A three-year effort by a non-profit municipal utility co-op to force its liability insurance company to pay ‘dizzying’ legal defense costs exceeding $5.3 million in ongoing criminal cases unfolds. heats up, despite a partial payment received recently.
The National Union Fire Insurance Company of Pittsburgh had refused to cover the Connecticut Municipal Electric Power Cooperative for the defense of five former officials charged in November 2018 with conspiracy and theft at a time when CMEEC regulations called for compensation in the allegations of wrongdoing.
The five former CMEEC officials have been charged with conspiracy and theft from a program receiving federal funds for their leadership role in planning lavish trips to the Kentucky Derby and a West Virginia golf resort. Two of them face a second indictment for theft.
On October 29, US District Judge Janet Bond Arterton ruled that the insurance company breached its contract with CMEEC by failing to advance defense costs.
The dispute is ongoing, but in late December, the Union Nationale insurance company paid the CMEEC $1,607,128, which the insurance company said were reasonable and necessary costs since the acts of charge until December 31, 2020.
CMEEC’s general counsel, Robin Kipnis, said Thursday that the co-op “does not agree at all with the position of the insurance company”. In a January 21, 2021 Day article, the CMEEC estimated the total cost at that time to be over $3.4 million.
CMEEC lawyers are now asking for an emergency court order to compel the insurance company to pay ongoing legal costs, including the advance of future legal costs in the criminal proceedings.
After a month-long criminal trial in November and early December, a jury on December 10 acquitted the five defendants of the conspiracy charges. However, former CMEEC CEO Drew Rankin, former Norwich Public Utilities chief executive John Bilda and former CMEEC board and Norwich Utilities Board Chairman James Sullivan were convicted of one count of robbery for the 2015 Kentucky Derby trip and a trip that year to the Greenbrier. golf resort in West Virginia. Lawyers for Rankin, Sullivan and Bilda plan to file motions to overturn the verdict or seek a new trial.
Former CMEEC Chief Financial Officer Edward Pryor and former CMEEC Board of Directors and Groton Utilities Commissioner Edward DeMuzzio were acquitted of all charges.
Rankin and Sullivan face a second criminal indictment of theft for the alleged CMEEC reimbursement to Sullivan for nearly $100,000 in personal expenses. This trial has not yet been scheduled.
Since the indictments of 2018, the insurance company had refused the cooperative’s repeated requests for payment of defense costs. CMEEC has filed a federal civil lawsuit against the insurance company for the following claims:
- legal defense coverage
- CMEEC costs, now totaling $736,731, to respond to subpoenas from federal prosecutors and defense attorneys
- costs in a separate federal civil lawsuit brought by Pryor against CMEEC after the indictment seeking court costs under CMEEC settlements that indemnified co-op officials for alleged wrongdoing.
Pryor’s civil case was put on hold after the CMEEC agreed to advance legal costs, with a stipulation that it could challenge the settlement in the future.
In September, Judge Arterton overturned an earlier court ruling in favor of the insurance company that said CMEEC had to prove through a civil trial that the insurance company was liable to pay court costs. On October 29, Arterton ruled that the National Union had breached its contract with the CMEEC and had to pay “future legal costs”.
This did not end the dispute. Two weeks into the criminal trial, with no payment made, CMEEC attorney Michael T. McCormack filed an emergency motion on November 12 seeking a judge’s payment order.
“The costs associated with the ongoing defense of federal indictments are staggering and increasing every day,” McCormack said. He wrote that the CMEEC should not be required “to bear the continued financial burden of indictment defense costs, which it has been forced to do since November 2018.
Union Nationale attorney Dennis O. Brown countered in a 17-page response Dec. 3 that the CMEEC had failed to prove that the demand for payment should be separated from the other issues to be decided in the case. civil. He wrote that the co-op had not demonstrated that it was facing “a danger of hardship or injustice, and that an order for payment amounted to a piecemeal decision” that risked leading to multiple calls on different issues.
The company also argued that the CMEEC was seeking payment before the end of the trials, citing a “criminal exclusion” from coverage if the parties were ultimately found guilty. CMEEC attorney Michelle M. Seery countered in a response, calling it an “absurd proposition” that CMEEC must wait for insurance coverage, and only if the defendants are acquitted.
No decision was filed on CMEEC’s request for an emergency claim, but on December 27, the Union Nationale told the court that it had sent a check that week to CMEEC for legal costs. until December 2020, “despite the absence of any final judgment” in the dispute.
The CMEEC responded two days later, calling it an “arbitrary” partial payment, reiterating a call for advance payments for ongoing legal costs. The CMEEC argued that the overdue payments, plus interest, would form part of a claim for damages “to be calculated at trial.”
“In fact, the Union Nationale seems to continue to believe that it does not need to advance defense costs in the absence of a judgment,” wrote CMEEC lawyer McCormack.
A settlement conference is scheduled for January 27 before a new judge assigned to the case, S. Dave Vatti. A joint statement from both parties dated January 10 indicates that if the issues are not resolved, the CMEEC plans to file a motion for an expedited civil trial date “to obtain a final determination of the amount of damages it will receive.” has suffered to date”.