• Louisiana Court Finds No Duty to Defend Under Malpractice Coverage for Lawyer Based on Fee Dispute Between Referring Attorneys
  • April 10, 2007
  • Law Firm: Hinshaw & Culbertson LLP - Chicago Office
  • Howard P. Elliott, Jr. v. Continental Casualty Company, __So.2d__, 2007 WL 530155 (La. 2007)

    Brief Summary
    The Louisiana Supreme Court held that a lawyer’s claims made policy did not require the insurer to defend an insured lawyer who was sued by another lawyer for allegedly fraudulently inducing him to accept a client whose claim was time-barred.

    Complete Summary
    Gary L. Ring hired lawyer Howard P. Elliott, Jr. to pursue a cause of action based on a citation for carrying an oversized load. Madro Bandaries worked various cases with Mr. Elliot, including Mr. Ring’s case. When Mr. Elliot sued Mr. Bandaries to recover fees, Mr. Bandaries filed a petition for declaratory judgment to collect legal fees which he claimed were due because Mr. Elliot did not inform Mr. Bandaries that he had allowed Mr. Ring’s cause of action to prescribe while he represented Mr. Ring. As a result, Mr. Bandaries incurred costs to pursue a worthless claim. Mr. Elliot submitted the claim to his malpractice carrier, Continental Casualty Company (“Continental”), which declined to provide a defense or provide coverage. The lower court denied a summary judgment for Continental and the Supreme Court reversed, finding no coverage was triggered by Mr. Bandaries’ petition.

    Mr. Elliot had a “Lawyers Professional Liability Policy” in effect with Continental that provided coverage for claims arising out of legal services provided. A claim was defined as “a demand received by the Insured for money or services arising out of an act or omission, including personal injury, in the rendering of or failure to render legal services. A demand shall include the service of suit or the institution of an arbitration proceeding against the Insured.” Id at *4. “Legal Services” were defined as:

    “1. those services performed by an Insured for others as a lawyer, arbitrator, mediator, title agent or as a notary public. Any title agency or company, on whose behalf the Insured acts as title agent or designated issuing attorney, is not an Insured under this Policy:

    2. those services performed by an Insured as an administrator, conservator, receiver, executor, guardian, trustee or in any other fiduciary capacity.”

    Id. at *4. In addition, the policy excluded disputes over fees. Id. at *5. The lower court found material issues of fact that precluded a summary judgment because Mr. Bandaries alleged damages due to Mr. Elliot’s negligence in allowing the claim to prescribe, and thus triggered a duty to defend by Continental. Id. at *2.

    The court acknowledged that Continental’s duty to defend was broader in scope than its duty to provide coverage. Id. at *3. The court noted, however, that the insurer’s “duty to defend is determined by the allegations of the plaintiff’s petition, with the insurer being obligated to furnish a defense unless the petition unambiguously excludes coverage.” Id. at *3. The allegations in the petition stated,

    “At no time did Howard P. Elliott, Jr. inform plaintiff, or his associates that he had allowed Ring’s cause of action to prescribe while he represented Ring. Ring’s cause of action, a citation for carrying an oversized load, took place on March 9, 2000, with the citation providing that Mr. Ring, to preserve his rights, had to file suit with in [sic]   “90 days” of this date or on or about June 9, 2000. Plaintiff would not have accepted this case if he had known that Howard P. Elliott, Jr. had allowed the matter to prescribe.”

    Id. at *3. The court disagreed with the lower court’s finding that Mr. Bandaries had alleged a claim for negligence in the performance of legal services by allowing Mr. Ring’s case to prescribe. Mr. Elliot was not providing legal services to Mr. Bandaries. Mr. Bandaries claimed damages because of an omission in the information provided by Mr. Elliot, not an omission in rendering or failing to render professional services. Id. at *5.

    Because the pleadings did not reveal a possibility of liability under the policy, there was no covered claim. The court found no reasonable interpretation of the policy that would support a finding of coverage, and therefor the summary judgment for Continental should have been granted and the case was reversed.

    Significance of Case
    The court refused to extend the duty to defend to a fee dispute between these attorneys simply because Mr. Bandaries alleged the insured attorney had committed negligence by missing the statute of limitations. While there would have been a duty to defend and coverage if Mr. Ring had sued Mr. Elliot for allowing his cause of action to prescribe, Mr. Bandaries was really complaining that Mr. Elliot had failed to advise him of this fact when he gave Mr. Bandaries the case, resulting in damages for the time and costs Mr. Bandaries invested in the case.