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The Collaborative Clearinghouse for Lawsuits and Other Claims Against ACE Group Insurance Companies

ACE Unit Sues Law Firm to Avoid Payout

October 2nd, 2013 - Westchester Fire Insurance Co. has sued a Chicago law firm and two of its attorneys as it seeks a court declaration that it does not have to defend them in a malpractice suit.

The ACE Group unit had sold a professional liability policy to Purcell & Wardrop Chtd. for a period between October 8th, 2011, and October 8th, 2012. A month before the policy lapsed, Purcell & Wardrop – along with firm attorneys Joshua Lauby and Ami DeMarco – were sued by Eli and Donna Atkin.

The Atkins had been sued in 2008 by JHC Acquisition LLC and Nihan & Martin LLC . That suit sought to hold them personally liable for contractual debts owed to JHC and Nihan & Martin.

In their complaint, the Atkins alleged that the law firm and lawyers failed on at least a 11 occasions to exercise due care for their clients, including failing to comply with court orders and to respond in a timely fashion to discovery requests. They also alleged that they had not been told by the law firm that a motion for sanctions had been entered against them.

As a result of this alleged carelessness, the Atkins said default judgments against them were entered and they were forced to pay $550,000 for a release of those judgments. They asked for that amount from Purcell & Wardrop, plus $25,000 in attorney fees.

Westchester initially said it would defend its client but reserved the right to decline coverage. It has now declined to defend or indemnify Purcell & Wardrop, saying that in order for coverage to attach, the insureds must not have had a reasonable basis to believe that they had committed any errors or made any omissions that might be expected to result in a claim.

Westchester said that its insureds did indeed have a basis to believe they had breached professional duties because they failed to comply with court orders regarding discovery and did not respond to a motion for sanctions.

The insurer asked the court to declare that it has no duty to defend or indemnify its client.
 

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