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State settles with legal malpractice insurer

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A legal malpractice insurance carrier has agreed to pay $16.5 million to Indiana's insurance department, settling a federal lawsuit that had come on the heels of a state malpractice claim where an Indianapolis law firm got hit with an $18 million verdict.

Indianapolis attorney Joe Chapelle with Barnes & Thornburg, who represented ProNational Insurance, said the settlement involves paying $16.5 million in response to the 4-month-old bad faith and breach of contract suit filed in the Southern District of Indiana. Payment instructions haven't been finalized, Chapelle said.

"It's important that there was no 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."

Cohen & Malad attorney Irwin Levin, who represented the Indiana Department of Insurance, acknowledged a settlement had been reached but declined to comment before his client had an opportunity to respond. State agencies are closed today in observance of Columbus Day. The proposed agreement came Oct. 10 in Jim Atterholt v. ProNational Insurance Company, No. 1:08-cv-0834-DFH-WTL, which came against ProNational for declining multiple opportunities to settle a state court malpractice claim against attorney Frederick W. Dennerline III and firm Fillenwarth Dennerline Groth & Towe.

That claim involved Dennerline's involvement in a failed health plan that left 8,200 Hoosiers with unpaid medical bills. He had served as outside counsel for the health plan Indiana Construction Industry Trust that ultimately went defunct. 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.

Check out tomorrow's Indiana Lawyer Daily for an update of this story.

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