Judge orders insurance company to pay over $150,000 in malpractice case

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Judge Joseph Boles ordered an insurance company to pay a $151,825 judgment plus interest after it stopped defending an accountant in a professional malpractice case.

In May 2009, Jeffrey Kraft, Prescott, filed a lawsuit against Jeannie Thompson, Durand, and Jeannie Thompson Accounting LLC, claiming Thompson was negligent in providing services to him.

Twin City Fire Insurance Company took on Thompson’s defense, but in March 2010 discontinued defending her without taking further action to litigate any coverage or duty-to-defend issues.

The attorneys defending Thompson later withdrew, and when no one challenged a motion, Thompson and her accounting firm were ordered to pay Kraft $151,825.

Thompson assigned any claims she had against Twin City to Kraft. He then sued the insurance company, alleging it had a duty to pay the judgment.

According to information in Boles’ decision, the policy says in essence Twin City would pay for losses for “wrongful acts” only if, at the time, no partner, principal, officer or director was aware of a wrongful act or circumstance, or could reasonably have foreseen that a claim might result.

Twin City argued it was justified in unilaterally deciding to end its defense of Thompson because the “condition precedent”--in a contract, an event which must take place before a party must perform or do its part--had not been met and there was no coverage. But Boles said the question of coverage should have been resolved in court and was not.

“Twin City ignored the proper procedure set out (by the Wisconsin Supreme Court) for an insurance company to follow when they deny coverage,” wrote Boles. He said the company should have asked for separate trials on the issues of coverage and liability, and should have stopped any proceedings on liability until the coverage issue was resolved.

Along with paying the $151,825 judgment and interest at the rate of 12 percent since Jan. 24, 2011, Twin City was ordered to pay $2,325 for attorney’s fees paid by Thompson.

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