Dickstein Shapiro collapsed more than two years ago, and a former California partner at the firm, Clyde Hettrick, has been dead nearly five years. But Hettrick’s time at Dickstein is still generating fresh litigation, with an excess insurer for the firm filing a federal lawsuit April 6 aimed at shedding potential responsibility for a chunk of a $64 million malpractice verdict.
Facing a possible $4.35 million obligation, Scottsdale Insurance Co. said in a complaint filed in California’s Central District that Dickstein’s primary policy holders invited the 2014 verdict by their refusal to defend the firm in a malpractice suit against Hettrick brought by onetime client Manhattan Beachwear LLC.
Hettrick left the firm in 2008. He died in 2013, at the age of 52.
Hettrick joined Dickstein in 2005, when the firm—then in an expansionary mode—established a beachhead on the West Coast by absorbing Los Angeles-based Pasich & Kornfeld. Three years later, he departed to form Hettrick Law PC.
Five months before his exit, however, Hettrick was retained by Manhattan Beachwear to represent the company in claims against certain underwriters at Lloyd’s of London over losses sustained as a result of a fire and theft. He continued to represent the company at the new firm, where he ultimately sued the insurers in January 2009.
That representation eventually prompted Manhattan Beachwear to file a California state court malpractice suit in late 2012, alleging that Hettrick mishandled the case and cost the company $11 million.
According to the April 6 complaint, Hettrick and his attorney then put Dickstein on notice that they believed that suit pinpointed malpractice that occurred while he was at the firm. But Dickstein’s primary insurers, including Lexington Insurance Co. and Swiss Re, then declined to provide coverage in the case.
After Hettrick’s death, his firm and estate reached a settlement with Manhattan Beachwear in which the estate agreed not to contest the claims against it at trial, while the company agreed not to collect on any judgment against the estate.
The estate then went undefended at a bench trial, held over two days in June 2015, which prompted a whopping $63.89 million judgment against Hettrick. That included almost $10 million in direct losses and nearly $49 million in consequential damages over a delayed business acquisition.
Manhattan Beachwear then assigned its rights to an entity named SFA Group LLC, which sued Dickstein’s insurers in California state court in 2016, alleging that they were unjustified in refusing to both defend and indemnify Hettrick.
That move put Scottsdale on the hook, as one of the excess insurers responsible for the first $15 million beyond the firm’s primary $15 million in insurance coverage. Scottsdale is specifically responsible for 29 percent of that second layer of coverage, or $4.35 million.
“Defendant insurers did not consult with Scottsdale Insurance Company about their decision to disclaim coverage (which included the refusal to defend Hettrick), and did not consult with Scottsdale Insurance Company about the terms, conditions, and exclusions upon which they were relying in support of their coverage disclaimer,” the insurer said in the suit.
The April 6 suit also names Dickstein as a defendant, and it seeks a declaration that it’s not liable to the firm or the primary insurers for any coverage under the excess policy.
Dorsey & Whitney partner Faisal Zubairi, who represents Scottsdale, did not immediately respond to a request for comment, nor did representatives for the insurers.
Counsel information for the defendants was not available Tuesday, but Dickstein has been represented in other post-dissolution proceedings by bankruptcy attorneys at Klestadt Winters Jureller Southard & Stevens.