AFC awarded $20M in insurance suitAFC awarded $20M in insurance suit

ATLANTA Popeyes Chicken & Biscuits parent AFC Enterprises Inc. has been awarded $20 million in a lawsuit filed by the company against its former insurance carrier, Executive Risk Indemnity Inc.

The insurer had attempted to rescind a 2003 liability policy for AFC’s directors and officers. During early 2003, AFC had to restate its financial results for prior years, including 2001, when the company went public. After AFC’s stock price tanked, a class-action lawsuit was filed by shareholders against the company and certain officers and directors, including some who had resigned. The plaintiffs asserted that they had bought stock because of false and misleading statements that had been made by the defendants about AFC’s financial health.

Damages were sought, and Executive Risk apparently contended that the liability policy did not protect AFC’s officers or directors, as they had presumed. However, a federal court in Atlanta ruled that the policy was indeed still in effect.

The $20 million award includes approximately $4 million in pre-judgment interest.

AFC said in a statement that a portion of the award would be paid to plaintiffs to settle the shareholder litigation. With legal expenses and fees also taken from the sum, the company said it expects to net $9 million to $10 million. But AFC said it would not recognize the funds as income because the award could be overturned if an appeal is filed.

Executive Risk did not issue a comment on the court’s decision.