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This is the case of Colliers International - Atlanta LLC v. Maxum Indemnity Co., in the U.S. District Court for the Northern District of Georgia.

Colliers International - Atlanta LLC, a Canadian-based diversified professional services and investment management giant has been battling it out in federal court against its former insurer, Maxum Specialty Insurance Group (Maxum) a unit of The Hartford, over Collier's request for more than $1 million it incurred in defending allegations that it failed to supervise a corrupt broker.

This week a federal judge in Georgia has ruled that Maxum had a contractual duty to defend Colliers against allegations that Colliers was liable for a corrupt broker until a court of competent jurisdiction found that the duty did not exist.

On Monday, U.S. District Judge Sarah E. Geraghty issued a summary judgment order finding that Maxum Indemnity Co. was obligated to defend Colliers in a Texas case that was prosecuted for nearly three years before Maxum obtained a declaration from a judge in a Georgia district court that says Colliers waited too long to report the lawsuit.

Colliers argued that Maxum secured a ruling from a Northern District of Georgia judge that it had no obligation to defend Colliers in the Texas suit, due to Collier's untimely notice of claim, but that the district court finding does not liberate Maxum from covering $1.6 million in defense costs.

Judge Geraghty also took exception to the declaration freeing Maxum from its coverage obligations. In her order filed on Monday, the judge found that the declaration does not apply retroactively.

The judge said, "If credited, Maxum's argument that a declaration of non-coverage retroactively eliminates an insurer's duty to defend could have profound implications." "An insurer that chooses to defend under a reservation of rights could be incentivized to delay defense payments and or underpay defense costs while hoping for a forthcoming declaration of non-coverage."

In its complaint, Colliers argues that Maxum breached its contractual duty to defend it in the Texas case and did so in bad faith, for which the agency seeks reimbursement the underlying litigation defense costs, as well as damages.

The Texas Case

This dispute arises from a lawsuit filed against Colliers in Texas State Court by plaintiffs, Mattress Firm Inc., a Colliers client, who alleged that former Colliers executive, Alexander Deitch was involved in various acts of corruption, including bribery, receiving kickbacks and self-dealing.