Law Firm’s Woes Are Not Insurer’s Problem

     WASHINGTON (CN) – An insurer can distance itself from the troubled Baylor Jackson law firm, which faces several claims for malpractice and misappropriation of assets, a federal judge ruled.
     Claiming that Baylor Jackson never disclosed that there were two legal malpractice claims pending against it when it sought coverage in 2010, Navigators Insurance said the misrepresentation rendered its policy void.
     Baylor Jackson sought coverage when another six cases were filed against it between March 2011 and January 2012. All six cases stem from the firm’s representation of Milan Group. The Securities and Exchange Commission filed one of the six complaints, which alleges that the firm defrauded investors and misappropriated assets deposited into a trust account.
     U.S. District Judge James Boasberg ruled Tuesday that the exemption in the policy let Navigators off the hook for the policy, and that Baylor Jackson has to pay back $24,838 in defense expenses already granted to it by Navigators.
     “Because the court finds that coverage for all six actions is barred by the exclusion for claims alleging misappropriation of assets, it will award Navigators judgment on that basis without reaching its other arguments,” Boasberg wrote. “It will additionally require defendants to repay certain sums Navigators paid in defense cost.”
     The ruling is bad news for World Class Construction Management Group, an intervening defendant that wants to recoup damages the firm owes it.
     Baylor Jackson partners Brynee Baylor and Dawn Jackson are named as defendants in the case, and are accused of perpetrating a scheme in which they used “the Firm’s escrow account to funnel funds from defrauded investors.”
     Boasberg noted that the other parties intervened after the defendants never answered the declaratory judgment action.

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