An Ohio appeals court recently swiped defense coverage from Chiquita Brands International Inc. for claims that it paid off Colombian terrorists who murdered thousands, a ruling policyholder attorneys say inexplicably turns a blind eye to negligence claims that would normally be covered.

The decision for now frees National Union Fire Insurance Co. of Pittsburgh, Pa., from defending the banana company against tort claims filed on behalf of 4,000 murder victims.

Chiquita — which claims it made the payments between 1989 and 2004 to save the lives of employees in Colombia who had received death threats — plans to take the case to the Ohio Supreme Court, the company's attorney William Skinner of Covington & Burling LLP told Law360 on Thursday.

Policyholder attorneys not involved in the insurance fight criticized the court's holding that National Union had no duty to defend even though the underlying lawsuits against Chiquita included claims of negligence. Insurers can avoid defending against claims of intentional misconduct, but they're typically forced to defend if even one claim of negligence could arguably be covered.

"It is hornbook insurance law that if any of the causes of action are covered, that the insurance company has to defend the entire action," said Bob Horkovich, a shareholder at Anderson Kill & Olick PC. "The court of appeals here simply ignored negligence counts, which would be covered under the policy."

The appeals court recognized that negligence counts would typically be covered, but seemed to disregard them anyway, according to Keven Eiber, a partner at policyholder-side firm Brouse McDowell.

"That's a significant concern to policyholders because this is an issue that arises in many, many, many cases of all different kinds," Eiber said. "That broad scope of the duty to defend is one of the most important features of policies. ... We don't want to see, as policyholder counsel, any kind of erosion in these areas."

If the Ohio Supreme Court refuses to weigh in or overturn the ruling, it would not be binding in other appeals court districts, but it would affect policyholders in the Cincinnati area. The decision could encourage other insurers to deny defense coverage despite negligence claims in the underlying suit, according to Eiber.

The appeals court ruled in National Union's favor after finding the underlying actions did not involve an "occurrence," or accident, that would be covered by policies issued to Chiquita from 1992 through 2000. Ruling on an issue of first impression in Ohio, the court also found that the underlying claims fell outside of the insurer's coverage territory.

According to the trial court, National Union had a duty to defend because the underlying suits included negligence claims. It didn't matter that the complaints also included serious allegations of intentional and malicious conduct that the insurance likely did not cover, the lower court found.

Setting aside that decision, the appeals court held there had been no occurrence because the underlying negligence claims arose from Chiquita's intentional acts. Merely insinuating that Chiquita had been negligent didn't transform essentially intentional torts into something accidental that National Union's policies would cover, the ruling said.

The appeals court stressed that the underlying plaintiffs had accused Chiquita of being directly and vicariously liable for the murder, torture and kidnapping of many, as well as of conspiring with terrorists.

"Our review of the record shows that although the underlying complaints set forth some causes of action sounding in negligence, those causes of action were all based on Chiquita's alleged intentional conduct," its decision said. "The complaints did not allege conduct that could be reasonably construed as negligent or accidental."

According to Horkovich, the appeals court got basic insurance principles "flat wrong."

Courts weighing whether to award defense coverage should be looking at whether the injuries themselves — not the acts causing them — were intended, Horkovich and Eiber agreed. Until now, case law on that point had been clear in Ohio, Eiber said.

"I think this court got a bit confused between looking at the resulting injury and looking at the cause of this act, when grappling with the whole occurrence issue," Eiber said. "It strikes me as very strange that anybody would conclude that Chiquita intended for people to be injured or murdered or tortured."

National Union won the appeal on a second front, too, through its argument that the occurrence took place outside of its coverage territory, defined in the policies as the U.S., Puerto Rico and Canada.

Though Chiquita's decision to pay off the armed groups — both left- and right-wing — was made at company headquarters in Cincinnati, employees of Chiquita's subsidiary implemented that policy to protect employees and property in Colombia.

Although no other Ohio case had tackled the location issue, the "great weight" of case law from other jurisdictions said the location of the injury determined the location for insurance coverage purposes, the appeals court held.

The Seventh and Fourth circuits have held that focusing on the cause of injuries, rather than their location, could create a windfall for policyholders. It would let them stretch domestic policies to cover foreign events by arguing that the cause — negligent supervision, for example — occurred in the United States.

But according to Horkovich, the court should have based its ruling on the language in the National Union policies and handed insurance benefits to Chiquita if the policies were silent on the issue.

"The court of appeals missed the clue that when it's guessing, it has to rule in favor of the policyholder," Horkovich said.

Skinner, Chiquita's attorney, told Law360 his client respectfully disagreed with the decision, while attorneys for National Union declined to comment.

According to the decision, Chiquita has settled with three other insurers that disputed coverage for the underlying tort suits. National Union was the sole insurer to go forward with the challenge.

Chiquita is represented by Kenneth Seibel of Jacobs Kleinman Seibel & McNally and William Skinner of Covington & Burling LLP.

National Union is represented by Richard Nicolaides Jr., Barbara Michaelides and Agelo Reppas of Bates Carey Nicolaides LLP, and Joseph Borchelt of Reminger Attorneys At Law.

The case is Chiquita Brands International Inc. v. National Union Fire Insurance Co. of Pittsburgh, Pa., case number C-120019, in the First Appellate District of the Court of Appeals of Ohio.