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Fifth Circuit Holds That Legal Malpractice Insurance Does Not Cover Restitution and Unjust Enrichment Claims

This is a lawsuit between an attorney and his malpractice carrier. The lawyer, Thomas Edwards, handled a personal injury lawsuit on behalf of a commercial diver against the diver’s former employer, Cal Dive. He obtained a multi-million dollar settlement. The victory was short-lived as one year later Cal Dive filed suit against the diver and Edwards alleging that the diver had exaggerated his injuries. Cal Dive sued Edwards for restitution and unjust enrichment.

Edwards requested that his insurance company defend him, but they declined. Edwards filed suit. While he obtained summary judgment in the trial court, the Fifth Circuit reversed that ruling and entered judgment for the insurance company.

The Fifth Circuit held that claims for unjust enrichment and restitution were not legal malpractice claims because they asserted no breach of the standard of care. Therefore, the policy did not provide a duty to defend or require any other coverage. The pertinent reasoning is as follows:

Even though Cal Dive’s unjust enrichment and restitution claims against Edwards have some general and remote relation to his representation of Schmidt, Cal Dive does not allege a single professional act or omission by Edwards that gives rise to such claims. Instead, Cal Dive named Edwards in the underlying action only because Edwards received settlement funds from Cal Dive for his representation of Schmidt. Cal Dive did not allege that Edwards did or failed to do anything to warrant its claims. In fact, Cal Dive specifically alleged that it does “not believe that Edwards . . . [was] aware of Schmidt’s fraud.” Cal Dive’s complaint, for which Edwards seeks defense from Continental, contains no allegations against Edwards, save for his receipt of settlement funds in the nature of attorney’s fees as a result of his client’s alleged fraud. Acts or omissions in the rendering of legal services by Edwards to his client, Schmidt, are simply not at issue. Thus, Continental’s insurance policy does not provide coverage to Edwards in Cal Dive II.

Comment: this holding is consistent with well-settled law. Legal Malpractice insurance policies rarely provide coverage for legal fee disputes because a fee dispute usually does not involve a claim of professional negligence.

Source: Edwards v. CONTINENTAL CASUALTY COMPANY, Court of Appeals, 5th Circuit 2016 – Google Scholar

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