FL: Underlying Malpractice Claim Insurance Coverage
FACTS: Dolan, Fertig and Curtis was a law firm that took out a legal malpractice insurance policy with Gulf Insurance Company. The policy lasted from November 20, 1978 to November 20, 1979 and covered damages the firm would be obligated to pay arising out of legal malpractice that occurred during the course of the policy. The policy further required that the firm have had knowledge of the claim during the insured period, and that the firm inform Gulf during the period. Dolan did not renew its policy with Guld and entered into a policy with Lawyers Professional Liability Insurance Company (LPLIC). The new policy was similar to the Gulf policy and also included a retroactive provision extending to potential claims dating back to 1977 providing the firm was unaware of the claim. As the Gulf policy was expiring on November 19th, 1979, the firm received a letter from a client alleging negligence and request that Dolan’s insurer be put on notice. Dolan filed the claim with LPLIC in the beginning of December ’79 but coverage was denied as the firm was aware of the claim prior to the policy period. Dolan then filed a claim with Gulf who denied coverage citing the explicit contract provision requiring disclosure during the policy term. Dolan’s former client eventually sued them and was awarded a judgment upwards of $50,000. Dolan sued for declaratory relief on the issue of both Gulf’s and LPLIC’s liability. The Circuit Court granted Gulf’s motion for summary judgment but was subsequently overturned by the District Court of Appeals. The District Court then submitted the following question to the Supreme Court of Florida as a certified question of great public importance:
ISSUE: Whether the Court can add a period of time onto an insurance contract after expiration of an “unambiguous claims-made policy” for the purpose of reporting claims that arose near to or at the end of the policy.
RULING: There are two main types of malpractice insurance contracts; claims-made and occurrence. Occurrence based policies cover malpractice that arises out of the policy period as long as the insurer was notified within a reasonable time of the occurrence. The former only covers those claims that the insurer was made aware of during the policy period. Public policy dictates that courts should hesitate to nullify transactions that are unambiguous, barring some great prejudice.
LESSON: “The essence of claims-made insurance policy is notice to the carrier within the policy period.” An attorney should always be aware of when insurance policies expire and keep ever appraised of any and all potential actions that may be brought against the attorney.