This article originally ran in Law360 on February 16, 2016.
Reed Smith LLP, having failed to secure arbitration for a former client's suit accusing it of botching an insurance settlement connected to a fire at a historic suburban Philadelphia mansion, asked a Pennsylvania state court judge last week to toss the suit.
In an answer to homeowner Jerold Batoff’s complaint, the firm argued that attorney Douglas Widin told him not to settle with insurer Chartis Property Casualty Co. as long as he was still in a dispute with the tenant of Bloomfield, a historic residence designed by renowned architect Horace Trumbauer.
At the time of the fire, according to the February 2015 complaint, Batoff was working to sell the home to two Canadian citizens — Dean Topolinski and Julie Charbonneau — who were leasing the property during the process.
Batoff alleged that Widin’s failure to include the tenants in a settlement with insurer Chartis Property Casualty Co. left him responsible for indemnifying Chartis against their claims.
“Plaintiff was advised of the indemnity clause in the Chartis release and the potential risk of entering into such an agreement with the pending dispute between him and Charbonneau and was advised not to enter into the agreement,” the firm responded.
The 2012 fire sparked a series of disputes between the Batoff and Charbonneau over the rights to the proceeds of Batoff’s insurance policy with Chartis, which had a limit of $22.4 million.
According to Batoff’s complaint, Widin and Reed Smith launched a declaratory judgment suit on his behalf against Charbonneau and Topolinski, arguing that Batoff was the only insured party.
Batoff said that while that litigation unfolded, Widin negotiated his insurance settlement with Chartis, which when finalized in October 2012 included a provision that Batoff would indemnify the insurer for any claims launched by the two tenants.
Once they received word of the settlement, Charbonneau and Topolinski received an order freezing Batoff’s receipt of the insurance proceeds until the end of the fight over who had rights to the payments under the policy. Some of the $20.5 million insurance settlement had already been paid out by Chartis for limited restoration and construction work, and the remaining $17.4 million was directed into escrow, according to the complaint.
Batoff then reached a settlement with Charbonneau and Topolinski in April 2013, in which the renters received $11 million of that sum and he held onto the remaining $6.4 million.
But in July 2013, Charbonneau filed a new federal suit against Chartis, seeking additional insurance proceeds and levying breach of contract and bad faith claims.
Charbonneau lost her suit in September following a bench trial, but Batoff said in his complaint that he was responsible for paying the insurer’s defense costs, which had cost $500,000 at the time of the complaint.
In the firm’s most recent filing, it argued that Batoff had hired other counsel to provide advice over the settlements with Chartis and Charbonneau. It said that Batoff reached the settlement with Charbonneau at a mediation without any Reed Smith lawyers present, and that he failed to secure a release from her of any rights that she was claiming under the Chartis policy.
“If plaintiff had obtained a release from Charbonneau or agreement not to sue Chartis, then plaintiff’s indemnity obligation would have been avoided,” the filing said.
The firm also disputed Batoff's contention that he was chargedmore than $200,000 in legal fees, and said that he did not pay all his bills.
In April, a Philadelphia judge denied the firm’s efforts to move the dispute to arbitration, after finding that the agreement was not enforceable. Reed Smith initially appealed the decision, but later withdrew its challenge.
Counsel for Batoff did not immediately respond to a request for comment. A spokesman for the firm declined to comment.
Batoff is represented by Jack A. Meyerson and Debora A. O’Neill of Meyerson & O’Neill.
Reed Smith is represented by Nicholas M. Centrella and Aya M. Salem of Conrad O'Brien PC.
The case is Batoff v. Widin et al., case number 2014102350, in the Philadelphia County Court of Common Pleas.
--Editing by Rebecca Flanagan.
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