be reached for comment Wednesday.

Marta B. Arriandiaga, a partner with Ropers, Majeski, Kohn & Bentley in Los Angeles who represents Illinois-based Evanston, also could not be reached for comment.

MGA sued several of its insurers in April 2008, accusing them of improperly pulling out of coverage for the company's mounting fees in the so-called Barbie vs. Bratz intellectual property court battle. In the case, a jury last summer agreed with many of the claims of Barbie manufacturer Mattel's lawsuit against MGA, including an allegation that a former Mattel designer helped MGA come up with the billion-dollar Bratz line. The same panel awarded Mattel $100 million in damages on claims including copyright infringement.

Afterward, Larson, also the judge in that case, awarded most key elements of the doll brand to Mattel. The case is on appeal, and the parties are gearing up for a second phase of the trial with additional claims by MGA and Mattel.

In refusing to cover the company's defense costs, MGA's insurers argued their policies didn't include the types of allegations at issue in the Mattel-MGA litigation.

One of its insurers, Massachusetts-based Lexington Insurance Co., ultimately agreed to pay. Three months ago, other insurers in the suit, Connecticut-based Hartford Insurance Co. of the Midwest, Hartford Fire Insurance Co. and Hartford Financial Services Group Inc., settled confidentially with the toymaker.

Evanston and Crum & Forster fought the issue in court, but Larson ruled they had to cover MGA. The judge found the companies had a duty to defend based on allegations of product disparagement in the case.

"Policies from both insurers cover instances of trade disparagement," Larson wrote in his order.

jason_armstrong@dailyjournal.com

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