Attorneys rely upon their legal malpractice insurance for stability and backup.  Clients rely upon the attorney’s legal malpractice insurance for safety and reassurance that when their human attorney makes a mistake, there will be someone who steps in and protects them.  What happens when the insurance company turns rogue?

Suckle Schlesinger PLLC v Ironshore Indem., Inc.   2015 NY Slip Op 30263(U)    February 24, 2015    Supreme Court, New York County    Judge: Cynthia S. Kern is a curious case of an insurer acting unpredictably, and shooting itself in the foot.

“The facts are as follows. Plaintiff was insured pursuant to a Lawy~rs Professional Liability Policy with lronshore. Plaintiff represented its client in a claim for property damage in a Supreme Court action, which action was settled for $600,000. This amount was pl~ced in plaintiffs escrow ·I account and was not released to plaintiffs client. Plaintiffs client then commenced an action for [* 1]legal malpractice against plaintiff. Plaintiff sent notice of the legal malpractice action commenced against it to lronshore. On July 11, 2013, York Pro, acting as defendant fronshore’s claim agent, sent plaintiff a letter, which stated as follows:

As such, we will provide coverage for this claim, subject to the following reservation of rights. Section I .B provides that the Insurer shall have the right and duty to defend any claim. As a result, Ironshore has facilitated the Insured’s retention of Robert Modica, Esq. of Gordon & Rees to provide a defense for the insured. We also direct your attention to Section VII.A of the Policy which 1 provides that the Insured shall not admit liability, offer to settle or agree to any settlement in connection with any Claim without the express prior written consent of the Insurer. As a result, we would ask that you limit discussions regarding this case to only those between you and Mr. Modica and his associates/partners.

After plaintiff received this letter, it alleges and defendants do not dispute, that it did not have any discussions with any persons other than the attorneys designated by the defendant insurance company about the case and the settlement of the case until after the settlement agreement was signed.

In November 2013, Mr. Beckman informed plaintiff that a settlement agreement had been reached in the legal malpractice action for the sum of $230,000.00. On November 21, 2013, Mr. Beckman sent an email to plaintiff in which he attached pdfs of the signed settlement agreement and indicated that he would be sending the originals for signature. On November 2, 2013, Gordon & Rees sent a written letter to plaintiff, which stated that two sets of the settlement agreement were enclosed for signature by plaintiff, which should then be returned to Gordon & 2 [* 2]1\ Rees. Plaintiff then signed the enclosed agreement, returned it to Gordon & Rees along with a check made payable to Ironshore in the amount of $5,000 as and for the policy deductible and a cover letter requesting that the insurance company Ironshore issue a check for $230,000 pursuant to the terms of the settlement agreement. In response to this letter, Gordon & Rees advised plaintiff that their contact person at York Pro was Collette Siesholtz and provided plaintiff with her email. Plaintiff then sent an email to York Pro, dated November 26, 2013, to the attention of Collette Siesholtz, requesting that she issue the settlement check pursuant to the terms of the settlement agreement. On November 27, 2013, Collette Siesholtz of York Pro sent an email to the plaintiff in which she stated that “I have requested the check and have noted the time constraint for payment.” The plaintiff then sent another email to Ms. Siesholtz asking for confirmation that the check was being processed. Ms. Siesholtz responded with another email, dated December 3, stating that “The claim was previously submitted last week with a request to expedite. I will follow up to see if the funding is being processed.” On December 4, the day before the settlement payment of $230,000 was due pursuant to the terms of the settlement agreement, Ms. Siesholtz of York Pro sent an email to plaintiff stating that Ironshore would not be making payment for the settlement as the $230,000.

Plaintiff has established that the settlement of the claim was made’ with the consent of the insurer and the insurer has failed to raise a disputed issue of fact with respect to its consent of the settlement. In the letter from defendants acknowledging that they would provide coverage for the claim, they clearly provided that they were retaining Robert Modica Esq. of Gordon & Rees to provide a defense for plaintiff.

Based on the foregoing, the court need not reach the other arguments raised by plaintiff; plaintiff is granted summary judgment on its claim for breach of contract and the clerk is directed to enter summary judgment in favor of plaintiff and against defendants for the amount of $230,000, plus costs and disbursements, plus interest from December 5, 2013. The foregoing constitutes the decision and order of the court.”