The Business Litigation Blog

US District Court Rules on "Claims Made" Policy Legal Malpractice Claim

The United States District Court of the Northern District of Ohio sided with a professional liability insurance carrier in a declaratory judgment action that a lawyer was not covered under his "claims-made" policy for a legal malpractice claim that the lawyer failed to report within the policy period.


The attorney, Spiro Gonakis, represented Rolvow LLC in a real estate transaction involving the Rolvow's sale of an apartment building to another LLC. Gonakis was retained in late 2011 to review the purchase agreement, promissory note, and mortgage. The transaction closed, and title for the building was transferred to the purchaser. The purchaser subsequently breached the parties' agreement.  In December of 2015, Gonakis received a letter from an attorney representing Rolvow stating that the attorney had been hired by Rolvow to "prosecute claims for damages arising from the sale of the apartment building."


Gonakis decided after reviewing the letter (which had been addressed to Gonakis and several other attorneys) and the docket for the court action involving the purchaser's breach that no legal malpractice claim would be brought against him. Gonakis did not inform his insurance carrier of this letter.


In April of 2016, Gonakis received a copy of a First Amended Complaint which named Gonakis as a defendant as to one count of legal malpractice. Immediately upon receiving the complaint, Gonakis tendered it to Medmarc, his professional liability insurance carrier as of January 2016. Medmarc denied coverage, referring to the December 2015 letter and Gonakis' failure to tender that letter to Medmarc. Gonakis filed a complaint for declaratory judgment and the parties moved for summary judgment shortly thereafter. Medmarc argued that it had no duty to defend Gonakis because Gonakis should have reasonably expected the lawsuit upon receiving the December 2015 letter, but had failed to tender the letter to Medmarc and failed to indicate Gonakis' knowledge of any possible malpractice claims in his January 2016 application. The district court agreed with Medmarc and found that, even if liberally construing the idea of "reasonable expectations," Gonakis was aware or should have been aware of facts that "reasonably could have been expected to result in a claim" as a result of the December 2015 letter.


If you have questions about how or when to involve your professional liability insurance carrier in a legal malpractice claim, Patterson Law Firm can help.



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