The United States District Court of the Northern District of Ohio sided with a professional liability insurance carrier in a declaratory judgment action. Because the lawyer failed to report a legal malpractice claim within the policy period, the insurance carrier denied coverage.
Gonakis Receives a Legal Malpractice Letter
The attorney, Spiro Gonakis, represented Rolvow LLC in a real estate transaction. The transaction involves Rolvow’s sale of an apartment building to another LLC. Rolvow retained Gonakis 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. Subsequently, the purchaser breached the parties’ agreement. In December of 2015, Gonakis received a letter from an attorney representing Rolvow. The letter stated that Rovlow hired the attorney to “prosecute claims for damages arising from the sale of the apartment building.”
He Ignores the Letter and His Insurance Carrier Denies Coverage
After reviewing the letter, Gonakis decided that his former client would not bring a legal malpractice claim against him. Gonakis did not inform his insurance carrier of this letter.
In April of 2016, Gonakis received a copy of a complaint which named him as a defendant. Immediately upon receiving the complaint, Gonakis tendered it to Medmarc, his professional liability insurance carrier. Medmarc denied coverage, referring to the December 2015 letter and Gonakis’ failure to tender that letter to them. 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 expected the lawsuit upon receiving the letter. However, he failed to tender the letter to Medmarc and failed to indicate knowledge of any possible malpractice claims in his application. The district court agreed with Medmarc. They found that 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 letter.