Andrew Sandler. Photo: Diego M. Radzinschi/ALM

Buckley LLP has gone on the offensive in a battle with its insurer over a $6 million coverage claim, filing a new lawsuit that also delves into alleged actions taken by firm founder Andrew Sandler before and after he left the firm.

The dispute initially became public in a federal lawsuit brought by Oxford Insurance Co. earlier this month, asserting that Sandler was forced out of his leadership role at the firm formerly known as Buckley Sandler because of unspecified misconduct allegations. But in a state court lawsuit filed Tuesday, Buckley called Oxford's conduct in handling the claim "reprehensible" and claimed that Sandler engaged in hardball tactics after he left the firm.

Buckley said it learned that Oxford had concluded its independent investigation into the insurance claim only when the first lawsuit was filed. It argued in a separate filing that the federal lawsuit should be thrown out on jurisdictional grounds.

"This is no ordinary dispute about insurance coverage," Buckley's lawyers at McGuireWoods and Williams & Connolly—including Williams & Connolly's John Villa—wrote in the North Carolina state court complaint. "Such misconduct can only be understood as a concerted effort by Oxford to deprive Buckley of the coverage it paid for and to violate Oxford's duty to its insured through deception and unfair practices."

Buckley said that it paid Oxford $1.1 million for "loss of key employee" coverage that was intended to cover the voluntary departure of Sandler or six other top attorneys at the firm, as part of an overall $6 million insurance premium.

In the lawsuit, it also asserted new details about Sandler's exit from the firm in early 2018. Buckley claimed that Sandler refused to cooperate in January of that year in an internal investigation that was launched the previous month by Kathryn Ruemmler, Latham & Watkins' global white-collar and investigations co-chairwoman and a former White House counsel to President Barack Obama.

Buckley said the firm's equity partners responded to Sandler by voting to continue the investigation, remove him from his role as chairman and executive partner, and place him on administrative leave. The firm added that the partners did not exercise their power to involuntarily remove him from the partnership, noting that Sandler's "retirement agreement" used language that indicated he had stepped down voluntarily, as did his communications with the firm and the press following his exit.

While Oxford argued in its initial lawsuit that Sandler had informed the insurer that he was actually pushed out of the firm, Buckley said that he had financial reasons to take that position. The firm said that not only did Sandler form a captive reinsurance company that would be obligated to pay a portion of the firm's $6 million claim, but that he also initiated negotiations with the firm about getting a cut of the payout if he stayed silent.

"He stated this could either be a 'win-win' or 'lose-lose' situation for him and Buckley depending on what he told Oxford about the voluntariness of his departure.," the firm said.

Sandler did not immediately respond to a request for comment.

With regard to Oxford, Buckley outlined a series of steps allegedly taken by the insurer to avoid paying out the firm's claim. That started with the "unilateral" inclusion of an endorsement intended to negate coverage of Sandler and five other partners when it provided the firm a final copy of the policy in June 2018, the firm said.

The firm said that Oxford agreed to discard the endorsement, and that it submitted its claim in October 2018. It alleges that while Oxford initially indicated approval, and the firm proceeded to calculate its loss at $6 million, the insurer than reversed its decision and referred the matter to a third party for an investigation.

Buckley argued that the investigation proved to be a "one-sided" effort aimed at undermining the claim, pointing to its failure to probe Sandler's contention that he was forced out and its lack of response to the firm's presentation of its own arguments.

Buckley added that it only learned about the outcome of the investigation from the lawsuit Oxford filed in federal court earlier this month, which it said came out of the blue.

"Oxford falsely assured Buckley two weeks before filing the suit that its 'sole desire is to make a fair claim determination,' that it was working to 'analyze and process the claim' and that it would 'provide [Buckley] with updates,'" the firm said.

Nevertheless, Buckley concluded, Oxford's haste to sue backfired. The firm said the federal suit should be thrown out because the insurer failed to take into account that one of the firm's equity partners makes his home in London. They said that's enough to defeat Oxford's contention that the case belongs in federal court because of diversity of the parties.

An attorney for Oxford, James Cooney at Womble Bond Dickinson, did not immediately respond to a request for comment Wednesday.

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