Lakins sue insurer for failing to defend them in $3.7 million default

By Steve Gonzalez | Aug 8, 2007

Brad Lakin

Robert Chemers

The Lakin Law Firm filed suit against Certain Underwriters at Lloyd's London, Lloyd's Illinois, Affinity Insurance and Norton & Rain alleging the defendants failed to defend the firm in a federal lawsuit.

Represented by Charles Chapman of the Lakin firm, the suit states the Lakin firm hired Norton & Rain Inc. (NRI), an insurance broker, to procure coverages including professional liability insurance for the firm.

"NRI recommended that Plaintiff purchase professional liability insurance coverage from Lloyd's," states the complaint filed Aug. 3 in Madison County Circuit Court.

Chapman states that the Lakin firm followed the advice of NRI and purchased the insurance from Lloyd's in 2006 and paid the premium of $427,025 for the policy's coverage.

According to Chapman, the Lloyd's policy required the Lakin firm to notify Affinity of any claim made against the firm, which they did after injured railroad worker Stephen Williams filed suit against the firm in the U.S. District Court for the Northern District of Oklahoma on Oct. 7, 2006.

U.S. District Judge Claire V. Eagan, chief judge of the Northern District of Oklahoma, on April 18 entered a default judgment of $3,752,601.80 against Thomas Lakin and the Lakin firm in Williams' legal malpractice claim.

Williams, of Chouteau, Okla., filed suit Sept. 26, 2006, after his tax-free structured settlement with Union Pacific over a 1991 injury was absconded by money manager James Gibson.

Judge Eagan entered the judgment after the Lakins did not appear in the case, even after being granted extra time to answer. The case was transferred to the U.S. District Court of the Southern District of Illinois on May 24.

Chapman claims after the notification was made, an attorney from Fields Howell Athans & McLaughlin contacted the firm regarding the lawsuit and on behalf of Lloyd's authorized the firm to waive service, asked for the pleading due date and the names of potential local defense lawyers.

Chapman claims at no time did Lloyd's file a declaratory judgment to determine whether it had a duty to defend the Lakin firm and at no time advised the firm that they were not going to defend the firm.

"Lloyd's failed to defend Plaintiff in the lawsuit," the complaint states.

Chapman states that after learning about the Oklahoma default judgment, the firm again requested Lloyd's to defend, but it has failed to do so.

"Lloyd's conduct was vexatious and unreasonable," the complaint states.

Chapman also claims NRI was negligent by failing to notify all of the Lakin firm's current and past insurance carriers of the lawsuit, including Illinois State Bar Association (ISBA) Mutual, one of Lakin's prior carriers.

Chapman claims now ISBA Mutual has denied coverage and will not defend the firm in the lawsuit.

ISBA Mutual is seeking to rescind its policy with the Lakin firm in a five-year-old Sangamon County lawsuit.

Attorney Robert Chemers, for ISBA Mutual, claims the Lakins obtained their insurance policy through misrepresentations. He amended the complaint recently to state that the firm "at no prior time ever notified ISBA Mutual of the pendency of the action in Tulsa, Oklahoma, nor did either or both ever request a defense for that action."

Chapman claims the Lakin firm has sustained damage in the amount of the default judgment, interest and has spent "tens of thousands of dollars" in time and legal expenses to set aside the default judgment and defend against collection efforts.

The case has been assigned to Circuit Judge Barbara Crowder.

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