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Starr wins damage suit from claims management firm

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Starr wins damage suit from claims management firm

A New York jury has awarded Starr Indemnity & Liability Co. $1.6 million in fees and reimbursements and $2.8 million in punitive damages in litigation the insurer had filed against a claims management unit of Brown & Brown Insurance Inc.

A jury in U.S. District Court in New York issued the award based on tort claims of “conversion” and “breach of fiduciary duty” made by New York-based Starr against American Claims Management, a subsidiary of Daytona Beach, Florida-based Brown & Brown, as well as aiding and abetting claims against ACM affiliates, according to a statement issued Wednesday by Starr's law firm, New York-based Chadbourne & Parke L.L.P. The affiliates were Superior Recovery Services Inc., Marquee Management Care Solutions Inc. and Pacific Claims Services Inc.

The jury also rejected counterclaims made by defendants against Starr, according to the law firm.

Chadbourne said in the statement that in January 2010, Starr entered into a claims services agreement with ACM that obligated ACM to provide services with respect to nonstandard automobile insurance claims arising under Starr insurance policies.

These services included establishing claims files, performing reporting and clerical work, recommending loss and expense reserves, estimating claims damages, attending to claims investigations, supervising litigation and paying claims.

In return for these services, ACM was to receive a 7.25% service fee on all total monthly auto premiums, according to the statement.

Under the agreement, Starr also was obligated to reimburse ACM for certain enumerated costs specifically defined and identified in the claims services agreement as allocated loss adjustment expenses.

Starr's initial complaint alleged that defendants were deeming certain expenses to be allocated loss adjustment expenses, which Starr contended did not qualify as such, as that term was described in the claims services agreement.

Chadbourne and Parke said the two types of alleged improper charges involved reimbursements Starr received from the Livonia, Michigan-based Michigan Catastrophic Claims Association, which reimburses auto no-fault insurance companies for each personal injury medical claim paid in excess of a set amount; and “litigation savings charges” charged by ACM and Marquee, a medical bill review entity, when Starr was sued by claimants.

Starr charged the defendants with improperly removing funds from a claim account funded by Starr without Starr's knowledge.

James F. Rittinger, a partner with law firm Satterlee Stephens Burke & Burke L.L.P., which represented defendants in the case, said in a statement, “We were obviously disappointed by the jury's verdict and intend to seek appropriate relief through post-trial motions to the trial court and, if necessary, an appeal.”

A Starr spokesman had no comment.

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