Claims Made Policy May Not Respond to Claims Made After Expiration of
the Policy
Twin City Fire Insurance Company sold a malpractice insurance policy to
John S. Xydakis, an attorney and one of the Defendants. Xydakis made
claims under the policy based on lawsuits and motions filed against him
in Illinois state court. Twin City sought a declaratory judgment that it
owes no insurance coverage to Defendants for these claims or, in the
alternative, rescission of the policy. In Twin City Fire Insurance
Company v. Law Office Of John S. Xydakis, P.C., et al., No. 18 C 6387,
United States District Court, N.D. Illinois, Eastern Division (March 20,
2023) the USDC resolved the dispute.
BACKGROUND
Underlying Lawsuits
The Chen Lawsuit.
Fiona Chen Consulting Company (“Chen Consulting”) sued Xydakis for
failing to pay retained expert witness fees. All the acts and conduct
related to the Chen Lawsuit occurred between January 2012 and November
2012.
The Spiegel Motions for Sanctions.
Litigants in a separate set of lawsuits (collectively the “Spiegel
Lawsuits”) brought three motions for sanctions The presiding Cook County
judge ruled on all three motions and entered judgment against Spiegel
and Xydakis for over $1,000,000.
The Klein Lawsuit.
On August 14, 2019, Tiberiu Klein filed a complaint against Twin City
and Xydakis alleging legal malpractice, breach of contract, and breach
of fiduciary duty.
The Twin City Insurance Policy
In December 2016, Xydakis applied for legal malpractice insurance
coverage from Twin City. Twin City underwrote and issued a
claims-made-and-reported Lawyers' Professional Liability Policy to the
Law Office of John S. Xydakis (the “Policy”).
DISCUSSION
Under Illinois law, the insurer's duty to defend arises when the facts
alleged in the underlying complaint fall within, or potentially within,
the policy's provisions. The insured bears the burden of proving that
its claim falls within the policy's coverage. Once the insured has
established coverage, the burden shifts to the insurer to prove that a
limitation or exclusion applies.
Xydakis had until March 27, 2018 to make claims under the Policy. The
Chen Lawsuit, the Spiegel Motions for Sanctions, and the Klein Lawsuit
each fall outside the Policy's scope of coverage, either for underlying
conduct occurring before its retroactive date or for claims made after
its expiration.
ESTOPPEL
Xydakis argued that a genuine issue of material fact exists as to
whether Twin City should be estopped from denying coverage. Estoppel
only applies where the insurer has breached its duty to defend.
