Baker Tilly Sues Insurance Carrier Over Liability Coverage

Chicago-based Baker Tilly Virchow Krause (FY11 net revenue of $259 million) is suing its insurance carrier for refusing to cover most of the damages after it was slammed with a $50 million verdict for negligence in May, Crain’s reported.

Baker Tilly in April sued Lexington Insurance Co. for breach of contract, alleging that the company failed to provide up to $40 million in professional liability coverage, as specified in a one-year contract in place when Aqua Finance’s lawsuit was filed.

“We feel there is no basis for this,” said Stephen Kravit, an attorney for Lexington. “They did not reveal the known issue concerning their potential liability for malpractice to Lexington at the time coverage was sought.”

The firm plans to appeal, calling the damages awarded in the case “excessive.”  A spokesman for Camico Mutual Insurance Co., which insures CPA firms, agreed that the size of the award for damages is “pretty unusual” for the industry.

Aqua Finance alleged in 2010 that the firm had a problem in the company’s accounting, but did not reveal it for a year. The firm dropped the account in 2008, leaving the company without audited financial statements. The company asserts that the firm “dramatically and catastrophically impeded the company’s crucial access to the credit necessary to maintain and grow its business,” according to the complaint.