Warren Buffett's Berkshire Hathaway faces a court battle with Volkswagen after rejecting its Dieselgate settlement deal

• Warren Buffett's Berkshire Hathaway is facing a legal clash with Volkswagen.
• The German carmaker settled with other insurers over Dieselgate, but Berkshire rejected the deal.
• Volkswagen is now preparing to take legal action against Berkshire to force it to pay up.

Warren Buffett's Berkshire Hathaway is facing a legal battle with Volkswagen after rejecting a settlement deal with the German auto giant related to its emissions scandal.

Volkswagen took out a "first excess liability insurance policy" with Berkshire's international-insurance unit in January, the automaker revealed in an investor document last week. That policy puts Buffett's company on the hook for up to 50 million euros ($59 million) if a claim exceeds Volkswagen's 25 million euros' worth of coverage from its primary insurer, Zurich.

The German automaker had been locked in talks with insurers for years over how much they owed it under various insurance policies following its emissions fiasco. It has now reached a settlement with insurers including AIG and Allianz that will see them pay a total of 270 million euros to Volkswagen, minus payments they've already made or scheduled. However, Berkshire refused to sign the agreement.

Volkswagen intends to enforce Berkshire's insurance obligation "including in court if necessary," and its supervisory board has "instructed that preparations be made for legal action against Berkshire Hathaway," the investor document shows.

The automaker added that it won't be bound by the settlement amount and other terms it offered Buffett's company while negotiating the settlement. That suggests it could seek more money from Berkshire than it initially requested.

Volkswagen declined a request for comment from Insider, while Berkshire didn't immediately respond to a request for comment from Insider.

Volkswagen has faced billions of dollars' worth of legal claims and fines since it admitted to installing "defeat devices" in millions of its diesel-powered cars between 2009 and 2015. The secret software enabled the cars to cheat vehicle-emission tests and skirt environmental regulations - a scandal dubbed "Dieselgate."

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In addition to its insurers, Volkswagen has reached Dieselgate-related settlements with its former chairman, Martin Winterkorn, and an Audi board member, Rupert Stadler. Winterkorn and Stadler will pay 11.2 million euros and 4.1 million euros respectively, partly by waiving their claims to bonuses.

Volkswagen might be clashing with Buffett, but it counts another famous value investor among its fans: Michael Burry of "The Big Short." The Scion Asset Management boss disclosed in March that he holds a stake in Porsche SE, the German holding company that owns about 31% of Volkswagen.

"Investors, partly due to the #ESGFog, underestimate the size, scale, brands, staying power, and resources of Volkswagen," Burry tweeted at the time.