WESTCHESTER FIRE INSURANCE COMPANY v. PURCELL & WARDROP, CHTD. et al Complaint

7/30/2019 WESTCHESTER FIRE INSURANCE COMPANY v. PURCELL & WARDROP, CHTD. et al Complaint

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Ca se: l:13-cv-061 51 Document #: 1 Filed: 08/28/13 Page 1 of 10 PagelD #:1

IN THE UNITED STATES DISTRICT COURTNORTHERN DISTRICT OF ILLINOIS - EASTERN DIVISIONWESTCHESTER FIRE INSURANCECOMPANY,

Plaintiff,

vs . No.PURCELL & WARDROP, CHTD.,JOSHUA LAUBY, AMI DeMARCO,ELI ATKIN, and, DONNA ATKIN,

Defendants.

COMPLAINT FOR DECLARATORY JUDGMENTNow comes Plaintiff, Westchester Fire Insurance C ompany, by and through its attorneys,

Walker Wilcox Matousek LLP, and for its Complaint for Declaratory Judgment against Purcell& Wardrope, Chtd., Joshua Lauby, Ami DeMarco, Eli Atkin and Donna Atkin, respectfullystates as follows:

NATURE OF THIS ACTION1. W estchester Fire Insurance Com pany ("WFIC") brings this action pursuant to 28

U.S.C. 2201 and 2202 for a declaratory judgment regarding its rights and obligations, if any,under Lawyers Professional Liability insurance policy number LPL-G2661 6232 001, issued tothe Named Insured Purcell & W ardrope, Chtd. ("Purcell & W ardrope") for the period October 8,2011 to October 8, 2012 ("the Policy") with respect to the lawsuit captioned Eli and Donna Atkinvs . Purcell & Wardrope, Joshua Lau by, and Ami DeM arco, bearing case number No. 12 L10296, pending in the Circuit Court of Cook County, Illinois, County Department, Law Division(the "Underlying Action").

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Case: l:13-cv-06151 Document #: 1 Filed: 08/28/13 Page 2 of 10 PagelD #:2

2. In this action, WFIC seeks a declaratory judgment, among other things, thatcoverage for the Underlying Action does not attach under the Policy based on the terms,conditions and exclusions of the Policy.

PARTIES3. WFIC is a corporation organized under the laws of the State of Pennsylvania with

its principal place of business in Philadelphia, Penn sylvania. At all times relevant hereto, WFICwas authorized to engage in the business of insurance in Illinois.

4. Defendant Purcell & Wardrope is a corporation duly licensed to conduct businessin the State of Illinois ope rating an office for the practice o f law located in C hicago, Illinois.

5. Defendant Joshua Lauby is an attorney duly licensed to practice law in the Stateof Illinois.

6. Defendant Ami DeM arco is an attorney duly licensed to practice law in the Stateof Illinois.

7. Defendants Eli and Donna Atkin are husband and wife and citizens of the State ofIllinois.

JURISDICTION AND VENUE8. This Court has Subject Ma tter Jurisdiction over this action pursuant to 28 U.S.C.

1332 because the matter in controversy exceeds the sum or value of $75,000, exclusive ofinterest and costs, and there is complete diversity of citizenship as between the Plaintiff and theDefendants.

9. Venue is prope r in this Court pursuant to 28 U.S .C. 1391(a)(1) because Purcell& Wardrope has its principal location of business within this Judicial District and each of theindividual defendants reside in this Judicial District. Venue is also proper in this Court pursuant[File :00646979.DOCX/ ]


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to 28 U.S.C. 1391(a)(2) because "a substantial part of the events or omissions giving rise to theclaim oc cu rred ...." w ithin this Judicial District. Finally, venue is also proper in this Courtpursuant to 28 U.S.C. 1391(a)(3) because each of the defendants are subject to personaljurisdiction in this Judicial District.

THE UNDERLYING COMPLAINT10. On September 11, 2012, Eli and Donna Atkin filed a Com plaint naming Purcell &

Wardrope, Joshua Lauby and Ami DeMarco (collectively, "the insureds") as defendants in theUnderlying A ction.

11. On December 26, 2012, Eli and Donna Atkin filed a First Amended Complaintagainst the insureds in the Underlying Action (hereinafter, "Underlying Complaint").

12. A true and accurate copy of the Underlying Complaint is attached hereto asExhibit A.

13. The Underlying Complaint alleges that, in 2008, Eli and Donna Atkin and otherswere sued by JHC Acquisition LLC and Nihan & Martin LLC in the Circuit Court of CookCounty, Illinois, in Case N o. 08 CH 19481. Ex. A at f 5.

14. The Underlying Comp laint generally alleges that, in Case No. 08 CH 19481, JH CAcquisition LLC and Nihan & Martin LLC sought to, inter alia, hold Eli and Donna Atkinpersonally liable for contractual debts owed to JHC Acquisition LLC and Nihan & Martin LLCby the co-defendants in that litigation. Ex. A at ^ 8.

15. The Underlying Complaint alleges that Eli and Donna Atkin were represented inCase No . 08 CH 19481 by the insureds. Ex. A at If 7. The Underlying Com plaint also allegesthat Joshua Lauby and Ami Demarco were associates or partners of the law firm Purcell &Wardrope throughout their representation of Eli and Donna Atkin in Case No. 08 CH 19481.(File:00646979.DOCX/ )


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16. The Underlying Complaint alleges that, in their representation of Eli and DonnaAtkin in Case No. 08 CH 19481, the insureds all "failed to exercise due care for their clients inone or more or all of the following respects:

a. Failed to respond timely to discovery reque sts propou nded to theirclients, in the instant plaintiffs, Eli Atkin and Donna Atkin, by JHCAcquisition, LLC d/b/a Omnicare of Northern Illinois and Nihan &Martin L LC, who were the plaintiffs suing Eli Atkin and Donna A tkinin Case No. 08 CH 19481.b. Failed to comply with one or more court orders that were entered priorto May 20, 2011 that directed their clients, the instant plaintiffs, EliAtkin and Donna Atkin, to comply with then pending discovery inCase No. 08 CH 19481.c. Failed to respond timely to a m otion for sanctions pursuant to SupremeCourt Rule 219 that was filed prior to May 20 , 2011 by the plaintiffs inCase No. 08 CH 19481 against Eli Atkin and Donna Atkin because ofnon-compliance by the instant defendants with then pending discoverypropounded to the instant plaintiffs, Eli Atkin and Donna Atkin.d. Allow ed sanction s in the form of an order of default to be entered onMay 20, 2011 against the instant plaintiffs, their clients, Eli Atkin andDonna Atkin, who were the defendants in Case No. 08 CH 19481 andwho were the respondents on the mo tion for sanctions.e. Failed to respond tim ely to the discovery requests after the sanction ofa default order was entered against their clients in Case No. 08 CH19481, but before a money judgment was entered on the default,despite being afforded continuances on the prove up on damages fromMay 20 to July 25, 2011 and from July 25 to August 15, 2011, andfrom August 15 to September 12, 2011.f. Failed to respon d timely to discovery wh en specifically directed by anagreed order of court, entered on August 15, 2011, to comply with thediscovery by August 29, 2011.g. Failed to prevent substantial mo netary jud gm ents from bein g enteredagainst their clients, the instant plaintiffs, Eli Atkin and Donna Atkin,on September 16, 2011, as a sanction for failure to respond todiscovery req uests.h. Failed to warn and advise their clients, the instant plaintiffs, Eli Atkinand Donna Atkin, that a motion for sanctions had been filed against

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them, that the clients must timely respond, and thereafter that asanction of a default order had been entered against them, andthereafter that a sanction of substantial monetary judgments had beenentered against them.i. Failed to advise the supervising partners on Case N o. 08 CH 19481,and others, that a motion for sanctions had been filed, that the sanctionof an order of default had been granted and that substantial monetaryjudgments had been entered against their clients, the instant plaintiffs,Eli Atkin and D onna Atkin.

j . Covered up, and attempted to cover-up, the fact that an order of defaultand substantial monetary judgments had been entered against theirclients, the instant plaintiffs, by failing to inform their clients that theorders of default and judgment had been entered by the court, byfailing to so inform their supervisors, by failing to so inform theirpartners, by signing other attorneys' names to instruments withoutauthority to do so, and otherwise.k. Failed to prope rly seek and obtain a vacatur of the judgments enteredagainst their clients on September 16, 2011."

Ex. A at f 17.17. The Underlying Complaint alleges that as a direct and proximate result of the

"acts of carelessness" of the insureds, default judgments were entered against Eli and DonnaAtkin by the Court in Case No. 08 CH 19481 in the amounts of $1,508,331.24 and $425,509.45on September 16, 2011. Ex. A at f 18.

18. The Underlying Complaint alleges that Eli and Donna Atkin paid in excess of$25,000 in attorney's fees in attempting to defend against the enforcement of the judgmentsentered against them on September 16, 2011. Ex. A at ^ 22.

19. The Underlying Complaint alleges that, on July 9, 2012, Eli and Donna Atkinpaid the sum of $550,000 in exchange for a release of the judgments entered against them onSeptember 16, 2011. Ex. A at f 22.

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20 . The Underlying Complaint seeks damages against the insureds in the amount of$575,000, plus costs. Ex. A at f 22.THE POLICY

21. WFIC issued a Lawyers Professional Liability Insurance Policy, number LPL-G2661 6232 001, on a claims-made and reported basis, to the Named Insured Purcell &Wardrope, Chtd., for the policy period October 8, 2011 to October 8, 2012.

22 . A true and accurate copy of the Policy is attached hereto as Exhibit B.23 . The Policy provides limits of liability of $5 million per claim and $5 million in

the aggregate and is subject to a $15,000 annual aggregate deductible which applies only to loss.Defense expenses have a separate limit of liability.

24 . The Polic y's Insuring Agreement, Section I. provides:The Company will pay on behalf of the Insured all sums which the Insured shallbecome legally obligated to pay as Damages for Claims first made against theInsured during the Policy Period and first reported to the Company during thePolicy Period or within thirty (30) days thereafter, arising out of any act, error,omission or Personal Injury in the rendering of or failure to render ProfessionalServices by an Insured or any entity or individual for whom the Named Insuredis legally liable; provided always that such act, error, omission or PersonalInjury happens:

A. during the Policy Period; orB. prior to the Policy Period provided that:

1. such act, error, omission or Personal Injury happened on orafter the Retroactive Date as indicated on the DeclarationsPage of this policy; and2. at the inception date of the first Lawyers ProfessionalLiability Policy issued by this Company to the NamedInsured or its Predecessor in Business and continuouslyrenewed and maintained in effect to the inception of thisPolicy Period, no Insured had a reasonable basis to believethat any Insured had breached a professional duty or areasonable basis to believe an act, error, omission orPersonal Injury might be expected to result in a Claim or

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Suit.The Company shall have the right and duty to defend any Suit against theInsured seeking Damages to which this insurance applies even if any of theallegations of the Suit are groun dless, false or fraudulent. Ho wev er, theCompany shall have no duty to defend the Insured against any Suit seekingDamages to which this insurance does not apply. For covered Claims, theCompany, at its option, shall select and assign defense counsel; however, theInsured may engage additional counsel, solely at their own expense, to associatein the defense of any covered Claim. The Insured shall not assume any liability,any obligations, incur any costs, charges, or expenses or enter into any settlementwithout the Company's consent.25. The Policy defines " Claim " as follows:Claim means a demand for money, the filing of Suit or the institution ofarbitration or mediation proceedings naming the Insured and alleging an act,error, omission or Personal Injury resulting from the rendering of or failure torender Professional Services.

WFIC'S COVERAGE POSITION26 . The insureds tendered the Underlying Action to WFIC for defense and indemnity

under the Policy.27 . By letter dated October 2, 2012, WFIC advised that it would provide the insureds

a defense to the Underlying Action subject to a comprehensive reservation of rights, includingbut not limited to the right to decline coverage based on noncompliance with Condition (B)(2)ofthe Polic y's Insuring Agreem ent, Section I.

28. A true and accurate copy of WFIC's October 2, 2012 letter is attached hereto asExhibit C.

29 . WFIC's October 2, 2012 letter expressly reserved WFIC's right to supplement itscoverage position and to deny coverage. Ex. C.

30 . The insureds tendered the Am ended C omplaint in the Underlying Action to WFICfor defense and indemnity under the Policy.

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31. On August 28, 2013, WFIC issued supplemental coverage letters to the insuredsadvising that it was now declining coverage for and withdrawing from the defense of theUnderlying Action.

32 . True and accurate copies of W FIC 's August 28, 2013 letters are attached hereto asExhibit D.

33 . WFIC's declination was based on its position that coverage for the UnderlyingAction does not attach under the Policy because Condition (B)(2)of the Insuring Agreement,Section I. is not satisfied. Ex. D.

COUNT IDeclaratory Judgment That The Underlying ComplaintDoes Not Trigger The Insuring Agreem ent Of The Policy

34 . WFIC incorporates by reference the allegations in paragraphs 1 through 33 as ifthey were fully set forth herein.

35. Condition (B)(2) of the Policy's Insuring Agreement, Section I. states thatcoverage will attach for a claim pursuant to the terms of the Insuring Agreement provided that"at the inception date of the first Lawyers Professional Liability Policy issued by this Companyto the Named Insured or its Predecessor in Business and continuously renewed and maintainedin effect to the inception of this Policy Period, no Insured had a reasonable basis to believe thatany Insured had breached a professional duty or a reasonable basis to believe an act, error,omission or Personal Injury might be expected to result in a Claim or Suit." Ex. B, InsuringAgreement, S ection I.(B)(2), updated by Endorsement PF 28282 (04/10).

36 . Pursuant to Insuring Agreement, Section I Condition (B)(2), in order for coverageto attach under the Insuring Agreement, before the inception of Purcell & Wardrope's first WFICPolicy, the insureds must not have had a reasonable basis to believe that any insured had{File :00646979.DOCX/ ) 8


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breached a professional duty or that an act, error, omission, or Personal Injury might be expectedto result in a Claim or Suit.

37. The Underlying Complaint alleges that the insureds failed to comply with courtorders entered "prior to May 20, 2011" and August 15, 2011 regarding discovery, failed torespond to a motion for sanctions that was also filed "prior to May 20, 2011", allowed an orderof default to be entered on May 20, 2011 and failed to prevent "substantial monetary judgmentsfrom being entered ... on September 16, 2011."

38 . Purcell & Wardrope's first WFIC Policy incepted on October 8, 2011.39 . If true, the allegations of the Underlying Complaint establish that the insureds had

a reasonable basis to believe that an insured had breached a professional duty and/or was awareof the potential for a claim prior to the inception of Purcell & Wardrope's first WFIC Policy onOctober 8, 2011.

40 . Accordingly, coverage does not attach under the Policy for the Underlying Actionbecause Condition (B)(2) of the Insuring Agreement is not satisfied.

PRAYER FOR RELIEFWHEREFORE Plaintiff Westchester Fire Insurance Company respectfully requests that

this Honorable Court enter judgment in its favor and against the Defendants as follows:(a) That an actual and judic iable controversy has arisen and now exists with respect

to the parties' rights, duties and obligations under the Westchester Fire Insurance CompanyPolicy w ith respect to coverage for the Underlying Action;

(b) Find and declare that W estchester Fire Insurance Company has no duty to defendPurcell & Wardrope, Joshua Lauby and/or Ami DeMarco in connection with the UnderlyingAction;{File: 00646979.DOCX / )


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(c) Find and declare that We stchester Fire Insurance Company has no duty toindemnify Purcell & Wardrope, Joshua Lauby and/or Ami DeMarco for any judgment that maybe awarded against them or any settlement that may be reached in connection with theUnderlying Action;

(d) Find and declare that the allegations of the Und erlying Complaint do not triggercoverage under the Insuring A greement of the Westchester Fire Insurance Com pany Policy.

(e) Award to We stchester Fire Insurance Com pany such other and further relief as isjust and proper.

Respectfully submitted,

Attorney for Plaintiff Westchester FireInsurance Company

WALKER WILCOX MATOUSEK LLPJoyce F. NoyesJames W . KienzleOne North Franklin Street, Suite 3200Chicago, Illinois 60606312-244-6700 (telephone)312-244-6800 (fax)Attorneys for Plaintiff Westchester Fire Insurance Company

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WESTCHESTER FIRE INSURANCE COMPANY v. PURCELL & WARDROP, CHTD. et al Complaint