UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS
UNITED STATES FIRE INSURANCE
COMPANY
v.
ACE AMERICAN INSURANCE
COMPANY JULY 30, 2014
COMPLAINT FOR DECLARATORY JUDGMENT
NATURE OF ACTION
1. This is an action for declaratory judgment brought by United States Fire Insurance
Company ("U.S. Fire") against ACE American Insurance Company ("ACE") concerning the
application of their respective insurance policies to the settlement of a professional malpractice
action involving their common insured, Dr. James B. Riley ("Dr. Riley"). U.S. Fire seeks a
declaration that the U.S. Fire policy is excess over the ACE policy as respect to the liability of
Dr. Riley. In the alternative, U.S. Fire seeks a declaration that the U.S. Fire and ACE policies
are mutually repugnant and that they must share the liability equally pursuant to their pro rata
sharing clauses.
PARTIES
2. U.S. Fire is a Delaware corporation with a principal place of business in
Morristown, New Jersey.
3. ACE is a Pennsylvania corporation with a principal place of business in
Philadelphia, Pennsylvania.
11018183.1
Case 1:14-cv-13169-WGY Document 1 Filed 07/30/14 Page 1 of 6
JURISDICTION AND VENUE
4. Jurisdiction over the matter is founded upon diversity of citizenship under
28 U.S.c. 1332 based upon the facts as specifically alleged in paragraphs 3 and 4 above.
5. The amount in controversy, exclusive of interest and costs, exceeds $75,000.
6. Venue in this matter lies in the District of Massachusetts under 28 U.S.C.
1391(b)(2).
7. The Court has authority to issue a declaratory judgment regarding the parties
rights and obligations under their respective policies pursuant to 28 U.S.c. 2201, et seq.
8. An actual controversy of a justiciable nature exists between U.S. Fire and ACE
regarding the order in which their respective insurance policies apply to the settlement of a
professional malpractice claim involving their common insured, Dr. Riley.
9. This COUli has personal jurisdiction over ACE because it conducts regular and
systematic business in Massachusetts.
FACTUAL BACKGROUND
10. This matter arises out of a professional malpractice action brought on behalf of a
minor, Andre McCollins, against the Judge Rottenberg Educational Center ("JRC"), two
employees, Dr. Israel and Dr. VonHeyn, and a consultant, Dr. Riley, in Norfolk Superior Court,
Civil Action No. 08-02146. The claim against JRC sounded in vicarious liability.
11. JRC was insured under a primary commercial general liability policy no.
5031940563 issued by U.S. Fire with limits ofliability of $1 ,000,000.
12. JRC was also insured under an excess policy issued by General Star.
13. Dr. Riley was insured under a Psychologists Professional Liability Claims-Made
Insurance Policy no. 58G2223674A issued by ACE with limits of liability of $1 ,000,000.
- 2 -
!l018! 83.1
Case 1:14-cv-13169-WGY Document 1 Filed 07/30/14 Page 2 of 6
14. Dr. Riley was also insured under the U.S. Fire policy issued to JRC, in his
capacity as a consultant.
15. Dr. Riley never tendered the McCollins claim to U.S. Fire, nor did he request that
U.S. Fire defend and/or indemnify him against the allegations set forth in McCollins' Complaint.
16. At the trial of the McCollins malpractice action, U.S. Fire provided a defense on
behalf of JRC and its two employees, Dr. Israel and Dr. VonHeyn.
17. At the trial of the McCollins' malpractice action, ACE provided a defense on
behalf of Dr. Riley.
18. On April 13,2012, the fifth day of trial, Edward T. Hinchey, the attorney retained
by ACE to defend Dr. Riley, wrote to U.S. Fire demanding that U.S. Fire defend and indemnify
Dr. Riley under the comprehensive general liability policy U.S. Fire issued to the JRC.
19. Prior to a verdict, the McCollins' action was settled in consideration of
$1,500,000 paid to the plaintiff by the defendants' insurers as follows:
ACE $ 50,000
U.S. Fire $1,000,000
General Star $ 450,000
20. U.S. Fire's contribution was made on behalf of JRC, Dr. Riley, Dr. Israel and
Dr. V onHeyn.
21. ACE's contribution toward the settlement was made on behalfofDr. Riley.
22. General Star's contribution toward the settlement was made on behalf of JRC,
Dr. Israel and Dr. VonHeyn (but not Dr. Riley).
23. The "Other Insurance" clause contained in the U.S. Fire policy states: "If an
insured under this policy is also an insured under other insurance covering any professional act,
error, or omission, this insurance is excess over the other insurance as respects that insured."
11018183.1
Case 1:14-cv-13169-WGY Document 1 Filed 07/30/14 Page 3 of 6
24. The "Other Insurance" clause contained in the ACE policy states: "If there is
other valid insurance (whether primary, excess, contingent or self-insurance) which may apply
against a loss or claim covered by this policy, the insurance provided hereunder shall be deemed
excess insurance over and above the applicable limit of all other insurance or self-insurance.
25. Insofar as the ACE policy covers professional acts, errors or omissions, the U.S.
Fire policy is excess over the ACE policy as respects Dr. Riley.
26. There exists a genuine dispute between U.S. Fire and ACE as to the application of
their respective insurance policies to the settlement of McCollins professional malpractice claim.
COUNT ONE: (Declaration That The ACE Policy Is Primary And The U.S. Fil"e Policy Is
Excess With Respect To The Liability Of Dr. Riley.)
27. U.S. Fire incorporates herein by reference the allegations contained in paragraphs
1 through 26.
WHEREFORE, U.S. Fire respectfully seeks a declaration that the U.S. Fire policy is
excess over the ACE policy as respects the liability of Dr. Riley.
COUNT TWO: (In The Alternative, Declaration That The U.S. Fire And ACE Policies Are
Mutually Repugnant And That The Insurers Must Share The Liability Equally Pursuant
To Their Pro Rata Sharing Clauses).
28. U.S. Fire incorporates herein by reference the allegations contained in paragraphs
1 through 24.
29. In the alternative, the "Other Insurance" clauses contained in the U.S. Fire and
ACE policies are mutually repugnant excess clauses.
30. To the extent that the u.S. Fire and ACE policies are mutually repugnant, they
must each contribute to the settlement of Dr. Riley's liability.
31. The method of sharing provision in the U.S. Fire policy provides:
- 4 -
II 018183.1
Case 1:14-cv-13169-WGY Document 1 Filed 07/30/14 Page 4 of 6
If the other insurance permits contribution by equal shares,
we will follow this method also. Under this approach, each
insurer contributes equal amounts until it has paid its
applicable limit of insurance or none of the loss remains,
whichever comes first. If any of the other insurance does
not permit contribution by equal shares, we will contribute
by limits. Under this method, each insurer's share is based
on the ratio of its applicable limit of insurance to the total
applicable limits of insurance of all insurers.
32. The method of sharing provision in the ACE policy provides:
When both this insurance and other insurance or self-
insurance apply to the loss on the same basis, whether
primary, excess or contingent, the Company shall not be
liable under this policy for a greater proportion of the loss
or defense costs than the applicable limit of liability under
this policy for such loss bears to the total applicable limit of
liability of all valid and collectable insurance against such
loss. Subject to the foregoing, if a loss occurs involving
two or more policies, each of which provides that its
insurance shall be excess, each will contribute pro rata.
33. When compared with each other, both policies contain pro rata sharing clauses.
34. There exists a genuine dispute between U.S. Fire and ACE as to the application of
their respective insurance policies to the settlement of McCollins' professional malpractice claim
against Dr. Riley.
WHEREFORE, in the alternative, U.S. Fire seeks a declaration that the U.S. Fire and
ACE policies are mutually repugnant and that they must share the liability equally pursuant to
their pro rata sharing clauses.
- 5 -
11018183.1
Case 1:14-cv-13169-WGY Document 1 Filed 07/30/14 Page 5 of 6
\
11018183.1
UNITED STATES FIRE INSURANCE
COMPANY
BY /s/ Calum B. Anderson
Calum B. Anderson, BBO #018140
DANAHERLAGNESE, PC
60 State Street
Boston, MA 02109
Telephone: (617) 371-2997
Email: canderson(clldanaherlagnese.com
- 6 -
Case 1:14-cv-13169-WGY Document 1 Filed 07/30/14 Page 6 of 6