County says error cost $20M
Friday, July 27, 2012
by Pat Milhizer
Cook County filed a lawsuit against an insurance broker to recover $20 million that the county alleges it could have avoided spending on a class-action settlement if the broker executed a deal to obtain additional coverage.
"Although the county doesn't file lawsuits against its vendors without significant thought, they believe they have the obligation to the taxpayers to recover money that should not have been paid. And they intend to pursue this case because they believe it's a viable claim," said Anthony C. Valiulis of Much, Shelist P.C., who represents the county as a special assistant state's attorney.
The Cook County Circuit Court suit alleges that Ralph Wilson of USI Holdings Corp. agreed to acquire excess liability and property insurance for the county in 2006.
At the time, the county faced a federal case that challenged the jail's former policy of routinely strip searching inmates. Kim Young, et al. v. County of Cook, et al. No. 06 C 552.
The current suit says the county anticipated additional claims in the federal case, so the county hired USI to obtain additional coverage. The county alleges that USI assured the county that it secured the proper liability policy from an insurance company that the county wasn't working with at the time.
The county paid about $1.4 million for what officials thought was the new insurance premium, the suit says, but the county never received additional coverage.
Instead, a company that already insured the county sent the policy to USI, the suit says. As a result, the county's existing policy was renewed and the county lacked the additional coverage it sought, the suit says.
The county alleges that USI failed to recognize that it secured the policy with the county's existing insurer, inform the county about the incorrect policy and advise the county about the potential consequences of the error.
In November 2010, the law firm representing the class in the federal action — Loevy & Loevy — and the county agreed to settle the strip search suit for $55 million. About 250,000 former inmates qualified to get a share of the settlement.
The county paid $45 million from its bank account and received $10 million in insurance money to cover the settlement.
If it obtained the extra insurance coverage it wanted, the county would've received an extra $20 million in insurance money to contribute to the settlement, the suit says.
"We believe that the county ended up paying significantly more money out of its own pocket to settle the case than it should have had it obtained the proper insurance from USI," Valiulis said.
In addition to Valiulis, the county is represented by Neil B. Posner and David A. Eisenberg of Much, Shelist.
Caesar A. Tabet and Michael J. Grant of Tabet, DiVito & Rothstein LLC represent USI. Grant said the suit lacks merit.
"I don't see that they have any claim against USI here," Grant said.
Liane Jackson, a spokeswoman for County Board President Toni Preckwinkle, said the county unsuccessfully tried to settle the matter out of court.
"It's not the practice of Cook County to sue its service providers, but in this case the county has a duty to the taxpayers and felt obligated to proceed," Jackson said.
Cook County Associate Judge Thomas R. Mulroy Jr. is assigned to the Daley Center case, which the county filed last week as County of Cook v. USI Holdings Corp., et al. No. 12 L 8066.