Re: lawsuit
The lawsuit breaks down into three parts.
1. Paragraphs 9 - 23. We allege that we had a policy of insurance wherein the insuring clause required Federal to defend us in the ERICY action. In 1993, Federal wrote a letter acknowleding coverage and undertook to pay for the defense and costs. Federal never undertook our defense under any type of waiver of coverage agreement. We allege that the policy contained no limitation on the amount of defense costs or expenses.
In Feb. 1995, Federated wrote us another letter acknowledging that it had no right to reimbursement of fees or expenses paid.
IDCC states there was no provision in the policy limiting the amount of attorney's fees. Somehow we got to hire F&J for the defense and apparently agreed to pay them $435.00 per hour plus costs. Sometime after hiring F&J, and without giving us a date the lawsuit indicates that Federal began to balk at the hourly amount and refused to pay any further attorney's fees above $240 per hour.
IDCC then alleges that out of fear that Federal would cease payments for the defense, they did not challenge Federal's unilateral refusal to pay fees over $240 and further agreed in Feb. 2000 to a $200 rate. We then state we have paid more than $5 million in fees to F & J.
My comments. How on earth did we get to hire F&J when most carriers have agreements with good lawfirms to provide defenses at a much lesser rate? I think Federal figured this out after the fact and after F&J was hired. They may have originally agreed to let us hire F&J and then later figured out the costs of defense was out of line and balked at their hourly rate. Did they then demand that F&J be replaced with a lesser firms hourly rate? Did we refuse to change? Did we have the right to demand a defense by F&J? These are all good questions that will be answered in the lawsuit.
2. Paragraphs 30 - 35. In addition to the above, IDCC also alleges that Federal threatened to seek reimbursement of litigation expenses and fees paid in defense of claims of ERICY not covered in the insuring clause. IDCC counters that PA. law is such that Federated was not entitled to separate out non covered claims and had to pay the entire legal bill.
Paragraph 36. IDCC states again that fearing loss of defense monies they agreed to a Reimbursement Agreement in 1999.
MY COMMENT: Hear it gets juicy. Beginning in Paragraph 37. IDCC points out that there was no consideration for this agreement. Consideration is big in law. Look at all your deeds and contracts. If there is "no good and valid consideration" then there is no enforceable contract.
Paragraph 37 - 42. IDCC lays the foundation that Federal gave no good and valuable consideration for the Reimbursement Agreement, but merely rammed the agreement down our throats. We point out that they gave up nothing for the agreement and got a 9-10% piece of the settlement pie. We then point out that they even included an escalating clause to get a bigger piece of the pie if they don't get reimbursed within 4 years.
To be continued:
JMHO Greg
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