(Photo: Diego M. Radzinschi/ALM)

A malpractice lawsuit claims a Barnes & Thornburg lawyer essentially did everything wrong when handling a woman's lawsuit that claimed a “crooked” insurance salesman scammed her out of hundreds of thousands of dollars and a $4 million policy.

The complaint filed last week said B&T Atlanta partner James Leonard “claimed to be an insurance expert who previously represented the insurance company” and could “fix everything with a couple of phone calls.”

Instead, the lawsuit claims Leonard “filed suit in the wrong court, pled the wrong law, asserted the wrong claims, failed to serve the crooked salesman, ignored facts provided by his clients, and lost a winnable case on a motion to dismiss.”

“And he charged his clients more than $150,000 for his legal services,” said the complaint filed in Fulton County State Court by David Hungeling and Adam Rubenfield of Hungeling Law.

The underlying case was ultimately tossed out by a federal judge in a decision upheld by the U.S. Court of Appeals for the Eleventh Circuit.

Adam Rubenfield (left) and David Hungeling, Hungeling Law, Atlanta (Photo: John Disney/ALM)

“All of this has really ended up costing my client in a big way,” said Hungeling. “She was truly victimized by this crooked salesman.”

Plaintiff Cynthia Cox-Ott was assured that Leonard, whose practice focuses on insurance litigation and was at one time an insurance company executive, could handle the case, said Hungeling. 

“I think he was truly surprised when Judge [Timothy] Batten dismissed it. He just didn't  believe it would get dismissed on a motion to dismiss,” Hungeling said.

Leonard and his firm are represented by Alston & Bird partner Steve Collins, who said by email that, “Barnes & Thornburg and Mr. Leonard are committed to serving their clients with care and integrity. They deny any liability on the claims in this complaint, and intend to defend against those claims vigorously.”

According to the complaint and other court filings, Cox-Ott and her husband, Claude Ott, then 67, were divorced in 2005. As part of the settlement, she purchased a $4 million life insurance policy on Claude Ott to be held in a trust to benefit their children.

She bought the AXA Equitable Life Insurance policy through agent Armen Hovakimian, who told her that under its terms she would pay an initial premium of $165,800 and annual premiums of $88,000 until Claude Ott turned 90.

Unknown to Cox-Ott, the policy was structured so that, after 12 years, the premiums would nearly triple, the complaint said.

The trust got an annual report from AXA in 2012 which contained “conflicting notices, projections and illustrations” about the policy. 

Cox-Ott inquired about the policy's premiums and when it would be considered paid up but got no response.

She subsequently learned that AXA fired Hovakimian in 2011 “due to his fraudulent sales practices and that all of the AXA insurance policies he sold to customers, including hers, were 'flagged' as potentially fraudulent.”

Hovakimian's broker's license was revoked, and, according to the FINRA BrokerCheck website, he is permanently barred from selling securities. 

AXA told Cox-Ott that “premium increases would be required on the policy to keep it in force.” 

In 2012, Cox-Ott hired B&T and Leonard, who “stated that he knew people at AXA and that AXA loved him because he won a big case for the company,” the complaint said.

Leonard filed a complaint with the Georgia Commissioner of Insurance in 2013, which responded that, “it did not have jurisdiction over the matter, because AXA is a New York company and the policy is governed by New York law.”

When Cox-Ott questioned Leonard about the matter, he assured her that “Georgia state court was the best venue for the trust claims” and that New York courts and law were “not as favorable” as those in Georgia.”

Leonard “was adamant that Ms. Ott litigate in Georgia and also told her 'I have to keep our case OUT of federal court,'” the complaint said.

Leonard quoted Cox-Ott estimated fees and costs of $200,000 to $250,000 to litigate with AXA “to the point where they will either agree to rescind the policy and return all your premiums with interest, or agree to reformat the policy,'” the lawsuit said. 

In March 2014, Cox-Ott and the C&C Family Trust sued Hovakimian and AXA in Fayette County Superior Court for claims including fraud, negligent misrepresentation and reformation of the policy. That complaint said that Cox-Ott and her mother and co-trustee were Fayette County residents.

But Cox-Ott was a citizen and resident of New York, it said. 

“In fact, B&T's engagement letter with Ms. Ott and all correspondence the firm sent her was mailed to her apartment in New York City,” it said.

AXA successfully sought to have the suit removed to the U.S. District Court for the Northern District of Georgia the following month. 

Leonard told the court he could not locate Hovakimian, “who lived in Paris, France, at the time,” it said. Leonard sought and was granted extra time to track the agent down but nonetheless failed to serve him. 

AXA field a motion to dismiss on several grounds, including assertions that the negligent  misrepresentation and fraud claims were barred by a comprehensive merger clause in the life-insurance policy.

“Attorney Leonard told Ms. Ott that 'I am not worried at all about our case being thrown out at this juncture because it is that unlikely and our judge knows better than to do that and face reversal on appeal,'” the complaint said.

Four months after it was removed, Batten dismissed the case for failure to state a claim, ruling that the trust affirmed the policy and its merger clause by seeking its reformation.

The Georgia Court of Appeals affirmed Batten's ruling in 2016, noting among other things that the policy plainly said that its premiums might be increased based on a number of factors, and that no reliance could be placed on verbal assurances or guarantees by the agent. 

“While we are troubled by the allegations in the trust's complaint, we are constrained to conclude that, because the trust affirmed the contract, the merger provision in the insurance policy and the unambiguous terms of the policy itself preclude the trust from showing 'justifiable reliance' as a matter of law under Georgia law,” the appellate ruling said. 

The complaint said Leonard and B&T's “Acts and omissions” have cost Cox-Ott and the trust millions of dollars, and includes counts for professional negligence and breach of contract.

Hungeling said he's seeking damages including the premium and interest Cox-Ott paid over the years, plus the $4 million coverage the trust lost when she was unable to maintain the premiums after they skyrocketed to $250,00 a year. 

And Hovakimian?

“We're not sure where he is,” said Hungeling. “At some point he was in Paris. The lawyer never bothered to track him down or have hims served by other means. All we know is he lost his insurance licenses and the SEC has barred him from ever holding one again.”

“The insurance company knew he crooked and that this was a bait-and-switch fraud,” he said. “He just got to walk away with the money.”