Thursday, June 30, 2005
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Claim Reported by Lawyer After Malpractice Policy Expired Was Timely Under Circumstances—C.A.
By a MetNews Staff Writer
An attorney who was told by a reporter that he was being sued for malpractice by a client on whose behalf he won a large judgment, but who waited several days before notifying his insurance carrier, was covered even though his ‘claims made and reported’ policy expired in the interim, the Fourth District Court of Appeal has ruled.
Emphasizing the unusual facts of the case and the panel’s intent that its ruling be applied narrowly, Div. Three ruled Tuesday that American Equity Specialty Insurance Company was not entitled to summary judgment declaring that it did not have to cover Farideh Jalali’s claim.
Root won a $2.75 million settlement of a discrimination case for Jalali, only to be sued on the ground that he was negligent in not getting more. A jury agreed with Jalali, but the Court of Appeal reversed, finding that Root had done ‘a very good job.’
In fact, Sills said Tuesday, Root ‘had drained the case for all it was worth.’
Root’s firm, Root & Feinstein, defended him in the malpractice suit after American Equity declined coverage. The denial was based on the fact that Root did not report the claim until March 2, 1999, two days after his policy expired.
Root explained that he had no idea Jalali had a claim against him until a reporter for an unspecified ‘legal journal’ called him on Feb. 25 to tell him Jalali had sued.
Root declared in his opposition to summary judgment:
‘At that time, I was a sole practitioner and I had never been sued by a client after more than 20 years of practicing law. I regarded the call as a possible prank and, in the middle of a typically busy day, did not immediately stop to think about when my professional liability policy expired, what its reporting requirements were, whether third party hearsay regarding a potential claim constituted a reportable event, or any of the other myriad implications of the call.’
Root went on to say that he was out of town on a previously scheduled vacation from Feb. 27 to March 2. When he returned, he said, he saw an article in the aforementioned publication, realized that he really was being sued, and notified the carrier immediately.
His subsequent insurer, he added, also declined coverage, on the basis that Root knew of the claim prior to the effective date of its policy.
Sills, writing for the Court of Appeal, concluded that the requirement of the American Equity policy that the claim be reported—as distinct from being ‘made’— within the policy period was not an element of coverage but ‘a condition precedent of coverage that may be equitably excused when it works a forfeiture.’
He elaborated:
‘Put it this way: Assuming timely report by the insured, the risk borne by the insurer on the insured’s behalf is exactly the same as in pure claims made coverage. The addition of a reporting requirement therefore doesn’t go to risk of a claim against the insured (i.e., what sort of claim might fall within the ambit of the costs the insurer promises to cover), but to the logically independent risk that the insured simply will not report the claim in time.’
The case is Root v. American Equity Specialty Insurance Company, 05 S.O.S. 3230.
Copyright 2005, Metropolitan News Company