Reinsurance Law Blog : Oklahoma Insurance Lawyer & Attorney : Stauffer & Nathan Law Firm

In Trinity Mortgage Companies v. Dryer, Dryer was sued for malpractice after a default was entered against Trinity in favor of Junker.  Later, Trinity and Junker reached an agreement which gave Junker an ownership interest in Trinity but only to the extent that Junker could control any lawsuit and any proceeds of that lawsuit against Dryer, on behalf of Trinity. Trinity then sued Dryer and both sides sought summary judgment.  Summary judgment was granted to Dryer and Trinity appealed.  The Tenth Circuit affirmed.

The trial court found that the claim against Dryer was effectively assigned to Junker.  Without the agreement, Junker would not likely recover anything against Trinity, and thus, the assignment was prohibited by 12 Okla. Stat. § 2017.  In addition to the statutory prohibition, the court decided that the assignment of a legal malpractice claim to a former adversary was contrary to public policy. 

The Tenth Circuit agreed that Trinity in fact did improperly assign tort claims. The settlement agreement between Junker and Trinity assigned tort claims by giving Junker decision-making authority concerning the litigation, precluding Junker from making decisions for Trinity apart from the lawsuit, sheltering Junker from any of Trinity’s liabilities, limiting Junker to money received from the lawsuit, prohibiting Junker from sharing in any other income of Trinity, and allowing Junker to collect on his judgment against Trinity only through the lawsuit. Thus, the settlement agreement was an assignment of a tort claim prohibited by Oklahoma law. The Tenth Circuit did not reach the public policy argument, but also affirmed summary judgment on the contract claim, because the breach of contract claim sounded in tort.
 

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In Lombardi v. American Guarantee, the plaintiff lawyers fell for an email scam where it was contacted to deposit a check  and then remit it to other parties less their fees.  After the check cleared, it was determined to be a counterfeit and the plaintiff lawyers were required to make it good to the bank.  The lawyer's insurer did not participate in the settlement of the claims between the insureds lawyers and the bank, claiming there was no coverage.

The insurance policy issued by defendant provided coverage for any claim "based on an act or omission in [plaintiff's] rendering or failing to render Legal Services for others." "Legal Services" is defined by the policy as "those services performed by an Insured as a licensed lawyer in good standing . . . or in any other fiduciary capacity but only where the act or omission was in the rendition of services ordinarily performed as a lawyer." The terms of this policy encompass more than what would traditionally be considered "legal malpractice" (see United States Fid. & Guar. Co. v U.S. Underwriters Ins. Co., 194 AD2d at 1029).

  The court found that when dealing with the Bank, the lawyers were performing legal services as defined by the policy.  The policy did not require that the lawyers perform services for a client (who in this case was an impostor); only that the lawyer perform legal services for others.  Holding money for others and paying it on demand is part of legal services that attorneys provide routinely.   

The only remaining element under the policy's coverage definition is whether the claim was "based on" plaintiff's actions in rendering legal services to others.  The phrases "based on" and "arising out of" are practically synonymous in the insurance coverage context (see Mount Vernon Fire Ins. Co. v Creative Hous., 88 NY2d 347, 352 [1996]). The latter phrase "requires only that there be some causal relationship between the injury and the risk for which coverage is provided" (Maroney v New York Cent. Mut. Fire Ins. Co., 5 NY3d 467, 472 [2005]).  Of course, since the court used such a broad definition, this element was found to be met.

The contractual liability exclusion did not apply, and the insurer had a duty to defend.  The case was remanded to determine if there was also a duty to indemnify.

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Here, the plaintiffs hired the defendant lawyer to file a wrongful death case for them against their deceased's co-employees.  Suit was not filed within the limitations period.  At trial, the judge permitted the jury to determine if the employers insurance would have covered the claims against the co-employees.  The jury found that it would and found for the plaintiffs.  The trial court then granted the defendant's motion for judgment notwithstanding the verdict, finding it was error to let the question of insurance coverage go to the jury.  The appellate court affirmed, finding that insurance policies are to be interpreted as a matter of law. 

Policies for commercial general liability and excess liability umbrella unambiguously did not cover bodily injuries caused by employees.  Employees had no assets of their own, so no recovery would have been possible in a wrongful death action against them.  Therefore, failure to timely file wrongful death action against employees did not damage plaintiffs and defendant is not liable for attorney malpractice.  Policies’ terms are a matter of law, not a jury question, so it was error to submit the case to the jury, and defendants were entitled to judgment notwithstanding the verdict.
Semsa Selimanovic, Alen Selimanovic, Dervis Selimanovic and Jarvis Selimanovic, Appellants, v. Daniel P. Finney, Jr., d/b/a Daniel P. Finney, Jr., Attorney At Law, Respondent.

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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. 
 

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