Notice to one is notice to all; professional liability claims made policy
In Berry & Murphy v. Carolina Cas. Co., the issue was whether notice to a former law partner of a claim was notice to the other law partner. The court held it was. Thus, because the former partner had notice of the claim before the policy was issued, the claim was not covered as to the other law partner.
Facts
The Burkhardts hired Murphy to handle a lawsuit. Murphy was a partner at Berry & Murphy. A year after he filed suit for the Burkhardts, he left the firm taking the case with him. The case was dismissed for failure to prosecute and was later reinstated with new counsel. A year after the partner left with the case, Burkhardts new counsel put Murphy on notice of a potential malpractice claim for the way he handled the lawsuit. Murphy put his carrier on notice of the potential claim – which happened to also be Carolina Casualty. No notice was given to Berry. When Berry was sued along with Murphy, he tendered the claim to Carolina Casualty, which denied coverage, claiming that the alleged malpractice claim was first made against an insured (i.e., Murphy) prior to the inception of the insurance policy, thereby falling outside the claims-made coverage of the policy.
Discussion
The policy was a claims made policy, rather than an occurrence policy. This means it covered claims only if first made during the policy period. “A Claim shall be deemed to have been first made at the time notice of the Claim is first received by any Insured.” The court found that Insured was defined to include an individual after he left the law firm if the claim involved that individual’s acts or omissions that occurred while at the law firm. Thus, Murphy was an insured, and notice to him of the claim before the policy period meant that Berry was not covered under the policy.
There is a spirited dissent, which states that since Murphy was not Berry’s agent when he had notice of the claim, notice to Murphy was NOT notice to Berry.
The odd thing about this case is that Carolina Casualty did have notice of the claim, and had it before Berry did; and issued the policy anyway. But, the policy as a claims made policy, was not in effect when Murphy gave Carolina Casualty notice. Therefore, it was not a claim made within the policy period and was not covered. An occurrence policy also requires that the event happen during the policy period. If Carolina Casualty had insured Berry the entire time, I am not sure it could have escaped liability, as the notice from Murphy could have been notice under the Murphy policy, too.
