US Specialty Insurance seeks declaratory relief in Ga. coverage dispute
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A Texas-based insurance company filed a lawsuit in Illinois federal court last month alleging a lawyer and his firm intentionally filed for bankruptcy after a court order permanently enjoined them from doing so.
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Houston-based U.S. Specialty Insurance Co. filed an insurance coverage action seeking declaratory relief against Chicago attorney William Factor and his law firm. The complaint, filed in the U.S. District Court for the Northern District of Illinois on Jan. 31, asked the court to adjudicate its rights and obligations related to the insurance policy it issued Factor and his firm for underlying litigation in Georgia federal court.
The U.S. Specialty issued a lawyers professional liability policy in March 2023 to continue into March 2024, which included legal services liability coverage, but stated the policy cannot apply to any claims related to racketeering violations. Factor is accused of violating a court order in the underlying litigation, and the underlying plaintiff in the case accused him and his firm of racketeering, among other charges, according to the complaint.
The underlying litigation in Georgia alleges Factor and Factor Law, along with other underlying co-defendants, intentionally filed bankruptcy for Can-Do National Tape (CDNT), a manufacturing company, the day after the company and its agents, including legal counsel were permanently enjoined from doing so.
The underlying lawsuit stemmed from an employment dispute between Donald Cleesattle, the underlying plaintiff, and CDNT that resulted in arbitration. After an arbitrator issued an order for $550,000 in sanctions against CDNT and enjoined it from filing for bankruptcy, Factor allegedly signed a bankruptcy petition as CDNT’s attorney the following day in the Northern District of Illinois, the complaint said.
The underlying plaintiff filed nine causes of action against the underlying defendants, including Factor and Factor Law, related to the violation of the court order. These included accusations of violating Georgia’s racketeering law, civil conspiracy, civil theft, deceit and misrepresentation.
In addition to a declaration that U.S. Specialty has no obligation to indemnify Factor or Factor Law in the underlying suit, the insurer is also asking the court for a jury trial and any other relief deemed appropriate.
Attorneys Alexander W. Ross and Elliot Kim, of Clyde & Co. in Chicago, are representing the insurance company.
Counsel has not yet made an appearance for the defendants. A request for comment from Factor went unanswered.