Insurer settles state lawsuit for $16.5M

A legal malpractice insurance carrier has agreed to pay $16.5 million to Indiana ‘s insurance department, settling a federal lawsuit stemming from the multi-million-dollar collapse of a health insurance trust.

Alabama-based ProNational Insurance Co. agreed to make the payment to settle a bad-faith and breach-of-contract lawsuit filed by the department four months ago.

ProNational was the malpractice insurer for Fillenwarth Dennerline Groth & Towe, an Indianapolis law firm
that represented the Indiana Construction Industry Trust, which provided health coverage to non-union construction workers before going bust in 2002.

Two years ago, a Marion County jury ordered Fillenwarth Dennerline to pay the insurance department $18 million, concluding it failed to alert the trust’s board to mushrooming financial problems.

The verdict–which far exceeded the small law firm’s ability to pay–equaled the amount of unpaid claims owed to 8,000 Hoosiers when the trust collapsed.

Fillenwarth Dennerline had desperately tried to settle the litigation before trial. It was hit with the judgment only after ProNational refused an offer to settle for a mere $1 million-the maximum amount of the law firm’s insurance coverage.

Before the jury handed down the devastating judgment, Fillenwarth Dennerline had sued ProNational, charging it was acting in bad faith.

Earlier this year, the insurance department released the law firm from that judgment after it agreed to pay $50,000 and assign its bad-faith claim against ProNational to the department.

In agreeing to pay the department $16.5 million, ProNational does not acknowledge doing anything improper.

“We are pleased with the outcome and the company is pleased to be able to put this behind them,” said Joe Chapelle, a Barnes & Thornburg attorney representing ProNational.

The law firm Cohen and Malad represented the insurance department in the litigation.