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Ironshore Indemnity Inc v. Bell et al

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Case Number: 
2:15-cv-03653 Search Pacer
ACE Group party(s): 
Opposing Party: 
Ironshore Indemnity Inc
Court Type: 
Federal
US District Court: 
District of South Carolina
Date Filed: 
Sep 11 2015

Plaintiff Ironshore Indemnity Inc. (“Ironshore”) states for its Complaint for Declaratory
Judgment against Defendants J. Edward Bell, III, Bell Legal Group, LLC, Darlington Veneer
Company (“Darlington”), and ACE American Insurance Company (“ACE”):

  1. PARTIES. JURISDICTION. AND VENUE
  1. Ironshore is a corporation organized pursuant to the laws of the state of
    Minnesota, having its principal place of business in the state of New York, and at all relevant
    times was engaged in the business of insurance within the state of South Carolina.
  2. J. Edward Bell, III is a resident of the state of South Carolina.
  3. Bell Legal Group, LLC is a limited liability company organized pursuant to the
    laws of the state of South Carolina and its members are residents of the state of South Carolina.
  4. Darlington is a corporation organized pursuant to the laws of the state of South
    Carolina, having its principal place of business in the state of South Carolina.
  5. ACE is a corporation organized pursuant to the laws of the Commonwealth of
    Pennsylvania, having its principal place of business in the Commonwealth of Pennsylvania, and
    at all relevant times was engaged in the business of insurance within the state of South Carolina.
  6. The matter in controversy involves parties among whom complete diversity of
    citizenship exists and exceeds the sum value of $75,000.00, exclusive of interest and costs.
  7. The matter in controversy involves a declaration of rights, duties, and obligations
    under an insurance policy pursuant to Rule 57 of the Federal Rules of Civil Procedure and 28
    U.S.C. §2201.
  8. The Court is vested with jurisdiction of this matter pursuant to 28 U.S.C. §§ 1332
    and 2201.
  9. Venue of this matter is proper pursuant to 28 U.S.C. § 1391.

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II. FACTS

  1. On September 29, 1993, Darlington, represented by Mr. Bell, filed suit against the
    South Carolina Public Service Authority, a/k/a Santee Cooper (“Santee”), in the Court of
    Common Pleas for Georgetown County, South Carolina, seeking to recover for inverse
    condemnation, trespass, and negligence (“Santee Litigation”).
  2. On November 19, 1993, Santee removed the Santee Litigation to the United
    States District Court for the District of South Carolina (“District Court”), where it was assigned
    Case No. 2:93-30770-23.
  3. On March 6, 1997, the jury in the Santee Litigation returned a verdict of liability
    for Darlington on inverse condemnation and trespass.
  4. On February 5, 2010, the District Court awarded Darlington $8,214,737.00 for
    diminution in value and $22,426,688.93 for prejudgment interest, which it calculated at the rate
    of 8%, compounded annually, running from the date of the taking to February 5, 2010.
  5. Ironshore issued Policy No. 000422902, to J. Edward Bell, III, LLC d/b/a Bell
    Legal Group, effective June 4, 2012 to June 4, 2013 (“Policy”).
  6. An authentic duplicate of the Policy is attached as Exhibit 1.
  7. On February 28, 2013, Darlington filed suit against Bell Legal Group, LLC and J.
    Edward Bell, III (collectively “Bell”) in the Court of Common Pleas for Georgetown County,
    South Carolina, captioned Darlington Veneer Co., Inc. v. Bell Legal Group, LLC, et al.. Case
    No. 2013CP2200235 (“Bell Litigation”).
  8. On May 13, 2013, Darlington filed an Amended Complaint in the Bell Litigation,
    which primarily alleged that Bell had collected an unreasonable fee with respect to his

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representation of Darlington in the Santee Litigation and had breached his “Fee Agreement” with
Darlington

18.

An authentic duplicate of the Amended Complaint is attached as Exhibit 2.

19.

On June 19, 2013, Bell provided written notice of the Bell Litigation to Ironshore.

20.

On July 9, 2013, Ironshore reserved all rights under the Policy.

21.

An authentic duplicate of Ironshore’s July 9, 2013 Reservation of Rights is

 

 

 


 

attached as Exhibit 3.

22. On September 8, 2014, Darlington filed a Motion for Leave to File Second
Amended Complaint in the Bell Litigation.

23.

An authentic duplicate of the Motion is attached as Exhibit 4.

24.

On October 9, 2014, Ironshore supplemented its reservation of rights.

25.

An authentic duplicate of Ironshore’s October 9, 2014 Supplemental Reservation

 

 

 


 

of Rights is attached as Exhibit 5.

26. On November 12, 2014, Darlington’s Motion for Leave to File Second Amended
Complaint in the Bell Litigation was granted.

27.

The Second Amended Complaint alleges, inter alia:

 

  1. ) On June 16, 1993, J. Edward Bell, III sent a letter and proposed

Fee Agreement to Darlington, seeking to represent Darlington with
respect to its claim of inverse condemnation against the South
Carolina Public Service Authority (“Santee Cooper”) arising out of
flooding of Darlington’s real property due to actions of Santee
Cooper;

  1. ) In seeking to represent Darlington, J. Edward Bell, III wrongfully

failed to advise that damages for inverse condemnation included
prejudgment interest and attorneys’ fees and to explain how J.
Edward Bell, Ill’s proposed 40% contingency fee would be
calculated;

 

 

 


 

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  1.  ) Darlington signed the Fee Agreement attached to the June 16, 1993

letter from J. Edward Bell, HI based on material representations
and non-disclosures by J. Edward Bell, III;

  1.  ) On March 11, 1997, following a jury trial of Darlington’s inverse

condemnation case against Santee Cooper, in which Darlington
was represented by the Bell Group, judgment in favor of
Darlington was entered;

  1.  ) Pursuant to the ambiguous and misleading Fee Agreement signed

by Darlington, the Bell Group improperly calculated its
contingency fee based on prejudgment interest and court-ordered
attorneys’ fees, without first deducting expenses;

  1.  ) The Bell Group committed malpractice in the course of

representing Darlington during the trial by failing to set the correct
date of the improper taking of land by Santee Cooper, thereby
negligently reducing the damages awarded; and

  1.  ) The Bell Group represented Darlington despite knowing of

conflicts of interest.

  1. An authentic duplicate of the Second Amended Complaint is attached as
    Exhibit 6.
  2. On January 8, 2015 and January 23, 2015, Ironshore supplemented its Reservation
    of Rights.
  3. Authentic duplicates of Ironshore’s January 8, 2015 and January 23, 2015
    Supplemental Reservations of Rights are attached as Exhibits 7-8.
  4. An actual justiciable controversy has arisen as to whether the Policy provides
    coverage to Bell for the Bell Litigation.
  5. On May 4, 2015, Ironshore and Bell unsuccessfully mediated this controversy, in
    satisfaction of General Condition G. of the Policy.
  6. Ironshore has raised herein the grounds that are ripe and present an actual
    justiciable controversy. Other grounds for Ironshore’s Reservation of Rights as to its duties

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under the Policy with respect to the Bell Litigation are not yet ripe for adjudication. As such, an
actual justiciable controversy on these grounds does not presently exist. Ironshore therefore
continues to reserve rights on such grounds.

  1. Darlington and ACE have an interest in this controversy, such that disposition of
    this action in their absence may impair or impede their ability to protect such interest.

m. COUNT I

  1. Ironshore restates Paragraphs 1-34 of its Complaint.
  2. The Policy provides, in pertinent part:

Section I.

Insuring Agreements

A.

The Insurer shall pay on behalf of each Insured all sums
the Insured shall become legally obligated to pay as
Damages as a result of a Claim first made against the
Insured during the Policy Period and reported to the
Insurer during the Policy Period and arising out of the
rendering of or failure to render Professional Legal
Services

* * *

Section II.

Definitions

* * *

C.

“Claim” shall mean a demand received by an Insured for
money or services, including the service of suit or
institution of arbitration proceedings against the Insured.

* * *

E.

“Damages” shall mean a monetary judgment or settlement,
including any such judgment or settlement for Personal
Injury, but does not include fines or statutory penalties,
sanctions, whether imposed by law or otherwise, any
amount awarded in a Disciplinary Proceeding, any
amount for which the Insured is not financially liable or
that is without legal recourse to the Insured or matters that
may be deemed uninsurable under law.

 

 

 


 

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* * *

M. “Professional Legal Services” shall mean legal services
and activities performed for others as a lawyer, and
including pro bono legal services, services as a notary
public, arbitrator, mediator, title insurance agent,
designated issuing lawyer to a title insurance company,
fiduciary, services rendered as a member of a bar
association, ethics, peer review, formal accreditation board
or similar professional boards or committees, or the
publication or presentation of research papers or similar
materials by an Insured but only if the fees generated from
such publication or presentation are not greater than thirty
thousand dollars ($30,000). Professional Legal Services
shall include services as an administrator, conservator,
receiver, executor, guardian, or in any similar fiduciary
capacity, or trustee, if such services are usual and
customary to the practice of law and are in the rendering of
professional services to others in an attorney client
relationship.

  1. Darlington’s allegations that Bell charged an excessive fee for the Santee Cooper
    Litigation do not arise out of the rendering of or failure to render Professional Legal Services as
    to fall within the Insuring Agreement of the Policy.
  2. Ironshore is entitled to a declaration that the Bell Litigation does not fall, in whole
    or in part, within the Insuring Agreement of the Policy.

IV. COUNT II

  1. Ironshore restates Paragraphs 1-38 of its Complaint.
  2. The Policy provides, in pertinent part:

Section III. Exclusions

The Insurer shall not be liable to make any payments in connection with
any Claim made against any Insured:

* * *

Text Box: 7M. alleging, arising out of, based upon or attributable to the
conversion, misappropriation, improper commingling of client

5842385

funds, the return of or restitution, or disgorgement of fees, costs
and expenses, or other amounts, or arising out of the rendering or
failing to render investment advice;

  1. The Bell Litigation alleges, arises out of, is based upon or attributable to the
    misappropriation, the return of or restitution, or disgorgement of fees, costs, and expenses paid to
    Bell for the Santee Cooper Litigation.
  2. Ironshore is entitled to a declaration that it is not liable to make any payments in
    connection with the Bell Litigation because coverage is precluded, in whole or in part, by
    Exclusion M. of the Policy.

V. COUNT III

  1. Ironshore restates Paragraphs 1-37 of its Complaint.
  2. The Policy provides, in pertinent part:

Endorsement # 4

* * *

SPECIFIC INSURED RETROACTIVE DATE

In consideration of the premium charged, it is hereby understood and
agreed that Section HI, Exclusions, is amended to include the following:

The Insurer shall not be liable to make any payments in connection with
any Claim made against the Insured specified below alleging, arising out
of, based upon or attributable to Professional Legal Services prior to the
corresponding Retroactive Date stated below and any subsequent
Related Professional Legal Services.

Insured            Retroactive Date

J. Edward Bell HI 04/15/1997

  1. The Policy defines “Related Professional Legal Services,” in pertinent part, as
    “Professional Legal Services that are the same, related or continuous, or Professional Legal
    Services that arise from a common nucleus of facts.”

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  1. The Bell Litigation alleges, arises out of, is based upon or attributable to
    Professional Legal Services prior to the Retroactive Date and subsequent Related
    Professional Legal Services.
  2. Ironshore is entitled to a declaration that it is not liable to make any payments in
    connection with the Bell Litigation because coverage is precluded, in whole or in part, by the
    Specific Insured Retroactive Date Exclusion of the Policy.

VL COUNT IV

  1. Ironshore restates Paragraphs 1-47 of its Complaint.
  2. The Policy provides, in pertinent part:

Section \TL Costs of Defense and Settlements

* * *

E. If a Claim made against an Insured includes both covered and
uncovered matters, the Insured and the Insurer recognize that
there must be an allocation between covered and uncovered
Damages and Claim Expenses. The Insured and the Insurer

shall use their best efforts to agree upon a fair and proper
allocation between covered and uncovered Damages and Claim
Expenses, taking into account the relative legal and financial
exposures and the relative benefits obtained by each Insured as a
result of the covered and uncovered matters and/or such benefits to
an uninsured party using the same measure. If the Insured and the
Insurer are not able to agree regarding the amount of the
allocation, the Insurer shall pay only those amounts, excess of the
applicable Deductible, that the Insurer deems to be fair and
equitable until a different amount shall be agreed upon or
determined pursuant to the provisions of this Policy and the above
standards.

  1. Ironshore is entitled to a declaration allocating Damages and/or Claim Expenses
    for the Bell Litigation between covered and uncovered matters.

VII. COUNT V

  1. Ironshore restates Paragraphs 1-51 of its Complaint.

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52. The Policy provides, in pertinent part:

53.

Manuscript: DEFENCE AND SETTELMENT OF CLAIM AMENDATORY

* * *

IT IS AGREED that Section I, Insuring Agreement B, is deleted in its

entirety and is replaced by

B. The Insurer shall have the right and duty to defend any Claim first
made against the Insured during the Policy Period and reported to
the Insurer during the Policy Period and arising out of the
rendering of or failure to render Professional Legal Services,
including an appeal thereof, seeking Damages to which this
insurance applies even if any of the allegations are groundless,
false, or fraudulent.

Ironshore does not have a duty to defend Bell in the Bell Litigation because it is

 
 


 

 


 

not a Claim arising out of the rendering of or failure to render Professional Legal Services,
seeking Damages to which the Policy applies.

54. Ironshore is entitled to a declaration that it is entitled to recoupment from Bell for
Claim Expenses that it has paid with respect to the Bell Litigation.

WHEREFORE, Ironshore respectfully demands the following relief:

1.

Declaratory judgment that the Bell Litigation does not fall within the Insuring

2.

Agreement of the Policy.

Declaratory judgment that Ironshore is not liable to make any payments in
connection with the Bell Litigation because coverage is precluded, in whole or in
part, by Exclusion M. of the Policy.

3.

Declaratory judgment that Ironshore is not liable to make any payments in
connection with the Bell Litigation because coverage is precluded, in whole or in
part, by the Specific Insured Retroactive Date Exclusion of the Policy.

4.

Declaratory judgment allocating Damages and/or Claim Expenses for the Bell
Litigation between covered and uncovered matters.

5.

Declaratory judgment that Ironshore is entitled to recoupment from Bell for
Claim Expenses it has paid with respect to the Bell Litigation.

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  1. Costs.
  2. Reasonable attorney fees.
  3. Any other relief that the Court deems equitable and just.

Respectfully submitted.

The provided text is an excerpt from a document filed in this case. For a full understanding of the case, one should read the complete court file, including the response.

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