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Court rescinds Hanover accountants policy


A U.S. District Court has agreed to rescind an accountants professional liability policy issued by a Hanover Insurance Group Inc. unit to a tax preparation service because of misrepresentations and omissions in its renewal application.

In June, 2017, the chief financial officer of Brighton, Colorado-based Paramount Financial Solutions Inc., which conducted business as Tax Tiger, filed a renewal application for an accountants professional liability insurance policy to Hanover Insurance Co., a unit of Worcester, Massachusetts-based Hanover Insurance Group Inc., according to Tuesday’s ruling by the U.S. District Court in Denver in Hanover Insurance Co. v. Paramount Financial Services, d/b/a Tax Tiger, et. al.

The insurance application represented that the CFO had no knowledge of any incidents or circumstances that might result in a claim being made against Tax Tiger, according to the ruling.

The policy then issued by Hanover had limits of $100,000 per claim and $200,000 in the aggregate, subject to a $2,500 per claim deductible, according to the complaint in the case.

The complaint states, however, that before 2017, Paramount Financial Solutions began accepting upfront fees for services from clients but did not perform any professional services for them, and the Tax Tiger office was closed in February 2018.

Since that time, Hanover has received notices from various Tax Tiger clients, who contend they paid Tax Tiger fees for tax services that were never performed, according to the ruling.

Defendants in the case have either defaulted, agreed to abide by the result of the court’s ruling, or have been dismissed, the ruling said.

None have disputed that the CFO, on Tax Tiger’s behalf, “knowingly and intentionally misrepresented material facts and omitted to disclose material facts in the application to renew the policy,” said the ruling in granting Hanover’s request to rescind the coverage.

Kathy Hill, owner and CEO of Sacramento, California-based Tax Tiger Franchising LLC, said in a statement, “One of my franchise owners in Colorado, Paramount Financial Solutions LLC, dba as Tax Tiger, became very ill with health issues, was in and out of the hospital and unable to continue the work for her current client base and operation.

"Once that became apparent to me, I closed her office down, transferred all of her open clients who still required work to be done, in-house to my corporate office in Sacramento, California, and completed all the work for them there. No client was left with unfinished work still required to be done. However, her business insurance was determined to be invalid because when she renewed it she believed she could complete the work. Obviously, the court saw differently.”

Hanover’s attorneys did not respond to a request for comment.

In December, a federal appeals court affirmed a lower court ruling and said a Hanover Insurance Group unit is not obligated to defend a club in a case in which one of its patrons was involved in a fatal drunk driving incident because of a liquor liability exclusion in its policy.