Insurer Fights Duty to Indemnify Shore Chan

     DALLAS (CN) – An insurer says in federal court that it has no duty to defend or indemnify a Dallas law firm in a lawsuit over referral fees worth millions.
     Greenwich Insurance Company sued Shore Chan Bragalone Depumpo and attorneys Michael Shore and Alfonso Chan in federal court last week.
     The lawyers want the insurer’s help fighting a 2009 complaint by Steven Thrasher and Steven Thrasher Associates LLC, alleging breach of contract and other claims in Dallas County Court.
     Thrasher says that Shore Chan failed to protect his referral fee interests in two legal matters “arising from a global fee arrangement that generated millions of dollars in fees for Shore Chan and/or its partners and misapplication of the funds that should have been paid to the plaintiffs by Shore Chan,” the complaint states.
     Now Greenwich says it does not owe the lawyers coverage under a professional liability policy in place.
     Thrasher’s allegations concern conduct that allegedly occurred before the policy’s retroactive date of Aug. 4, 2005, Greenwich says. None of the allegations fall within the insurer’s fiduciary roles set in the policy’s definition of “professional services,” according to the complaint.
     The policy’s definition of “damages” also does not include punitive or exemplary damages or return of legal fees, costs or expenses, Greenwich says.
     “Greenwich contends that the disgorgement or return of fees that allegedly belonged to the Thrasher plaintiffs under the referral agreement … do not fall within within the definition of ‘damages,'” the complaint states. “Furthermore, coverage for claims for the return of misapplied fees due under the referral agreement, assuming arguendo such coverage exists, would be contrary to public policy.”
     Allowing a wrongdoer to transfer the cost of disgorgement of illegally obtained property onto an insurer only serves to encourage more illegal activity, the insurer adds.
     On Sept. 4, Greenwich sued attorney Steve Holmes and Carter Holmes PLLC in federal court, refusing to defend or indemnify them in civil lawsuits springing from the $57 million Striker Petroleum Ponzi scheme.
     In at least four underlying lawsuits, investors claimed Holmes acted as trustee for the benefit of Striker debenture holders.
     Shore Chan specializes in complex commercial litigation and intellectual property licensing and enforcement, according to its website.
     Greenwich, a member of the XL Group, seeks declaratory relief. It is represented by Michael Huddleston with Shannon Gracey of Dallas.

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