Insurer: No obligation to defend Lisle company accused of mismanaging West Dundee ice rink

A Michigan-based liability insurer has asked a federal judge to declare it has no responsibility to fund the defense of a west suburban company accused of mismanaging an ice rink in northwest Kane County.

Atain Insurance Companies filed suit April 27 in federal court in Chicago against Club Sports Consulting Group, a Lisle-based facility management company, and Club Sports president Don LaPato, asserting the terms of its agreement do not require the insurer to defend Club Sports and LaPato in the ongoing litigation they face from the Leafs Hockey Club Inc., which owns the Leafs Ice Centre, a multi-sheet hockey and ice skating facility, just northwest of the junction of Randall Road and Interstate 90 in West Dundee.

In October 2014, the hockey club, incorporated as LHC LLC, filed suit against LaPato, Club Sports former Leafs Hockey Club president Michael Durkin, of Algonquin, in federal bankruptcy court.

According to the complaint, Leafs Hockey Club had hired Club Sports in 2007 to operate its hockey rink, a relationship that continued until February 2013. The rink had been constructed in 2007 by the club, formerly known as Crystal Lake Hockey Club, funded by $20 million in sports facility revenue bonds issued by the Illinois Finance Authority, court documents said.

In late 2012, the hockey club replaced its entire board of directors, which previously had included LaPato and Durkin.

A few weeks later, the new board of directors terminated its management agreement with Club Sports.

Among other causes cited by the board when it fired Club Sports, the board of directors said in its complaint against Club Sports, the rink “was in a general state of disrepair” under the management of LaPato and Club Sports, and the board cited “evidence the rink had been mismanaged physically and financially for a substantial period of time.”

Leafs Hockey Club filed for Chapter 11 bankruptcy protection on Feb. 25, 2013.

In the bankruptcy court complaint, Leafs Hockey Club alleged Club Sports not only failed to maintain proper accounting records for its management of the ice rink and its revenue, but “removed physical records from the rink, including seven years of accounting records and records relating to construction of the rink” and “deleted various email and computer records” in the days preceding Leafs Hockey Club’s decision to terminate its management agreement with Club Sports.

Leafs Hockey Club further asserted Club Sports, LaPato and others used their “unfettered access” to the ice rink’s financial records to “misappropriate” the rink’s revenue “for their own benefit,” paying invoices listing their personal addresses and paying invoices “for the goods and services of a competitor rink,” identified in the bankruptcy court complaint as North Shore Ice Arena in Northbrook. The complaint alleges LaPato and Club Sports were also managing the North Shore Ice Arena at the time.

The hockey club further alleges LaPato and Club Sports removed security cameras and a security system server from the West Dundee arena.

Leafs Hockey Club has requested unspecified damages from Club Sports.

Atain had issued Club Sports a policy for general commercial liability for the period of Feb. 4, 2012, to March 4, 2013. And, when Leafs Hockey Club introduced its legal action against Club Sports, the facility management company filed a claim with Atain for coverage.

However, citing the allegations of “intentional and deliberate” wrongdoing and malpractice against Club Sports listed in Leafs Hockey Club’s complaint, Atain has alleged it has no duty to cover Club Sports’ or Lapato’s potential liability in the suit.

Atain is represented in the action by attorneys David T. Brown and Tara L. McTague, of the firm of Kaufman Dolowich & Voluck, of Chicago.

Club Sports is represented in the bankruptcy court litigation by attorney Michael J. Davis, of Davis & Greene Law LLC, of Lisle.

LaPato is represented by attorney Michael J. Greene, of Archer Bay, of Lisle.

LHC LLC is represented by attorneys Jeffrey C. Dan, Brian P. Welch and David K. Welch, of Crane, Heyman, Simon, Welch & Clar, of Chicago.