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

IN THE UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS - EASTERN DIVISION WESTCHESTER FIRE INSURANCE COMPANY,
Plaintiff, vs. PURCELL & WARDROP, CHTD., JOSHUA LAUBY, AMI DeMARCO, ELI ATKIN, and, DONNA ATKIN, Defendants. COMPLAINT FOR DECLARATORY JUDGMENT Now comes Plaintiff, Westchester Fire Insurance Company, 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, respectfully states as follows: NATURE OF THIS ACTION 1. Westchester Fire Insurance Company ("WFIC") brings this action pursuant to 28 No.

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 to the Named Insured Purcell & Wardrope, Chtd. ("Purcell & Wardrope") for the period October 8, 2011 to October 8, 2012 ("the Policy") with respect to the lawsuit captioned Eli and Donna Atkin vs. Purcell & Wardrope, Joshua Lauby, and Ami DeMarco, bearing case number No. 12 L 10296, pending in the Circuit Court of Cook County, Illinois, County Department, Law Division (the "Underlying Action").

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2.

In this action, WFIC seeks a declaratory judgment, among other things, that

coverage for the Underlying Action does not attach under the Policy based on the terms, conditions and exclusions of the Policy. PARTIES 3. WFIC is a corporation organized under the laws of the State of Pennsylvania with

its principal place of business in Philadelphia, Pennsylvania. At all times relevant hereto, WFIC was authorized to engage in the business of insurance in Illinois. 4. Defendant Purcell & Wardrope is a corporation duly licensed to conduct business

in the State of Illinois operating an office for the practice of law located in Chicago, Illinois. 5. of Illinois. 6. of Illinois. 7. Illinois. JURISDICTION AND VENUE 8. This Court has Subject Matter Jurisdiction over this action pursuant to 28 U.S.C. Defendants Eli and Donna Atkin are husband and wife and citizens of the State of Defendant Ami DeMarco is an attorney duly licensed to practice law in the State Defendant Joshua Lauby is an attorney duly licensed to practice law in the State

1332 because the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and there is complete diversity of citizenship as between the Plaintiff and the Defendants. 9. Venue is proper 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 the individual defendants reside in this Judicial District. Venue is also proper in this Court pursuant
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to 28 U.S.C. 1391(a)(2) because "a substantial part of the events or omissions giving rise to the claim occurred...." within this Judicial District. Finally, venue is also proper in this Court pursuant to 28 U.S.C. 1391(a)(3) because each of the defendants are subject to personal jurisdiction in this Judicial District. THE UNDERLYING COMPLAINT 10. On September 11, 2012, Eli and Donna Atkin filed a Complaint naming Purcell &

Wardrope, Joshua Lauby and Ami DeMarco (collectively, "the insureds") as defendants in the Underlying Action. 11. On December 26, 2012, Eli and Donna Atkin filed a First Amended Complaint

against the insureds in the Underlying Action (hereinafter, "Underlying Complaint"). 12. Exhibit A. 13. The Underlying Complaint alleges that, in 2008, Eli and Donna Atkin and others A true and accurate copy of the Underlying Complaint is attached hereto as

were sued by JHC Acquisition LLC and Nihan & Martin LLC in the Circuit Court of Cook County, Illinois, in Case No. 08 CH 19481. Ex. A at f 5. 14. The Underlying Complaint generally alleges that, in Case No. 08 CH 19481, JHC

Acquisition LLC and Nihan & Martin LLC sought to, inter alia, hold Eli and Donna Atkin personally liable for contractual debts owed to JHC Acquisition LLC and Nihan & Martin LLC by the co-defendants in that litigation. Ex. A at ^ 8. 15. The Underlying Complaint alleges that Eli and Donna Atkin were represented in

Case No. 08 CH 19481 by the insureds. Ex. A at If 7. The Underlying Complaint also alleges that 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.
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16.

The Underlying Complaint alleges that, in their representation of Eli and Donna

Atkin in Case No. 08 CH 19481, the insureds all "failed to exercise due care for their clients in one or more or all of the following respects: a. Failed to respond timely to discovery requests propounded to their clients, in the instant plaintiffs, Eli Atkin and Donna Atkin, by JHC Acquisition, LLC d/b/a Omnicare of Northern Illinois and Nihan & Martin LLC, who were the plaintiffs suing Eli Atkin and Donna Atkin in Case No. 08 CH 19481. b. Failed to comply with one or more court orders that were entered prior to May 20, 2011 that directed their clients, the instant plaintiffs, Eli Atkin and Donna Atkin, to comply with then pending discovery in Case No. 08 CH 19481. c. Failed to respond timely to a motion for sanctions pursuant to Supreme Court Rule 219 that was filed prior to May 20, 2011 by the plaintiffs in Case No. 08 CH 19481 against Eli Atkin and Donna Atkin because of non-compliance by the instant defendants with then pending discovery propounded to the instant plaintiffs, Eli Atkin and Donna Atkin. d. Allowed sanctions in the form of an order of default to be entered on May 20, 2011 against the instant plaintiffs, their clients, Eli Atkin and Donna Atkin, who were the defendants in Case No. 08 CH 19481 and who were the respondents on the motion for sanctions. e. Failed to respond timely to the discovery requests after the sanction of a default order was entered against their clients in Case No. 08 CH 19481, but before a money judgment was entered on the default, despite being afforded continuances on the prove up on damages from May 20 to July 25, 2011 and from July 25 to August 15, 2011, and from August 15 to September 12, 2011. f. Failed to respond timely to discovery when specifically directed by an agreed order of court, entered on August 15, 2011, to comply with the discovery by August 29, 2011.

g. Failed to prevent substantial monetary judgments from being entered against their clients, the instant plaintiffs, Eli Atkin and Donna Atkin, on September 16, 2011, as a sanction for failure to respond to discovery requests. h. Failed to warn and advise their clients, the instant plaintiffs, Eli Atkin and 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 a sanction of a default order had been entered against them, and thereafter that a sanction of substantial monetary judgments had been entered against them. i. Failed to advise the supervising partners on Case No. 08 CH 19481, and others, that a motion for sanctions had been filed, that the sanction of an order of default had been granted and that substantial monetary judgments had been entered against their clients, the instant plaintiffs, Eli Atkin and Donna Atkin. j. Covered up, and attempted to cover-up, the fact that an order of default and substantial monetary judgments had been entered against their clients, the instant plaintiffs, by failing to inform their clients that the orders of default and judgment had been entered by the court, by failing to so inform their supervisors, by failing to so inform their partners, by signing other attorneys' names to instruments without authority to do so, and otherwise.

k. Failed to properly seek and obtain a vacatur of the judgments entered against 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 Donna Atkin by the Court in Case No. 08 CH 19481 in the amounts of $1,508,331.24 and $425,509.45 on 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 judgments entered against them on September 16, 2011. Ex. A at ^ 22. 19. The Underlying Complaint alleges that, on July 9, 2012, Eli and Donna Atkin

paid the sum of $550,000 in exchange for a release of the judgments entered against them on September 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. 23. A true and accurate copy of the Policy is attached hereto as Exhibit B. 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 Policy's Insuring Agreement, Section I. provides:

The Company will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as Damages for Claims first made against the Insured during the Policy Period and first reported to the Company during the Policy 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 Professional Services by an Insured or any entity or individual for whom the Named Insured is legally liable; provided always that such act, error, omission or Personal Injury happens: A. during the Policy Period; or B. prior to the Policy Period provided that: 1. such act, error, omission or Personal Injury happened on or after the Retroactive Date as indicated on the Declarations Page of this policy; and 2. at the inception date of the first Lawyers Professional Liability Policy issued by this Company to the Named Insured or its Predecessor in Business and continuously renewed and maintained in effect to the inception of this Policy Period, no Insured had a reasonable basis to believe that any 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
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Suit. The Company shall have the right and duty to defend any Suit against the Insured seeking Damages to which this insurance applies even if any of the allegations of the Suit are groundless, false or fraudulent. However, the Company shall have no duty to defend the Insured against any Suit seeking Damages to which this insurance does not apply. For covered Claims, the Company, at its option, shall select and assign defense counsel; however, the Insured may engage additional counsel, solely at their own expense, to associate in 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 settlement without the Company's consent. 25. The Policy defines "Claim" as follows:

Claim means a demand for money, the filing of Suit or the institution of arbitration or mediation proceedings naming the Insured and alleging an act, error, omission or Personal Injury resulting from the rendering of or failure to render Professional Services. WFIC'S COVERAGE POSITION 26. 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, including but not limited to the right to decline coverage based on noncompliance with Condition (B)(2)of the Policy's Insuring Agreement, Section I. 28. Exhibit C. 29. WFIC's October 2, 2012 letter expressly reserved WFIC's right to supplement its A true and accurate copy of WFIC's October 2, 2012 letter is attached hereto as

coverage position and to deny coverage. Ex. C. 30. The insureds tendered the Amended Complaint in the Underlying Action to WFIC

for defense and indemnity under the Policy.

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31.

On August 28, 2013, WFIC issued supplemental coverage letters to the insureds

advising that it was now declining coverage for and withdrawing from the defense of the Underlying Action. 32. Exhibit D. 33. WFIC's declination was based on its position that coverage for the Underlying True and accurate copies of WFIC's August 28, 2013 letters are attached hereto as

Action does not attach under the Policy because Condition (B)(2)of the Insuring Agreement, Section I. is not satisfied. Ex. D. COUNT I Declaratory Judgment That The Underlying Complaint Does Not Trigger The Insuring Agreement Of The Policy 34. WFIC incorporates by reference the allegations in paragraphs 1 through 33 as if

they were fully set forth herein. 35. Condition (B)(2) of the Policy's Insuring Agreement, Section I. states that

coverage 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 Company to the Named Insured or its Predecessor in Business and continuously renewed and maintained in effect to the inception of this Policy Period, no Insured had a reasonable basis to believe that any 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, Insuring Agreement, Section I.(B)(2), updated by Endorsement PF 28282 (04/10). 36. Pursuant to Insuring Agreement, Section I Condition (B)(2), in order for coverage

to attach under the Insuring Agreement, before the inception of Purcell & Wardrope's first WFIC Policy, the insureds must not have had a reasonable basis to believe that any insured had
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breached a professional duty or that an act, error, omission, or Personal Injury might be expected to result in a Claim or Suit. 37. The Underlying Complaint alleges that the insureds failed to comply with court

orders entered "prior to May 20, 2011" and August 15, 2011 regarding discovery, failed to respond to a motion for sanctions that was also filed "prior to May 20, 2011", allowed an order of default to be entered on May 20, 2011 and failed to prevent "substantial monetary judgments from being entered ... on September 16, 2011." 38. 39. Purcell & Wardrope's first WFIC Policy incepted on October 8, 2011. 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 aware of the potential for a claim prior to the inception of Purcell & Wardrope's first WFIC Policy on October 8, 2011. 40. Accordingly, coverage does not attach under the Policy for the Underlying Action

because Condition (B)(2) of the Insuring Agreement is not satisfied. PRAYER FOR RELIEF WHEREFORE 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 judiciable controversy has arisen and now exists with respect

to the parties' rights, duties and obligations under the Westchester Fire Insurance Company Policy with respect to coverage for the Underlying Action; (b) Find and declare that Westchester Fire Insurance Company has no duty to defend

Purcell & Wardrope, Joshua Lauby and/or Ami DeMarco in connection with the Underlying Action;
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(c)

Find and declare that Westchester Fire Insurance Company has no duty to

indemnify Purcell & Wardrope, Joshua Lauby and/or Ami DeMarco for any judgment that may be awarded against them or any settlement that may be reached in connection with the Underlying Action; (d) Find and declare that the allegations of the Underlying Complaint do not trigger

coverage under the Insuring Agreement of the Westchester Fire Insurance Company Policy. (e) Award to Westchester Fire Insurance Company such other and further relief as is

just and proper. Respectfully submitted,

Attorney for Plaintiff Westchester Fire Insurance Company WALKER WILCOX MATOUSEK LLP Joyce F. Noyes James W. Kienzle One North Franklin Street, Suite 3200 Chicago, Illinois 60606 312-244-6700 (telephone) 312-244-6800 (fax) Attorneys for Plaintiff Westchester Fire Insurance Company

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