Another write up from Hinshaw:
Richard H. Milgrub v. Continental Casualty Company, 2007 WL 625039 (W.D. Pa.).
The attorney-insured in this case sold his home and represented himself, his wife and the buyers in the transaction. The buyers subsequently sued the attorney alleging breach of fiduciary duty and professional negligence. After the attorney’s professional liability insurance carrier attempted to exclude coverage based on the subject policy’s “contractual liability” exclusion, the attorney filed a declaratory judgment action for a coverage determination against the carrier. Finding that the breach of fiduciary duty allegations were not causally based on the contract transaction, the court ordered the carrier to provide coverage for them.
Richard Milgrub and his wife entered a contract on September 9, 2003 to sell their residence to Robert and Shellie Brown (the Browns). The Browns believed Milgrub was acting as the legal representative for both parties in the deal. In November 2004, the Browns sued the Milgrubs alleging: (1) fraudulent representation; (2) claims under the Pennsylvania Sellers Disclosure Act and the Unfair Trade Practices Consumer Protection Act; and (3) claims for professional negligence and breach of fiduciary duty. Milgrub reported the claim to his professional liability provider, the Continental Casualty Company (Continental). Continental denied coverage and Milgrub filed a declaratory judgment action. Both parties in that case moved for judgment on the pleadings.
"The “determinative question” for the court was whether any specific aspect of the breach of fiduciary claim was independent of an alleged conflict of interest, in which case coverage would obtain. The allegations in (1), (3) and (5) above relied on a conflict of interest arising out of the real estate contract. However, the court found that the allegations in (2) and (4) were independent of any alleged conflict based on the contract. For that reason, there would still have been coverage under the policy language covering claims if liability would have attached in the absence of the contractual agreement. The court thus held that there was no coverage for the claims arising out of the contractual obligations, but that there was for the claims arising out of the breach of fiduciary duty allegations.