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AL: Insured Attorneys protected so long as they act in a fiduciary capacity

Marcus v. St. Paul Fire and Marine Insurance Co., 651 F.2d 379 (1981).

AL: Underlying action based on a professional liability insurance policy

Student Contributor: Farah Shahidpour

Facts: Attorney chose St. Paul, an insurance company, to protect against his professional liability in connection with his legal practice. Specifically, the policy stated that the insurer would be responsible for, “paying all sums which the Attorney should become legally obligated to pay as damages arising out of the performance of professional services for others in the Attorney’s capacity as a lawyer and caused by the lawyer…” Clients gave Attorney money for investment purposes. Attorney agreed to pay back money to clients with interest. Attorney failed to repay money, and judgments were entered against him. Attorney could not pay awards, and clients were forced to initiate parallel actions in state court against St. Paul. St. Paul was granted summary judgment since the obligations did not arise out of the performance of professional legal services as covered by the policy. Attorney filed suit in district court against St. Paul alleging breach of contract in that they wrongfully refused to defend, and did not appear in several suits filed against the former clients. The district court granted St. Paul’s motion for summary judgment against Attorney on grounds of “stare decisis and collateral estoppel, if not res judicata.” The court concluded that this policy did not cover the Attorney in a debtor-creditor relationship, even if those relationships were with former clients.

Issue: Whether there is substantial evidence probative of policy coverage?

Ruling: Yes. Substantial evidence indicated that the judgments rested on obligations arising from the attorney-client relationships rather than in a debtor-creditor context.

Lesson: Regardless of whether summary judgment is proper under the federal standard, in certain circumstances, a summary judgment motion can be denied for policy reasons. Even if it seems that an attorney-client relationship is more like a debtor-creditor one, if that attorney-at-law acts in a fiduciary capacity his conduct can be considered as professional services as one described in the insurance policy above.


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Posted in: Alabama