Articles Posted in Insurance Coverage

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Todd A. Duckson v. Continental Casualty Company, 14-1465 MJD/JJK (D. Minn. 12 8 2014).

Lawyers often get into trouble with legal malpractice insurers when they become involved in outside businesses. Most legal malpractice policies exclude coverage of any lawsuit arising out of non-legal business activity. Here, an attorney became involved in the sale of interests of a real estate fund, known as Capital Solutions Monthly Income Fund LP.

Duckson was an attorney with Hinshaw & Culbertson, a law firm with its main office in Chicago, Illinois. Duckson sued Continental alleging that Continental breached its duty under a legal malpractice insurance policy to provide coverage to Duckson. In particular, Duckson alleged that Continental had a duty to defend him and indemnify him in response a lawsuit brought against Duckson and Hinshaw in California state court. The case is referred to as the Shoor action.

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In Illinois, a lawyer is not required to obtain legal malpractice insurance. If you want to know if your lawyer has legal malpractice coverage, you should go to www.iardc.org and review the lawyer’s listing under “Lawyer Search.”  Obviously, if the lawyer has insurance coverage, you have a better chance of obtaining a financial recovery if there is an error or omission by the lawyer.  Lawyers who have insurance have also passed muster with the insurance company, which does some research on each lawyer it covers.

For lawyers, having insurance means that the lawyer can obtain defense counsel in the event of a lawsuit or ARDC grievance.

Before you hire a lawyer, you should check with the ARDC website and determine if your lawyer has insurance.

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CLAUSON & ATWOOD v. PROFESSIONALS DIRECT INSURANCE CO., Dist. Court, D. New Hampshire 2013 – Google Scholar.

This is yet another development in the huge and growing area of litigation between lawyers and their legal malpractice insurers.

Here, the insurance company obtained summary judgment against the lawyers on the ground that the claim was not made in the policy period. Once again, the lawyers did little to help their own cause – they failed to promptly report the claim to the insurance company.

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COLONY INSURANCE COMPANY v. FLADSETH, Dist. Court, ND California 2013 – Google Scholar.

This case is a declaratory judgment action brought by an insurance company against a lawyer. The underlying cases were two lawsuits against the lawyer. He was accused of charging excessive fees in two medical malpractice lawsuits. He sought coverage under his legal malpractice insurance policy and the insurer denied coverage.

The insurance policy excluded from coverage any fee disputes with clients.

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ABRAMS, FENSTERMAN, FENSTERMAN, EISMAN, GREENBERG, FORMATO & EINIGER, LLP v. UNDERWRITERS AT LLOYD’S, Dist. Court, ED New York 2013 – Google Scholar.

Every year, when I receive my legal malpractice insurance application, there is always a question on whether I am an officer or director of an outside entity.

In this case, one member of the law firm was involved in an outside entity, a corporation, American Gulf Insurance, LLC, that allegedly fraudulently induced certain investors to invest in the company. The plaintiffs, in the underlying case, sued the law firm for fraud and legal malpractice. The plaintiffs alleged that the lawyers negligently advised them to invest in the entity. Howard Fensterman, one of the name partners of the law firm, was allegedly an owner of American Gulf Insurance. Fensterman allegedly had more than a passive role in the entity.

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LEE & AMTZIS, LLP v. American Guar. & Liab. Ins. Co., 2013 NY Slip Op 30018 – NY: Supreme Court 2013 – Google Scholar.

This case is one of a growing group of cases where insurers contest their duty to defend an insured lawyer after the lawyer is sued for legal malpractice. The plaintiff, Ms. Kurtin, alleged that she was represented by the law firm in negotiating a loan with one of the principals of that firm, Randy Lee. [If true, the allegations of legal malpractice are problematic. Lee was one of the persons getting a benefit from the loan from Kurtin. He could not fairly and adequately represent her in connection with that loan transaction. Lee’s interests and those of Kurtin were directly adverse.

The lawyers gave prompt notice to their legal malpractice insurer, which denied coverage. The insurer argued that the conflict of interest between Lee and Kurtin barred coverage under the legal malpractice policy:

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Excess Insurer Can Bring Legal Malpractice Claim Against Lawyer

ACE AMERICAN INSURANCE CO. v. SANDBERG, PHOENIX & VON GONTARD, PC., Dist. Court, SD Illinois 2012 – Google Scholar.

This is a dispute between an insurer and the lawyers who were hired to defend a case. Illinois has recognized that an insurance company has a right to sue defense counsel for malpractice. Illinois has never decided whether to allow an excess insurer to bring such a lawsuit.

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Lawyer prevails in dispute with malpractice insurer in legal malpractice case

Foster v. WESTCHESTER FIRE INSURANCE COMPANY, Dist. Court, WD Pennsylvania 2012 – Google Scholar.

This is a dispute between a lawyer and his legal malpractice insurer. One of the major trends in recent years is the coverage lawsuit filed by the insurance company against the lawyer.  Legal malpractice insurance is usually purchased for a one-year period.  The insurer agrees to indemnify and defend the insured against any and all claims arising in that year and only that year.   The policies are known as “claims made” policies, which means the insurance company must receive the claim during the policy period or there is no coverage.

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Insurance coverage dispute

Goodman v. MEDMARC INS., 2012 Ohio 4061 – Ohio: Court of Appeals, 8th Appellate Dist. 2012 – Google Scholar.

This case involves an insurance coverage dispute. The lawyer was the policyholder and he was sued for legal malpractice. An Ohio court has ruled in favor of an attorney who tendered a claim to his carrier but was denied coverage.  Such litigation is common. The risk to the lawyer is that he ends up litigating two cases (a) the underlying malpractice case; and (b) the declaratory judgment case against the insurer.