Articles Posted in Insurance Coverage

The case is ALPS Prop. & Cas. v. Keller, Reynolds 482 P.3d 638 (Montana, 2021). After purchasing the malpractice insurance policy, the firm sought to tender a malpractice claim to the insurer. Unfortunately for the lawyers, the insurer denied coverage because the law firm knew the basis of the malpractice action before it purchased the insurance policy. The Montana Supreme Court held that there was no coverage under the policy because the law firm (through one of its partners) was aware of the potential claim before purchasing insurance.

The reasoning:

¶16 Here, the Policy contains two provisions—one coverage provision, and one exclusionary provision—that enforce this basic concept. First, in defining the scope of the Policy’s coverage, provision 1.1.2 states that ALPS “agrees to pay on behalf of the Insured all sums (in excess of the Deductible amount) that the Insured becomes legally obligated to pay as Damages, arising from or in connection with a Claim first made against the Insured and first reported to [ALPS] during the policy period, provided that at the Effective Date of [the] Policy, no Insured knew or reasonably should have known or foreseen that the act, error, omission or Personal Injury might be the basis of a Claim….” (Emphasis added.)

ISBA Mutual has won an appeal against a case filed by the McNabola Law Group, P.C., 2019 IL App (1st) 182386. McNabola handled a case for Scot and Patricia Vandenberg against Brunswick. While that jury was deliberating, there was a dispute as to whether McNabola obtained inside information about the jury’s deliberations before accepting the settlement. (That dispute is itself complicated and the facts are disputed. There have been multiple proceedings to sort out that dispute). The Vandenbergs discharged McNabola and retained new counsel. After the Vandenberg case settled, the Vandenbergs challenged the validity of McNabola’s lien. The Vandenbergs also sued McNabola for legal malpractice.

McNabola requested that his insurer, ISBA Mutual, handle the lien dispute. ISBA mutual refused on the ground that the dispute involved legal fees, not a malpractice claim. The trial court ruled that ISBA mutual had a duty to defend McNabola, but the Illinois Appellate Court disagreed and reversed. The holding follows:

¶ 29 We find that the underlying motion did not seek damages arising from wrongful conduct as defined in the malpractice policy and contemplated by the parties. Accordingly, ISBA Mutual had no duty to defend McNabola against the Vandenbergs’ motion to adjudicate an attorney’s lien, and the trial court’s finding to the contrary was error.

Plaintiffs, Charles Faber and Karen Faber, filed suit against insurance agencies and related individuals, claiming insurance malpractice. Defendants moved for summary judgment on the basis that Plaintiffs’ claims were barred by the statute of limitations. Plaintiffs responded that the limitation period was tolled because Charles could not reasonably have discovered the alleged insurance malpractice until a date within the limitations period because a reasonable person does not read his or her insurance policies. Summary judgment was entered for Defendants on grounds that Plaintiffs’ claims were time-barred under the three-year limitation period for insurance malpractice claims. The Supreme Court affirmed, holding that Plaintiffs’ claims against Defendants were untimely.

This is an insurance malpractice case, a case in which the plaintiff claimed that it was insurance malpractice to fail to include uninsured motorist coverage in his umbrella policy. The court rejected this claim because the insurance company sent notices to the plaintiff explaining exactly what coverage he had purchased. Because the change in coverage (dropping the uninsured motorist coverage) occurred in 2002, the statute of limitations had long expired before the Plaintiff filed suit.

The analysis:

This is a case where an insurance company sued a lawyer to rescind an insurance policy on the basis that the lawyer made material omissions in his application for insurance and in his application to renew his insurance. The lawyer missed the statute of limitations in a personal injury case and was tardy in filing an appeal of an adverse judgment. Despite these omissions, he told Liberty that he was not aware of any claim against him. The opinion summarizes this language as follows:

In addition to the renewal application prepared by Mr. Wolfe for the 2013 Policy, Mr. Wolfe also submitted a Notice of Acceptance Letter to Liberty on November 5, 2013, in which he wrote, in part: “this letter acknowledges that, after inquiry, I am not aware of any claims and/or circumstances, acts, errors, or omissions that could result in a professional liability claim since completion of my last application and supplements.” Id. ¶ 28. As a result of Mr. Wolfe’s certification on each application that he had no knowledge of circumstances that could result in potential claims against him, Liberty issued the 2011, 2012, and 2013 policies. Id. ¶¶ 22, 25, 29. Liberty now contends that these certifications were material misrepresentations. Id. ¶¶ 56-67.

The lawyer also failed to respond to Liberty’s requests for information for the two claims.