Fifth Circuit Determines the Prior Act Exclusion Bars Coverage for Legal Malpractice Claim

Byrd & Assocs., PLLC v. Evanston Ins. Co.

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A federal court ruled that professional liability insurer Evanston Insurance Company was not obligated to defend or indemnify its policyholder, the law firm of Byrd & Associates, in a legal malpractice action stemming from dismissal of a medical malpractice action prosecuted by the law firm. The medical malpractice case was dismissed after the firm failed to comply with the court’s scheduling order.

The firm submitted its application for professional liability insurance after an appellate court extended the lower court’s scheduling order and reinstated the medical malpractice complaint. The firm indicated on its application that its members were unaware of any act that may be reasonably expected to form the basis of a claim against them. Relying on this information, Evanston issued a professional liability policy. The policy was renewed one year later after the firm again submitted an application stating that its members were unaware of any act that may be reasonably expected to form the basis of claim. Before submission of the renewal application, however, the Mississippi Supreme Court reversed the appellate court’s decision and dismissed the medical malpractice complain.

Evanston refused to defend or indemnify the firm based on a prior acts exclusion in the renewal policy. That exclusion barred coverage for “any claim made against the Insured arising out of any act, error or omission in professional services of Personal Injury” happening before the policy’s inception. The court rejected the firm’s argument that the “act” that gave rise to the claim was the firm’s negligence, which could not be established absent a jury or court finding that an attorney at the firm acted negligently.

The court held that the “act” that gave rise to the claim was the firm’s failure to comply with the lower court’s scheduling order, which occurred before inception of the policies. Moreover, the court held that the firm expected or should have expected a claim to arise from that act inasmuch as the Mississippi Supreme Court dismissed the medical malpractice action before the firm submitted its renewal application.

For a copy of the decision, click here

Carrie Appler and Rick Cohen

http://www.goldbergsegalla.com/attorneys/Appler.html

http://www.goldbergsegalla.com/attorneys/Cohen.html