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

Illinois Union Flip Flops on Client Coverage, Lawsuit Charges

June 19th, 2012 - A Georgia company has sued Illinois Union Insurance Co. after the ACE-Group unit reportedly backed out of a deal to cover its legal fees in a lawsuit.

Focus Development Inc. said, that at the time it was sued by Tucker Athletic Center Holdings Inc., it had in place a business and management indemnity insurance policy that had been issued by Illinois Union. Tucker was seeking to rescind an operating agreement with Focus and also sought restitution for claims of breach of fiduciary duty and breach of the agreement.

The suit was filed on April 3, 2008, and was eventually referred to arbitration.

Plaintiffs, including Focus Land Investors LLC and Focus executives Michael Blonder and Bradley Johnson, said they were told on Aug. 7, 2008, that Illinois Union denied coverage. But some time during that month they said their attorney was advised by the insurer that it would provide coverage for plaintiffs’ defense costs and loss sustained pursuant to the lawsuit.

The plaintiffs’ attorney allegedly was contacted by an attorney representing Illinois Union to discuss taking over defense of the suit, and he sent pertinent pleadings and documents to the insurer’s lawyers. There the matter rested until two business days before the arbitration hearing was to begin, when the suit said that Illinois Union “inexplicably reneged on its promise to provide coverage for the claims.”

Plaintiffs said they were told that Illinois Union denied coverage on the basis that the policy did not cover the wrongful acts alleged in the lawsuit.

Because of that alleged refusal, plaintiffs said they incurred expenses of litigation. So they sued Illinois Union, claiming breach of implied covenant of good faith and fair dealing. They asked for an order declaring the policy to provide coverage and for damages including a penalty for bad faith dealing.

Focus had filed the suit in Georgia state court, and now Illinois Union has filed to remove it to U.S. District Court in Atlanta.

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