Burton v. Continental Cas. Co., 2007 WL 2669201 (S.D. Miss. Sept. 6, 2007).

Wiley Rein reports:

"The United States District Court for the Southern District of Mississippi, applying Mississippi law, has granted summary judgment for an insured attorney, holding that his insurer was obligated to defend the attorney where the underlying complaint alleged misconduct that occurred both before and after the retroactive date in the attorney’s professional liability policy. Burton v. Continental Cas. Co., 2007 WL 2669201 (S.D. Miss. Sept. 6, 2007).

The insurer issued a duty-to-defend professional liability policy to the attorney with a retroactive date of November 26, 2001. The policy included a "Retroactive Exclusion Clause Endorsement," which provided that the grant of coverage was available only if "the act or omission occurred on or after 11/26/2001."

Former clients filed suit against the attorney in December of 2002 in connection with his representation of them in a lawsuit against a life insurance company. The underlying plaintiffs alleged that, prior to November 2001, the attorney and other associated lawyers attempted to force plaintiffs to settle their case through a settlement pursuant to which the attorney would receive a separate sum of $2.9 million. The underlying plaintiffs also alleged that the attorney refused to return the case files when asked to do so in November 2002. The insurer denied coverage and declined to defend the attorney in the underlying action. The attorney subsequently filed the instant action. The court also rejected the insurer’s contention that because the allegations in question related to conduct that occurred after the underlying plaintiffs fired the attorney, any misconduct in 2002 was not in connection with provision of "legal services."

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.

From Hinshaw:  In an Illinois case where the legal malpractice complaint was dismissed, the court went too far in Visvardis v. Ferleger, ___ Ill. App. 3d ___, 873 N.E.2d 436 (1st Dist. 2007)

"Illinois’ First District Appellate Court recently held that a trial court erred when it went outside of the pleadings to grant a 735 ILCS 5/2-615 motion to dismiss plaintiff’s legal malpractice complaint. The appellate court found fault with the trial court’s having based its decision on a conclusion that plaintiff would not have won the underlying lawsuit even if defendant had not committed malpractice. The appellate court further held that plaintiff’s complaint alleged sufficient facts from which it could be inferred that the defendants in the underlying lawsuit had sufficient assets to pay damages on the date of alleged malpractice (or thereafter"

Legal Malpractice insurance is a vital component of doing business in New York.  What attorney goes to sleep comfortably without it?  Yet, carriers are always looking for a way out.  Here is an example of the latest twist in NJ from Law.Com:

"A legal malpractice carrier is taking a hard line on the level of client grumbling that puts a lawyer on notice of a potential claim that must be reported.

The carrier’s declaratory judgment suit, filed Tuesday in federal court in Trenton, N.J., could cause sleepless nights for any lawyer who has ever had to deal with a client disappointed by the outcome of a case.

General Star National Ins. Co. says a lawyer’s silence about a client’s displeasure over the size of a settlement offer in a wrongful-death case and her threat to consult with separate counsel was enough to void malpractice coverage.

The carrier cites language in its policy, common to legal malpractice policies, that defines a claim to include "knowledge by an insured of any event or circumstance which could reasonably be expected to result in or lead to a claim being asserted against an insured, provided that the insured gives the company written notice of such event or circumstance prior to the termination date of the policy period .  William Voorhees Jr. of Morristown, N.J., says:""The prior knowledge exclusion is the exclusion du jour of the insurance industry," he says. "The denial of claims because of the prior knowledge exclusion has increased dramatically in the past four to five years. It is working, if for no other reason than it has the factual effect of driving down the malpractice plaintiff’s demand."

 

It centers around a Charles M. Russell statue; what could be more quintessentailly Western.  Real or Fake?  The outcome of this case is a $1 Million verdict against the attorneys and $ 9 Million in Punitive damages.  Hinshaw reports:

"Steve Morton and the international law firm that represented him had very strong, credible grounds to believe that famed artist Charles M. Russell’s signature on a painting that Morton owned was a forgery. But, represented by an “of counsel” attorney of the law firm, Morton nonetheless sued W. Steve Seltzer, an art authenticator, who had refused to recant his professional opinion that the painting was not an authentic painting by Russell. The underlying case was dismissed for lack of expert support for Morton’s position, Morton acknowledged that he could not prevail, and the law firm representing him was found to have committed discovery abuses by withholding key evidence. Seltzer subsequently sued Morton and his law firm for malicious prosecution. The Montana Supreme Court upheld a trial court judgment for $1.1 million in compensatory damages and $9.9 million in punitive damages against the firm.

Our recurring theme is that legal malpractice may pop up anywhere in the world/attorney interaction.  Here is an interesting situation we never envisioned.  What does an estate attorney do about vintage firearms?  What about that WW2 tommy gun up in the attic?

"Estate Planning for Grandpop’s Gun in the Chest
Joshua Prince, a law student has written another article on NFA Firearm issues and estate planning.
To answer these and other question about Firearms and Estate Planning Please read his article Estate Planning for Grandpop’s Gun in the Chest. His article deals with the requirements, benefits, and detriments of registering a weapon as an individual person, corporation , or trust. Many of the issues hold trust for Florida Gun Trusts but you should check with a Florida Gun Lawyer to verify what makes sense in your particular situation. His article begins:

As an estate attorney, how do you handle the planning of an estate, which includes National Firearms Act [NFA] firearms? What if your client asks you, prior to his/her purchase of a NFA weapon, what is the best form of ownership, with long term estate planning in mind?This issue may plague estate attorneys, leaving them to scratch their head in bewilderment as to the correct course of action. More importantly, a probate attorney may be flirting with malpractice, since the registration of NFA weapons is mandatory and ignorance is not a defense

Some states require disclosure of legal malpractice coverage [really non-coverage.]  New York does not.  California is debating the issue.  From Law.Com:

"Deciding whether to require that attorneys tell clients when they don’t have malpractice insurance is proving extremely difficult for the California Bar Board of Governors.

After a confusing and contentious discussion Friday, board members unanimously punted a controversial proposed amendment back to agency staffers and the Committee on Regulation, Admissions and Discipline to discern whether it would fly legally.

The amendment would clarify when exactly lawyers would have to disclose their malpractice insurance status to clients, by linking disclosure with state Business and Professions Code §6147 and 6148. The codes require attorneys to draft written fee agreements for both contingency and non-contingency work that could cost clients more than $1,000. Exceptions include workers’ compensation cases and lawyers working for government agencies.

Based on his visibly irked reaction when the Board of Governors gave the amendment conceptual approval by a narrow 10-9 vote, State Bar President Jeffrey Bleich likely hopes the amendment will eventually get a thumbs down. He huffily denounced the proposed change as "problematic," saying it could allow attorneys to "commit a fraud" by insinuating they’re covered by malpractice insurance when in reality they aren’t. "

From Law.Con [sorry, we reprinted the entire blurb here]:

"Pillsbury Caught In Another Bankruptcy Conflict

Perhaps Pillsbury Winthrop Shaw Pittman needs to reevaluate its system for screening conflicts and disclosing material developments that may impact bankruptcy claims. Back in March, we mentioned that Pillsbury was the subject of a motion filed by the U.S. Trustee to disqualify the firm from representing Sonic Boom and to force it to disgorge fees earned. Now, according to this article, Pillsbury has been accused of another confict. Apparently, Pillsbury failed to disclose an agreement between the firm and directors of its clients, extending the statute of limitations on a potential malpractice claim. Creditors argue that this situation should have been disclosed to the court.

The California Business Bankruptcy Blog explains the significance of the case to bankruptcy practitioners:

In the first instance, Pillsbury lost the business of representing SonicBlue in the case, and thus its presumable large revenue stream. Now, if the accusation comes to anything, Pillsbury stands to lose money in the form of damages for losses to the corporation due to the directors’ actions. Yikes.

It is important for bankruptcy counsel to always bear in mind the competing constituencies involved in every bankruptcy proceeding. What may be a good idea in garden variety civil litigation, may be a devastating decision in the bankruptcy arena. Deals with clients in business litigation such as that between Pillsbury and the SonicBlue board may be perfectly reasonable in most situations, but in bankruptcy, where the interests of creditors are paramount in a debtor-in-possession situation, such a deal undermines the entire process because Pillsbury could not be expected to fully pursue claims against the board if Pillsbury was potentially on the hook for any damages by agreement. Being able to recognize hidden conflicts as well as the obvious ones is essential to a successful bankruptcy practice, as the SonicBlue representation highlights.

If there’s anything else that Pillsbury hasn’t revealed about this matter, now would seem to be the appropriate time, indeed, the last chance, to disclose it.

Posted by Carolyn Elefant on November 14, 2007 at 02:23 PM "

Arguments between insurers and reinsurers are a fertile area of litigation.  Important decisions on attorney-client privilege have come from these cases, and in this particular report, Federal Ins. Co. v North Am. Specialty Ins. Co. ,2007 NY Slip Op 08391 ,Decided on November 8, 2007 ,Appellate Division, First Department , the issue of privity between the attorneys defending a personal injury case and the re-insurer is discussed.

Here, there is no privity between them, and the case is dismissed.  "Plaintiff Federal Insurance Company, claiming it should have contributed only $1,000,000 to the settlement, sues individually and as subrogee of Galaxy General Contracting Corp. to recoup half of the $2,000,000 it paid as Galaxy’s excess liability insurer to settle an underlying personal injury action in which Galaxy was a named defendant. In this action, Federal named as defendants Rivkin Radler, LLP and Bruce A. Bendix (collectively Rivkin), who represented Galaxy in the underlying action, asserting legal malpractice, and also Allied World Assurance Company (U.S.) Inc., formerly known as Commercial Underwriters Insurance Company (CUIC), Galaxy’s primary liability insurer, asserting as against it bad faith, indemnity and legal malpractice.

Federal’s fourth cause of action, against both CUIC and Rivkin, alleged legal malpractice. Without asserting a client relationship with Rivkin or alleging the existence of privity or any allegations of "near privity," Federal claimed merely that CUIC and Rivkin owed Galaxy a duty to defend. Federal further alleged that Rivkin was negligent in opposing the owners’ motion for summary judgment on their indemnification claims by failing to assert antisubrogation or to apprise Federal in a timely manner that the owners had asserted such cross claims. According to [*4]the complaint, had Rivkin raised the antisubrogation rule, the court would have "limited any right of indemnity to the amount above the $1,000,000 limit of CUIC’s OCP." Federal’s fifth cause of action, also against CUIC and Rivkin, alleged a similar theory of liability, but as Galaxy’s subrogee.

None of the determinations reached to justify denial of Rivkin’s motion withstands scrutiny, and its dismissal motion should have been granted. To state a cause of action for legal malpractice, a complaint must allege the negligence of the attorney, that the negligence was a proximate cause of the loss sustained, and actual damages (Leder v Spiegel, 31 AD3d 266, 267 [2006], affd 9 NY3d 836 [2007]). In addition, "New York courts impose a strict privity requirement to claims of legal malpractice; an attorney is not liable to a third party for negligence in performing services on behalf of his client"
(Lavanant v General Acc. Ins. Co., 164 AD2d 73, 81 [1990], affd 79 NY2d 623 [1992]; see also D’Amico v First Union Natl. Bank, 285 AD2d 166, 172 [2001], lv denied 99 NY2d 501 [2002]). Thus, absent an attorney-client relationship, a cause of action for legal malpractice cannot be stated (Baystone Equities, Inc. v Handel-Harbour, 27 AD3d 231 [2006]; Linden v Moskowitz, 294 AD2d 114, 115 [2002], lv denied 99 NY2d 505 [2003]).

In the instant matter, there is no privity between Rivkin and Federal; Rivkin’s duty in the Bermejo lawsuit ran only to its client, Galaxy, and not to any third party ."

The Attorney judgment rule holds that no attorney may be held liable for a strategic decision which was reasonable both objectively and subjectively. This may include choices of questions at trial, selection of experts, choices of evidence.

Here is a story from Hinshaw, of a Michigan Case: Bowman v. Gruel Mills Nims & Pylman, LLP, 2007 WL 1203580 (W.D. Mich. April 24, 2007)

"A federal district court in Michigan has held in a legal malpractice case that an attorney was precluded from obtaining summary judgment under the “attorney judgment rule” because he violated the Michigan Rules of Professional Conduct requirement that he keep his client informed of important decisions. Bowman retained attorney Gruel to seek maximum retirement benefits. Gruel consulted with an employee benefits specialist, attorney Stevenson, who advised that if Gruel sought to recover the retirement benefits by asserting causes of action under the Employee Retirement Income Security Act (ERISA), the claim would face “a number of significant obstacles.”

Gruel filed suit in state court seeking recovery solely under a state law theory of breach of contract. Knape & Vogt contended that ERISA preempted the claim. In response, Gruel contended that Bowman had been wrongfully denied benefits in violation of § 1132(a)(1)(B) of ERISA. The case was tried to the state court judge, who applied ERISA to Bowman’s claim. The judge ruled that under ERISA, the Administrative Committee’s decision to deny maximum retirement benefits was not “arbitrary and capricious.” The trial judge then applied a theory that Gruel had not raised, and ruled that Bowman was entitled to maximum retirement benefits under ERISA based on a promissory estoppel theory.

A Michigan appellate court reversed the trial court’s award of benefits, ruling that the trial court lacked subject matter jurisdiction over § 1132(a)(3) of ERISA, which was the basis for the promissory estoppel claim. Instead, the appellate court held, state courts have subject matter jurisdiction only over claims under § 1132(a)(1)(B) of ERISA, which applies to wrongful denial of benefits. The Michigan Supreme Court denied leave to appeal.

Bowman sued Gruel for legal malpractice for seeking recovery under a state law breach of contract claim rather than under ERISA, and for failing to advise him that recovery would not be sought under ERISA. Gruel moved for summary judgment based on the “attorney judgment rule” and on the grounds of causation. The court ruled that Gruel was not entitled to summary judgment under the attorney judgment rule, but that he was entitled to partial summary judgment on the ground of causation. "