A New York-based insurance company has asked a federal judge to declare it has no duty to represent an Elmhurst lawyer facing a malpractice suit alleging he failed to properly represent the former owners of a Calumet City car dealership while they sold the business, potentially leaving them on the hook for a $746,000 payment to a union pension fund.
Navigators Insurance Co. filed complaint for declaratory judgment in February in Chicago's federal court against attorney Anthony Pope, whose legal and accounting practice, Anthony Joseph Pope Ltd., specializes in tax law and assistance with corporate transactions, according to his firm’s website.
While Navigators acknowledges Pope has a professional liability policy from the insurer that ends Sept. 30, 2014, it wants the court to rescind that policy.
The insurance company contends Pope failed to uphold his end of the terms of the policy by not properly notifying it of the potential claims against him stemming from the legal malpractice suit brought against him by River Oaks Inc., a company that had formerly owned and done business as the River Oaks Toyota Scion dealership in Calumet City.
River Oaks Inc., led by its president, Anthony Cassello, filed a legal malpractice suit against Pope in December 2013 in the Cook County Circuit Court, claiming Pope erred in his preparation of an agreement to complete the sale of the dealership in 2012, according to the insurance company's complaint.
Navigators notes in its complaint that the malpractice suit alleges the dealership had operated under a collective bargaining agreement with some of its employees, represented by the Automobile Mechanics Local 701, that was in effect from August 2009 to July 2013.
Under the terms of the agreement, River Oaks was required to make regular weekly payments to the union local’s pension fund, which River Oaks did until December 2012.
At that time, according to the complaint, Cassello and River Oaks reached a deal to sell the dealership to Toro Automotive LLC.
River Oaks then hired Pope to represent it in the sale and draft the purchase agreement.
In the malpractice suit, however, Cassello and River Oaks contend Pope neglected to include any language specifying to the buyers that they would be required to continue making the contributions to the union’s pension fund.
When those payments stopped following the sale, the union leadership sued Cassello and the former River Oaks ownership demanding a “withdrawal liability” payment of more than $746,000 to settle accounts.
Cassello and River Oaks then sued Pope, requesting damages of at least $50,000. Pope, in turn, submitted a claim to Navigators to defend him in the matter.
In its complaint, Navigators asserts it has no obligation to defend Pope under the terms of the policy.
Specifically, the insurer notes that, Pope would have known at the time he applied for coverage through Navigators in July 2013 that the auto mechanics union had initiated litigation against River Oaks’ former ownership, and “that the purchase agreement failed to include the appropriate language regarding withdrawal liability.”
These constituted “material misrepresentations” by Pope to the insurance company, Navigators asserts, adding that it notified Pope in January of its intent to rescind coverage.
Navigators is being represented in the matter by attorneys Kimberly E. Blair and Michael P. Tone of Wilson, Elser, Moskowitz, Edelman & Dicker LLP in Chicago.
Pope and his practice are being represented by Scott Andrew Nehls and Steven M. Ruffalo of Fuchs & Roselli Ltd. in Chicago. They filed an unopposed motion for an extension of time to respond to the suit last month.
U.S. District Judge John Darrah granted that motion, according to electronic court records that also show the defendants have been given a May 9 deadline to answer or otherwise plead. An initial status hearing in the matter has set for May 20.