Fen-phen lawyer might have to repay insurer

Judge cites omissions in policy application

jkegley@herald-leader.comMarch 20, 2010 

A disbarred Lexington attorney who represented clients in a multimillion-dollar fen-phen settlement might have to repay his former insurance company for defense costs, a ruling filed in United States District Court says.

On March 15, a federal judge ruled that Melbourne Mills Jr. committed "material misrepresentations or omissions of fact" in his 2003 application to Continental Casualty Co., which provided a liability policy to Mills' firm and paid for his defense in a 2005 lawsuit against him by his former fen-phen clients.

Continental has until April 16 to tell the court the amount of defense costs it is entitled to recover from the Law Offices of Melbourne Mills Jr., the ruling said. Mills' policy provided a maximum of $5 million in coverage, according to a motion filed by Continental.

In the motion, Continental claimed Mills improperly answered two questions on an application for insurance coverage from 2003 to 2004. If the omissions had been known, they could have kept Mills' firm from receiving insurance coverage, the company said.

Continental's application asked whether there were any claims against Mills' firm "that may reasonably be expected to be the basis of a claim against the firm," and whether any attorney at his company had been "disbarred, suspended, formally reprimanded or subject to any disciplinary inquiry, complaint or proceeding for any reason."

U.S. District Judge Joseph M. Hood ruled that Mills answered "no" to both questions despite being aware that the Kentucky Bar Association was investigating bar complaints against him in connection with the fen-phen action.

"Mills knew that a bar complaint had been filed against him in early 2002, and he admitted that as of the date he signed and certified the 2003 application, the KBA's investigation was ongoing," the order said.

In 2006, a judge ruled that Mills and Lexington lawyers William Gallion and Shirley Cunningham had to pay $42 million to former clients after swindling them out of millions of dollars in settlement money awarded for injuries caused by the diet-drug combination of fenfluramine and phentermine.

Though Mills was acquitted of criminal charges, the Kentucky Bar Association voted 14-1 in January to disbar him for his part in the settlement.

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