ILNews

Settlement may be largest of its kind: State agency resolves federal lawsuit that began with legal malpractice claim

Back to TopCommentsE-mailPrintBookmark and Share
An Indianapolis law firm has been holding its breath for two years. Ever since getting hit with a potentially devastating $17.9 million jury verdict on a legal malpractice claim in state court, the 45-year-old law firm Fillenwarth Dennerline Groth & Towe hasn't been able to put the focus on its daily client business without acknowledging that dark storm cloud hovering overhead.

Now, the storm cloud has dissolved.

In what may be the state's largest-ever liquidation return of its kind, the Indiana Department of Insurance has reached a $16.5 million settlement with Alabama-based ProNational Insurance to end a fourmonth-old federal lawsuit alleging bad faith and breach of contract for how it handled the legal malpractice claim against Frederick Dennerline and the firm.

"This is a big relief," partner William Groth said about the settlement. "The last couple years have been pretty difficult from an emotional standpoint; there's been a lot of bitter tears and uncertainty. The judgment has been a big distraction, but that's now all concluded and that distraction is removed."

ProNational was the malpractice insurer for the law firm when a situation materialized. At the time, Fillenwarth Dennerline represented the failed Indiana Construction Industry Trust that had provided health-care coverage to 8,200 non-union construction workers before going bust in 2002. Those Hoosiers were left with unpaid medical bills, and the insurance commissioner went after all the defendants - including Dennerline, who'd served as outside counsel for the health plan and had knowledge of the failing trust.

About 80 other defendants settled with the state agency, but Dennerline proceeded to trial. ProNational declined to settle for the $1 million limit that Dennerline wanted. A jury in August 2006 found Dennerline and the firm liable and assessed a $17.9 million verdict that the Indiana Court of Appeals affirmed this past spring.

Earlier this year, the law firm assigned its rights to the insurance commissioner and paid $50,000, releasing it from any obligation to pay the multi-million dollar verdict. The U.S. District Court, Southern District of Indiana, suit immediately followed in June.

The agreement came about 4:30 p.m. Oct. 10 in Jim Atterholt v. ProNational Insurance Co., No. 1:08-cv-0834-DFH-WTL, which accused ProNational of declining multiple opportunities to settle the state court claim. The suit claimed the company breached its obligation to pay the claims and engaged in a "malicious, willful, oppressive, and unfounded" manner in failing and refusing to settle.

Indianapolis attorney Joe Chapelle with Barnes & Thornburg, who represented ProNational, said he and the company are pleased with the $16.5 million settlement.

"This is not to be construed to mean that there was any finding by the department of bad faith," he said. "We are pleased with the outcome, and the company is pleased to be able to put this behind them."

He maintained that ProNational does not have a "no-settle" policy - a position made following the federal suit filing in the summer.

At that time, Chapelle said that his client insures about 1,000 attorneys or firms in Indiana and offers coverage up to $5 million. In the past five years, about 67 percent of the cases against attorneys have been resolved without any payments from dismissals, summary judgments, or defense verdicts, he said. About 27 percent have been settled, and about 7 percent have evaded judgment, he said. 

"We do not have a no-settle policy," he said. "That's something someone would throw out there on these types of complaints."

Of about 20 suits filed nationally in the past decade where ProNational was a defendant, federal dockets show that about six involved the insurer getting sued for medical malpractice claims. None of the others appear to involve legal malpractice, except for this current case and the previous one that was filed but dismissed in 2005 by Fillenwarth Dennerline. Records show most were dismissed, with some involving joint stipulation of dismissal from both parties following settlement. Some records were sealed or not available online.

Cohen & Malad attorney Irwin Levin, who represented the state insurance agency and was on the original legal malpractice action against the firm, said this federal settlement negotiation came down to balancing the trust fund needs with a potentially ongoing appeal and federal suit.

"We negotiated and took a tough stance, and it came down to how long we wanted to litigate," Levin said, noting this settlement ended the federal suit and a transfer request pending on the state legal malpractice claim before the Indiana Supreme Court.

Levin added that to his knowledge, this is the highest amount ever returned from a liquidation action without a guaranty fund in the state. An additional $7.7 million in settlements already paid by other defendants makes a combined total of more than $24 million to be paid into the trust.

The Department of Insurance described this recovery as remarkable, noting that it hadn't expected to recover this amount. The money will be used to reimburse about 80 percent of out-of-pocket expenses paid by member companies, their employees, and healthcare providers that should have been paid years ago by the trust. A payout date is set for Dec. 15; members, employees, and healthcare providers are able to submit reimbursement claims to a special deputy liquidator, Indiana Insolvency Inc.

In the meantime, Groth and others at the firm are just happy to be able to look past this suit that has been all engulfing. The firm's malpractice rates have dropped, the client base continues expanding from those loyal clients who endured the past two years, and Groth said the firm has more work than ever. The firm has changed insurance carriers and no longer goes with ProNational. 


Previous ProNational coverage:

"Justices asked to hear law firm case" - Sept. 3, 2008
 
"Suit filed against insurer" - July 9, 2008

"$18 million verdict clouds law firm's future" - Sept. 20, 2006"This was our only experience with ProNational, and it wasn't a pleasant one.We don't know if it's consistent to how they operate with everyone, but they didn't settle when we wanted them to," Groth said, adding that he hopes this $16.5 million amount will teach ProNational and other insurers a lesson.

"We hope this will cause them to put the insureds' interests ahead of their own financial interests," he said. "Maybe it'll make them pay more attention to the emotional and financial consequences of refusing to settle, particularly when that insured is a law firm and there's no cap on liability, as there is on medical professionals." •
ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. A high ranking Indiana supreme Court operative caught red handed leading a group using the uber offensive N word! She must denounce or be denounced! (Or not since she is an insider ... rules do not apply to them). Evidence here: http://m.indianacompanies.us/friends-educational-fund-for-negroes.364110.company.v2#top_info

  2. A high ranking bureaucrat with Ind sup court is heading up an organization celebrating the formal N word!!! She must resign and denounce! http://m.indianacompanies.us/friends-educational-fund-for-negroes.364110.company.v2#top_info

  3. ND2019, don't try to confuse the Left with facts. Their ideologies trump facts, trump due process, trump court rules, even trump federal statutes. I hold the proof if interested. Facts matter only to those who are not on an agenda-first mission.

  4. OK so I'll make this as short as I can. I got a call that my daughter was smoking in the bathroom only her and one other girl was questioned mind you four others left before them anyways they proceeded to interrogate my daughter about smoking and all this time I nor my parents got a phone call,they proceeded to go through her belongings and also pretty much striped searched my daughter including from what my mother said they looked at her Brest without my consent. I am furious also a couple months ago my son hurt his foot and I was never called and it got worse during the day but the way some of the teachers have been treating my kids they are not comfortable going to them because they feel like they are mean or don't care. This is unacceptable in my mind i should be able to send my kids to school without worry but now I worry how the adults there are treating them. I have a lot more but I wanted to know do I have any attempt at a lawsuit because like I said there is more that's just some of what my kids are going through. Please respond. Sincerely concerned single parent

  5. California Sex Offender Management Board (CASOMB) End of Year Report 2014. (page 13) Under the current system many local registering agencies are challenged just keeping up with registration paperwork. It takes an hour or more to process each registrant, the majority of whom are low risk offenders. As a result law enforcement cannot monitor higher risk offenders more intensively in the community due to the sheer numbers on the registry. Some of the consequences of lengthy and unnecessary registration requirements actually destabilize the life’s of registrants and those -such as families- whose lives are often substantially impacted. Such consequences are thought to raise levels of known risk factors while providing no discernible benefit in terms of community safety. The full report is available online at. http://www.casomb.org/index.cfm?pid=231 National Institute of Justice (NIJ) US Department of Justice Office of Justice Programs United States of America. The overall conclusion is that Megan’s law has had no demonstrated effect on sexual offenses in New Jersey, calling into question the justification for start-up and operational costs. Megan’s Law has had no effect on time to first rearrest for known sex offenders and has not reduced sexual reoffending. Neither has it had an impact on the type of sexual reoffense or first-time sexual offense. The study also found that the law had not reduced the number of victims of sexual offenses. The full report is available online at. https://www.ncjrs.gov/app/publications/abstract.aspx? ID=247350 The University of Chicago Press for The Booth School of Business of the University of Chicago and The University of Chicago Law School Article DOI: 10.1086/658483 Conclusion. The data in these three data sets do not strongly support the effectiveness of sex offender registries. The national panel data do not show a significant decrease in the rate of rape or the arrest rate for sexual abuse after implementation of a registry via the Internet. The BJS data that tracked individual sex offenders after their release in 1994 did not show that registration had a significantly negative effect on recidivism. And the D.C. crime data do not show that knowing the location of sex offenders by census block can help protect the locations of sexual abuse. This pattern of noneffectiveness across the data sets does not support the conclusion that sex offender registries are successful in meeting their objectives of increasing public safety and lowering recidivism rates. The full report is available online at. http://www.jstor.org/stable/full/10.1086/658483 These are not isolated conclusions but are the same outcomes in the majority of conclusions and reports on this subject from multiple government agencies and throughout the academic community. People, including the media and other organizations should not rely on and reiterate the statements and opinions of the legislators or other people as to the need for these laws because of the high recidivism rates and the high risk offenders pose to the public which simply is not true and is pure hyperbole and fiction. They should rely on facts and data collected and submitted in reports from the leading authorities and credible experts in the fields such as the following. California Sex Offender Management Board (CASOMB) Sex offender recidivism rate for a new sex offense is 0.8% (page 30) The full report is available online at http://www.cdcr.ca.gov/Adult_Research_Branch/Research_Documents/2014_Outcome_Evaluation_Report_7-6-2015.pdf California Sex Offender Management Board (CASOMB) (page 38) Sex offender recidivism rate for a new sex offense is 1.8% The full report is available online at. http://www.google.com/url?sa= t&source=web&cd=1&ved= 0CCEQFjAA&url=http%3A%2F% 2Fwww.cdcr.ca.gov%2FAdult_ Research_Branch%2FResearch_ documents%2FOutcome_ evaluation_Report_2013.pdf&ei= C9dSVePNF8HfoATX-IBo&usg=AFQjCNE9I6ueHz-o2mZUnuxLPTyiRdjDsQ Bureau of Justice Statistics 5 PERCENT OF SEX OFFENDERS REARRESTED FOR ANOTHER SEX CRIME WITHIN 3 YEARS OF PRISON RELEASE WASHINGTON, D.C. Within 3 years following their 1994 state prison release, 5.3 percent of sex offenders (men who had committed rape or sexual assault) were rearrested for another sex crime, the Justice Department’s Bureau of Justice Statistics (BJS) announced today. The full report is available online at. http://www.bjs.gov/content/pub/press/rsorp94pr.cfm Document title; A Model of Static and Dynamic Sex Offender Risk Assessment Author: Robert J. McGrath, Michael P. Lasher, Georgia F. Cumming Document No.: 236217 Date Received: October 2011 Award Number: 2008-DD-BX-0013 Findings: Study of 759 adult male offenders under community supervision Re-arrest rate: 4.6% after 3-year follow-up The sexual re-offense rates for the 746 released in 2005 are much lower than what many in the public have been led to expect or believe. These low re-offense rates appear to contradict a conventional wisdom that sex offenders have very high sexual re-offense rates. The full report is available online at. https://www.ncjrs.gov/pdffiles1/nij/grants/236217.pdf Document Title: SEX OFFENDER SENTENCING IN WASHINGTON STATE: RECIDIVISM RATES BY: Washington State Institute For Public Policy. A study of 4,091 sex offenders either released from prison or community supervision form 1994 to 1998 and examined for 5 years Findings: Sex Crime Recidivism Rate: 2.7% Link to Report: http://www.oncefallen.com/files/Washington_SO_Recid_2005.pdf Document Title: Indiana’s Recidivism Rates Decline for Third Consecutive Year BY: Indiana Department of Correction 2009. The recidivism rate for sex offenders returning on a new sex offense was 1.05%, one of the lowest in the nation. In a time when sex offenders continue to face additional post-release requirements that often result in their return to prison for violating technical rules such as registration and residency restrictions, the instances of sex offenders returning to prison due to the commitment of a new sex crime is extremely low. Findings: sex offenders returning on a new sex offense was 1.05% Link to Report: http://www.in.gov/idoc/files/RecidivismRelease.pdf Once again, These are not isolated conclusions but are the same outcomes in the majority of reports on this subject from multiple government agencies and throughout the academic community. No one can doubt that child sexual abuse is traumatic and devastating. The question is not whether the state has an interest in preventing such harm, but whether current laws are effective in doing so. Megan’s law is a failure and is destroying families and their children’s lives and is costing tax payers millions upon millions of dollars. The following is just one example of the estimated cost just to implement SORNA which many states refused to do. From Justice Policy Institute. Estimated cost to implement SORNA Here are some of the estimates made in 2009 expressed in 2014 current dollars: California, $66M; Florida, $34M; Illinois, $24M; New York, $35M; Pennsylvania, $22M; Texas, $44M. In 2014 dollars, Virginia’s estimate for implementation was $14M, and the annual operating cost after that would be $10M. For the US, the total is $547M. That’s over half a billion dollars – every year – for something that doesn’t work. http://www.justicepolicy.org/images/upload/08-08_FAC_SORNACosts_JJ.pdf. Attempting to use under-reporting to justify the existence of the registry is another myth, or a lie. This is another form of misinformation perpetrated by those who either have a fiduciary interest in continuing the unconstitutional treatment of a disfavored group or are seeking to justify their need for punishment for people who have already paid for their crime by loss of their freedom through incarceration and are now attempting to reenter society as honest citizens. When this information is placed into the public’s attention by naive media then you have to wonder if the media also falls into one of these two groups that are not truly interested in reporting the truth. Both of these groups of people that have that type of mentality can be classified as vigilantes, bullies, or sociopaths, and are responsible for the destruction of our constitutional values and the erosion of personal freedoms in this country. I think the media or other organizations need to do a in depth investigation into the false assumptions and false data that has been used to further these laws and to research all the collateral damages being caused by these laws and the unconstitutional injustices that are occurring across the country. They should include these injustices in their report so the public can be better informed on what is truly happening in this country on this subject. Thank you for your time.

ADVERTISEMENT