In January of 2011, 10 ACE Group Companies agreed to pay $70 million in settlement fees to the New York Workers’ Compensation Board after an investigation into whether certain insurance companies had been overcharging policyholders.
ACE Unit Sues Law Firm to Avoid Payout
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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