Free Intervenor Complaint - District Court of Colorado - Colorado

Case 1:01-cv-00275-JLK Case 1:01-cv-00275-JLK

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Civil Action No. OI-cv- OO275- JLK

DOMINICK P AOLONI , ft. aI.,
Plaintiffs

DONALD I. GOLDSTEIN, ft. aI.,
Defendants.

and, NBSA , LLC, ft. aI.,
Relief Defendants.

CHICAGO INSURANCE COMPANY' S DECLARATORY JUDGMENT COMPLAINT IN INTERVENTION
Chicago Insurance Company hereby submits this Declaratory Judgment Complaint in
Intervention against plaintiffs and third party defendants Dominick Paoloni , Investor Protection
Services , Inc. , Nathaniel P. Jarvis , Associated Retirement and Estate Planning, Inc. , John Zidan
Retirement First , Inc. , Roger Larson , Patsy Schmidt , Gary A. Ethridge, Ethridge Insurance

Services , Anthony Horpel , Great Northern Financial Services , Inc. , KCOR, Inc. , CPS Marketing
Group, Inc. , Jeffrey Davenport , Davenport , P.
David B. Sacks ,

, Ricky McElroy, Professional Products , Inc.

David B. Sacks , MD , PC , Profit Sharing Plan , Sacks Family Family Trust , Larry

Bunnell , Strategic Portfolios , Inc. , Tim Patterson , Dean McBride , Vamal' s Financial Benefits
LLC , Larry Johnson , Larry Johnson & Associates , Randy Thomas, Craig Miles , Conservative
Investors Group, Inc. , Michael E. Ramer , Stephen Foster, Peter Samaras , Ambassador Financial
Group, Inc. , Tailored Services Association , Inc. , Marshall Gold , Don Hess , Michael Huber , Fred

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Nichols

John

E. Santoro Agency,

EMGO

Financial Services ,

Inc. , Tom Gorter , Darcy Smith

Baron Financial Corporation , Juli Stockberger and

John

P. Barbee (" Plaintiffs

PARTIES. JURISDICTION AND VENUE
Chicago Insurance Company is an Illinois corporation , with its principal place of
business in Illinois.

Upon information and belief, Plaintiffs are citizens of Colorado , and are not
citizens of Illinois.

Plaintiffs filed a Complaint on February 16 , 2001 , making claims against various

defendants as a result of certain investments purchased by Plaintiffs. The law firm of Hyman
Lippitt , P.
, Terry Givens , and other Hyman Lippitt shareholders (the " Hyman Lippitt

Defendants ), were added as defendants in this action via a Third Supplement to the Second
Amended Complaint filed on January 3 2002.

Chicago Insurance Company had issued a professional liability insurance policy
(the "

Policy ) to the Hyman Lippitt Defendants , but denied that coverage existed under the
limit ofliability.

Policy for Plaintiffs ' claims. The policy was subject to a $5 million
On September 16 ,

2005 , Plaintiffs entered into a settlement agreement with the

Hyman Lippitt Defendants. As part of that settlement , Chicago Insurance Company agreed to
pay the remaining policy limits to Plaintiffs.

The policy was a diminishing policy, such that defense costs were subtracted from

the liability limits. As the policy limits were $5 million and defense costs totaled $829 137.
Chicago Insurance Company therefore made payment to Plaintiffs of $4 , 170 862 , 10.

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Plaintiffs admittedly understood at the time they entered into the settlement

agreement that defense costs were deducted from liability limits. Nevertheless , Plaintiffs have
now demanded that Chicago Insurance Company pay an additional $829 137.
, arguing that a

typographical error in a reservation of rights letter had the effect of changing the terms of the
Policy.

Chicago Insurance Company seeks a declaration that (i) Chicago Insurance Company has paid all amounts owed by it under the Settlement Agreement (ii) the typographical error in the reservation of rights letter did not amend the terms of the policy; and (iii) Plaintiffs

are not entitled to any further payments from Chicago Insurance Company under the Settlement
Agreement.

Chicago Insurance Company brings this action under Colorado law , pursuant to

RS.

9 13- 51- 101

et seq. and Rule 57 of the Federal Rules of Civil Procedure. There is an

actual controversy involving Chicago Insurance Company on the one hand and Plaintiffs on the other regarding whether the typographical error in the reservation of rights letter amended the

terms of the policy, and whether Plaintiffs therefore are entitled to any further payments from
Chicago Insurance Company under the Settlement Agreement.
10.

Jurisdiction over this Declaratory Judgment Complaint in Intervention is based on

the supplemental jurisdiction of this Court pursuant to 28 US. C. 9 1367. Moreover , diversity

jurisdiction exists under 28 US. C. 9 1332(a) and (b). Complete diversity of citizenship exists
between Chicago Insurance Company and Plaintiffs. The amount in controversy exceeds
$75 000.

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11.

Venue is proper in this Court pursuant to 28 US. c. 9 1391 (a) because Plaintiffs

reside in the state of Colorado.

CLAIM FOR RELIEF: DECLARATORY JUDGMENT
12.

Chicago Insurance Company incorporates Paragraphs 1 through 11 as if fully

stated herein.
13.

Chicago Insurance Company has paid Plaintiffs $4 170 862 10 pursuant to the

Settlement Agreement , which amounts represents the $5 000 000 policy limits less $829 137.
in defense costs.
14.

Plaintiffs are not entitled to any further payments under the Settlement

Agreement. The Policy was a diminishing policy, such that defense costs were subtracted from

the liability limits , and neither the Policy nor the Settlement Agreement obligate Chicago

Insurance Company to pay those costs of defense twice.
15.

A declaration of Chicago Insurance Company s rights is necessary to terminate

the controversy, prevent additional litigation , and settle the dispute concerning whether the
typographical error in the reservation of rights letter amended the terms of the policy, and

whether Plaintiffs are entitled to any further payments from Chicago Insurance Company under
the Settlement Agreement.

WHEREFORE , Intervenor Chicago Insurance Company Indemnity Company prays for a

judgment in its favor and against Plaintiffs declaring that (i) Chicago Insurance Company has
paid all amounts owed by it under the Settlement Agreement; (ii) the typographical error in the

reservation of rights letter did not amend the terms of the policy; and (iii) Plaintiffs are not

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entitled to any further payments from Chicago Insurance Company under the Settlement
Agreement; and for such other and further relief as the Court deems just and proper. Respectfully submitted this 27th day of April , 2006.

sf Carolyn 1. Fairless Carolyn 1. Fairless
LLP 1801 California Street , Suite 3600 Denver , Colorado 80202
Wheeler Trigg Kennedy

Telephone: (303) 244- 1800 Facsimile: (303) 244- 1879
E-mail: fairless~wtklaw. com

Attorney for Intervenor Chicago Insurance Company

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CERTIFICATE OF SERVICE

(CM/ECF)

I hereby certify that on April 27 , 2006 , I electronically filed the foregoing CHICAGO INSURANCE COMPANY' S DECLARATORY JUDGMENT COMPLAINT IN INTERVENTION with the Clerk of Court using the CM/ECF system which will send notification of such filing to the following e-mail addresses:
Brent Ross

Cohen

bcohen~rothgerber. com

Robert Arthur Dill
bobdill~dillanddill. com tdorau~dillanddil1. com Daniel J. Garfield dgarfield~bhf- Iaw. com krees~bhf- Iaw. com

Adam Joseph Goldstein
agoldstein~wsteele. com nmarion~wsteele. com

Richard D. Greengard rgreengard~ir- Iaw. com aknight~ir- Iaw. com Dale R. Harris
dale. harris~dgslaw. com linda. ridding~dgslaw. com
Paul Franklin Hultin

hultin~wtklaw. com

hand~wtklaw. com

John Alonzo Hutchings
j hutchings~dillanddil1. com chuffman~dillanddill. com

Michael J. Pankow mpankow~bhf- Iaw. com

krees~bhf- Iaw. com

and served the following non- participants via US. Mail:

Christopher Kevin Leigh Barthe & Leigh , LLP 2455 East Sunrise Boulevard , Ste. #602 Ft. Lauderdale , FL 33304

Alan M. Loeb Davis , Graham & Stubbs LLP- Colorado 1550 Seventeenth Street , Ste. #500 Denver , CO 80202
sf Carolyn 1. Fairless by Janean C. Hart

Carolyn 1. Fairless Attorney for Chicago Insurance Company Wheeler Trigg Kennedy LLP 1801 California Street , Suite 3600 Denver , CO 80202
Telephone: (303) 244- 1800 Facsimile: (303) 244- 1879