Legal Malpractice

Notifying the Target Attorneys's Carrier in Legal Malpractice

By (Andrew Lavoott Bluestone)

Often, the only way plaintiff knows whether target attorney defendant has legal malpractice insurance is by the name of the attorneys who answer the complaint.  If they are attorneys who normally are retaied by legal malpractice insurance carriers, then plaintiff knows there is insurance.  If not, then there is trouble brewing.  What happens if the attorney simply is out of the picture, and completely refuses to answer any correspondence, and never notifies his carrier?

McCabe v St. Paul Fire & Mar. Ins. Co. ;2009 NY Slip Op 29341 ;Decided on August 19, 2009 ;Supreme Court, Erie County ;Nemoyer, J. is one such case.  "Factually speaking, the focus of the motion and cross motion is on the repeated efforts by plaintiffs to communicate with Fretz, the eventual communications by both Fretz and plaintiffs with St. Paul, and St. Paul's responses to those communications. Apparently, plaintiffs' first attempt to communicate with Fretz following his catastrophic neglect of their insurance claim came in late September 2006, after plaintiffs had consulted with attorney John J. Fromen for the purpose of engaging in such communication. Plaintiffs apparently do not contend that Fromen's September 22, 2006 letter to Fretz constituted the making of a claim against Fretz, so this Court will not summarize that letter. It is enough to note that Fretz did not respond to Fromen's entreaties to contact Fromen with regard to plaintiff's matter. "

"The fundamental question is whether the instant policy insuring Fretz against liability for attorney malpractice is a "policy or contract insurance liability for injury to person," within the meaning of Insurance Law § 3420 (a). St. Paul says that it is not, relying on a decision of the Federal District Court in Sirignano v Chicago Ins. Co. (192 F Supp 2d 199, 206-207 [SDNY [*6]2002]). The Court cannot accept that contention for several reasons. First, Sirignano was concerned with the applicability to a malpractice insurance policy of Insurance Law § 3420 (d) — which pertains to the timeliness of a disclaimer by an insurer of a liability for "death or bodily injury" arising out of an "accident" — not the discernibly distinct provisions of section 3420 (a), which are by no means limited to "accident" insurance. The same is true with regard to various New York cases cited by St. Paul on this question on the applicability of section 3420 (see e.g. Doyle v Siddo, 54 AD3d 988, 989 [2d Dept 2008]; Iafalo v Nationwide Mut. Fire Ins. Co. 299 AD2d 925, 926-927 [4th Dept 2002]; Fairmont Funding Ltd. v Utica Mut. Ins. Co., 264 AD2d 581 [1st Dept 1999]). This case has nothing to do with section 3420 (d). "

"Having determined the applicability of Insurance Law § 3420 (a) (2), it remains for this Court to determine the validity of St. Paul's disclaimer under the policy. St. Paul now contends that it validly disclaimed coverage under the policy on two grounds: first, that no claim was made during the policy period; and second, that no claim was reported to St. Paul during the policy period or the 60-day extension period. The problem for St. Paul is that only the second of those disclaimer grounds was articulated in St. Paul's July 17, 2007 disclaimer letter to Fretz. The pertinent paragraph of the letter stated that St. Paul was denying Fretz any defense and indemnity in the malpractice action on the ground that "this Claim' was neither reported to St. Paul during the Policy Period,' nor was the Claim' or your disability reported within the 60 days following the date of the St. Paul Policy's" lapse. It is of course a fundamental principle of the law in this realm that an insurer's attempt at disclaimer is strictly limited to those grounds articulated in the notice of disclaimer, and that a ground not raised in a disclaimer letter may not be later asserted by the insurer (see General Accident Ins. Co v Cirucci, 46 NY2d 862, 864 [1979]; City of Kingston, Harco Nat. Ins. Co., 46 AD3d 1320, 1321 [3d Dept 2007]; Benjamin Shapiro Realty Co. v Agric. Ins. Co., 287 AD2d 389 [1st Dept 2001]; see also Wraight v Exchange Ins. Co., 234 AD2d 916, 917-918 [4th Dept 1996] [held: where insurer disclaimed coverage based solely upon its insured's failure to provide timely notice, insurer is subsequently estopped from raising the injured party's allegedly untimely notice as a defense in the declaratory judgment action]). Indeed, St. Paul's July 17, 2007 letter explicitly assumed, based on Doyle's representations, that the claim was first made against the insured on January 2, 2007, within the policy period. The Court understands that St. Paul entertained that assumption without having seen the January 2, 2000 letter, but St. Paul's own lack of reasonable investigation into the circumstances is not a ground for departing from the aforementioned principle that the insurer is strictly limited to those disclaimer grounds articulated in the letter of disclaimer (see 2540 Associates, Inc. v Assicurazioni Generali, S.p.A., 271 AD2d 282, 284 [1st Dept 2000] [held: "as a matter of policy, [*8]reasonable investigation is preferable to piecemeal disclaimers"]; see also DiGuglielmo v Travelers Property Cas., 6 AD3d 344, 346 [1st Dept 2004], lv denied 3 NY3d 608 [2004]). Contrary to St. Paul's contention, enforcement of the rule that an insurer's attempt at disclaimer is strictly limited to those grounds articulated in the notice of disclaimer does not involve the creation of coverage where none would otherwise exist. St. Paul's belated attempt to supplement its disclaimer letter to Fretz by adding or resurrecting the "claim not timely made" disclaimer ground — an attempt not made until October 7, 2008, after the commencement of this declaratory judgment action by plaintiffs and indeed following the interposition of St. Paul's answer and counterclaim asserting only that the malpractice claim had not been timely reported — cannot avail for obvious reasons, both procedural and substantive. "{

Full post as published by New York Attorney Malpractice Blog on August 24, 2009 (boomark / email).