Chadbourne Wins High-Profile Insurance Dispute for Starr Indemnity

May 28, 2015, 11:28 ET from Chadbourne & Parke

NEW YORK, May 28, 2015 /PRNewswire/ -- A Chadbourne & Parke LLP litigation team secured a complete trial victory on behalf of Starr Indemnity & Liability Company in a lawsuit Starr brought against American Claims Management (ACM), a subsidiary of Brown & Brown Insurance.

A jury in the Southern District of New York awarded the return of US$1.625 million in fees and reimbursements based on the tort claims of conversion and breach of fiduciary duty against ACM, as well as aiding and abetting claims against ACM affiliates, Superior Recovery Services, Inc. (SRS), Marquee Managed Care Solutions, Inc. (Marquee) and Pacific Claims Services, Inc. (PCS). The jury also awarded punitive damages against all the defendants, totaling US$2.75 million. Finally, the jury also rejected all of the defendants' counterclaims against Starr.

In January 2010, Starr entered into a Claims Services Agreement with ACM, which obligated ACM to provide services with respect to non-standard automobile insurance claims arising under Starr insurance policies. The services ACM agreed to provide included, but were not limited to, establishing claims files, performing reporting and clerical work, recommending loss and expense reserves, estimating claim damages, attending to claim investigations, supervising litigation, and paying claims. In return for these Basic Services, ACM would receive a 7.25% service fee on all total monthly auto premiums.

Starr was also obligated to reimburse ACM for certain enumerated costs specifically defined and  identified in the Claims Services Agreement as allocated loss adjustment expenses (ALAE). In the most general of terms, Starr's initial complaint alleged that defendants were deeming certain expenses to be ALAE, which Starr contended did not qualify as ALAE as that term was described in the Claims Services Agreement.

There are two types of alleged improper charges: (1) a 15% or 18% fee applied by ACM and SRS to reimbursements that Starr received from the Michigan Catastrophic Claims Association (MCCA), which reimburses auto no-fault insurance companies for each personal injury medical claim paid in excess of a set amount, (the MCCA Charges), and (2) "Litigation Savings Charges" charged by ACM and Marquee (formerly PCS), a medical bill review entity, when Starr was sued by claimants, for 10% of the difference between the amount demanded by the claimant and the amount of the settlement or claim resolution, based on the assertion that Marquee performed bill review that achieved a savings for Starr on all categories of damages demanded by the plaintiff, and not just those specific to medical services.

Defendants paid themselves for the MCCA Charges and the Litigation Savings Charges by withdrawing money from the Claim Account. By doing so, Starr claims that ACM committed a conversion of Starr's funds, breached the fiduciary duty it owed Starr, and also breached the Claims Service Agreement. Starr alleges that Defendants, Marquee, PCS and SRS aided and abetted ACM's alleged wrongful acts and Starr seeks recovery of the amounts it alleges to have been improperly charged as well as an award of punitive damages.

The Chadbourne litigation team is led by litigation partner Thomas McCormack and includes insurance partner Joy Langford, litigation counsel Seth Kruglak, and litigation associate Michael Samalin.  

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