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Insurer Has Not Duty to Defend or Indemnify Malpractice Claim of Which Insured Had Notice Prior to Policy Period
Insurance Law Update
U.S. Court of Appeals, Tenth Circuit
In Berry & Murphy, P.C. v. Carolina Cas. Ins. Co., 586 F.3d 803 (10th Cir. (Colo.) November 12, 2009), the U.S. Court of Appeals, Tenth Circuit, ruled that a former partner of a law firm was an “insured” within the meaning of the firm’s professional liability policy and, as such, a letter he received prior to the start of the policy period constituted the first notice of a claim and precluded coverage under the claims-made policy at issue.
Seth Murphy, while a partner at Berry & Murphy, P.C., filed a personal injury complaint on behalf of Oksana and William Burkhardt. Murphy later withdrew as counsel and left the firm. The successor firm, Timothy H. Berry, P.C. (which no longer represented the Burkhhardts), was a named insured on a claims-made lawyers’ professional liability insurance policy effective February 6, 2008 to February 6, 2009.
On January 10, 2007, the Burkhardts’ new attorney sent a letter to Murphy advising him to put his legal malpractice insurance carrier on immediate notice of a malpractice claim they intended to file. Murphy did not send this letter to Berry, his former partner. The Burkhardts subsequently filed a legal malpractice suit against Murphy and Berry & Murphy, P.C. Berry accepted service of the suit on July 23, 2008. The insurer denied coverage for the malpractice claim because it was first made against an insured – Murphy – prior to the inception of the policy. The district court agreed and granted summary judgment for the insurer.
The Tenth Circuit affirmed, holding that the failure to give timely notice precluded coverage of the malpractice claim. The court explained that the letter to Murphy and the malpractice suit alleged “related wrongful acts” under the policy and therefore constituted one “claim.” The court held that Murphy, as a partner of a “predecessor firm,” was an “insured” under the terms of the policy. As a result, since notice of the “claim” was given to Murphy via the letter before the start of the policy period, the insurer “had no duty to defend or indemnify” Berry & Murphy, P.C. or its successor. The court concluded that the “utility of claims-made insurance policies” supported robust enforcement of the bargained-for notice provisions.
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