2012 PROFESSIONAL LIABILITY UPDATE - Eckert Seamans

Post, through Bochetto, attempted to discuss coverage responsibilities with St. Paulregarding the Sanctions Petition. St. Paul offered to pay $36,220.26 when Post had alreadyaccrued $400,000 in attorneys’ fees. Post declined the offer and proceeded to file suit.Post filed a Complaint against St. Paul alleging a breach of contract. He then filed aMotion for Partial Summary Judgment as to Count I, II and V in his Complaint. Those Countsalleged, a Breach of Contract as to the insurance policy, breach of contract as to the agreement topay the costs of the sanctions proceeding and declaratory judgment, respectively. In analyzingPost’s Motion for Partial Summary Judgment the Court stated:Id. at 13.The sanctions exclusion in the Liability Policy, however, under thecommonly understood definition of sanctions as discussed above,refers to sanctions motions brought by opposing counsel. Thisexclusion does not preclude from coverage a sanctions petitionjoined by a lawyer’s former client, particularly one brought inanticipation of a malpractice suit based on identical allegations ofwrongdoing. The attorney-client relationship between Post andMercy indicates that the damages Mercy requested in the sanctionspetition were actually malpractice damages, though Mercy termedthem “sanctions.” As Post’s former client, the fact alleged byMercy in the sanctions petition sound in malpractice, even thoughbrought under a cause of action for sanctions. It is the facts in thecomplaint that dictate whether the exclusion in the liability policyapplies, not the cause of action selected by Mercy. If the sanctionspetition were excluded from coverage, Mercy could choosewhether to proceed with an action where Post was covered by hisinsurance carrier, or an action where Post was not, and potentiallybe awarded similar relief in either action.A professional liability insurance carrier should not be able toavoid coverage for what is essentially a malpractice claim simplybecause of how an attorney’s former client chooses to term therequested relief. Because the sanctions exclusion in the liabilitypolicy was unclear, it must be construed in favor of the insured.Therefore, the sanctions petition was not excluded from coverageunder the liability policy after Mercy joined the sanctions petitionand St. Paul had a duty to defend Post at that time. St. Paulbreached their duty to defend Post under the Liability Policy andare therefore liable for breach of contract.The court proceeded to Grant Post’s Motion for Partial Summary as to Count I and V,and denied relief at to Count II, with the amount of the reimbursement to be determined.181