A retired Orange County accountant is demanding that an insurance company defend him in a $100 million malpractice and fraud case.
Irwin Kossoff and Kossoff & Kossoff LLP sued Chicago-based Continental Casualty Co. on May 21 in federal court in White Plains.
Continental Casualty”™s refusal to defend them, the complaint states, is requiring Kossoff to “expend legal fees which he otherwise needs for his retirement.”
Kossoff, 80, closed his firm in Goshen in 2017. Now he lives in Boynton Beach, Florida.
The underlying legal dispute concerns TS Employment Inc., a Manhattan temporary staffing business for which Kossoff provided accounting services. TS Employment filed for Chapter 11 bankruptcy reorganization in 2015.
Last year, U.S. Trustee James S. Feltman sued Kossoff and the firm for $100 million in the TS Employment bankruptcy proceeding for allegedly misreporting payroll taxes. He accused them of accounting malpractice and fraud.
The trustee argues that Kossoff was an insider who exercised exclusive control over TS Employment’s financial reporting and internal accounting. Kossoff”™s attorneys dispute the characterization. A bankruptcy court judge dismissed the complaint but allowed the trustee to file a new pleading.
The amended complaint was filed in March.
Kossoff claims that Continental Casualty is required to defend him, under a professional liability insurance policy, as it did previously in a 2016 California lawsuit. That case, accusing the firm of conspiring to misappropriate payroll tax funds, was dismissed.
The trustee”™s bankruptcy case and the California case are interrelated, Kossoff”™s attorneys argue. Continental disagrees, according to the complaint, and has refused to defend Kossoff.
“Interrelated” generally means that after insurance coverage expires, a new claim that shares the same facts or circumstances as a previously covered claim can be considered part of the original claim.
Both cases allege that Kossoff and his firm provided accounting services to TS Employment, knew that payroll tax funds were being diverted, failed to disclose misappropriation of funds and actively conspired in the scheme.
Therefore, Kossoff”™s attorneys argue, the trustee”™s lawsuit and the California case are connected by alleged facts, circumstances, situations, transactions, events, advice and decisions.
Kossoff is asking the court to declare that the lawsuits are interrelated and that Continental must defend Kossoff and cover the legal expenses.
Continental Casualty spokesman Brandon Davis said the company “does not comment on matters involving litigation.”
Kossoff is represented by Storch Amini PC of Manhattan.
