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Oyster Bay sues insurer to recoup $1.5M in legal fees in day laborer case

Oyster Bay Town alleges in a federal lawsuit

Oyster Bay Town alleges in a federal lawsuit that its insurer improperly denied coverage for most of the legal fees. Credit: Anthony Lanzilote

Oyster Bay has sued an insurance company in a dispute over $1.5 million in legal fees the town paid after losing a lawsuit over an ordinance restricting day laborers.

In July, a federal judge ordered Oyster Bay to pay the costs of the attorneys representing groups that sued the town. The Town Board approved the $1.5 million payment in September and town spokesman Brian Nevin said in an email Tuesday it has been paid.

The town sued the Illinois National Insurance Company about two weeks after the judge’s order, alleging in a federal lawsuit that it had improperly denied coverage for most of the legal fees.

The legal fees arise from a lawsuit filed against Oyster Bay in 2010 by Centro de la Comunidad Hispana de Locust Valley and The Workplace Project, a nonprofit that advocates for Latino rights, over a 2009 ordinance to prevent day laborers from gathering on the street to seek work. A federal judge struck down the ordinance in 2015, and in 2017 a federal appeals judge upheld the lower court’s decision on First Amendment grounds.

In a Jan. 16, 2018, letter to the town from AIG Property Casualty, as an authorized representative of Illinois National Insurance, the insurance adjuster wrote that while the policy covered up to $10 million in costs, the attorney’s fees were subject to a $100,000 limit under an exclusion in the policy. “The insured shall bear responsibility for any indemnity amounts that remain unpaid,” stated the letter, which was included in court filings.

Outside attorneys for the town alleged in court filings the “exclusion … is ambiguous as drafted, and therefore unenforceable” and the insurer must pay the full amount.

The town originally sued Illinois National Insurance in federal court but refiled the case last month in state court because the company is based in Manhattan and the state court has jurisdiction.

Nevin said in an email the administration and Town Board “are taking all necessary steps to recoup money for taxpayers.”

Attorneys for Illinois National Insurance did not respond to requests for comment.

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