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.
Workers’ Comp Claims Inquiry Blows into ACE Group Lawsuit
1430 North Cahuenga Partners, doing business as the Cabana Club, filed suit in California Superior Court against ACE Fire Underwriters Insurance Co. & Pacific Employers Insurance Co. Also suing the insurer was Venue Management Systems Inc., which provides payroll and human resources services to clients such as Cabana Club.
Acting on behalf of Cabana Club, Venue Management had procured workers’ compensation policies that were issued by ACE Fire. The policies, effective December 13, 2008, to Dec. 13, 2010, were issued in the name of the Cabana Club, according to the Complaint.
The plaintiffs said that, during the term, “various and multiple” claims were made upon the policies, creating a potential for award of damages against ACE. In 2012, the plaintiffs said they became aware that ACE had begun a fraud investigation in connection with the policies.
ACE allegedly took the position - wrongly, said the plaintiffs - that claims submitted to it were illegitimate and demanded reimbursement for all sums paid out under the policies. But Cabana Club maintains that ACE was wrong, and that it has a duty to indemnify it against any claims.
Cabana Club accused ACE of breach of contract and breach of the implied covenant of good faith and fair dealing. It said ACE, among other things, failed to conduct a reasonable investigation of the claims.
For its part, Venue Management claimed ACE officials stated or implied to Cabana Club that the company may have embezzled funds from the nightclub. Those were false statements and were meant to interfere with the relationship between Venue Management and Cabana Club, according to the Complaint.
Venue Management further accused ACE of defamation per se by giving Cabana Club information or representations meant to state that Venue was not fit to perform its duties to its client.
Both Venue Management and Cabana Club asked the court to award unspecified damages.
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