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NY: Proximate Cause? Does the Attorney's Negligence Make a Difference in the Underlying Case?

Schorsch v. Moses & Singer LLP, 60 A.D.3D 557, 876 N.Y.S.2d 367 App. Div. 1st Dep’t 2009).

NY: Underlying insurance claim

Student Contributor: Nicole Milone

Facts: M.R.S. Antiques was a family-owned business that sold art and antiques. The business was run by Margaret Schorsch, her brother David Schorsch, their mother Marjorie Schorsch, and two other unrelated employees. M.R.S. Antiques had an insurance policy through Utica Mutual Insurance Company (Utica). On September 23, 1995, M.R.S. Antiques was robbed. Their inventory, valued at roughly $2 million dollars, was missing. M.R.S. Antiques reported the theft to the police and filed a claim of loss with Utica. Margaret Schorsch believed that her brother David had committed the theft. Based on this belief, she retained Moses and Singer, LLP (Moses) to represent her and the company in an action against her brother. Moses also came to represent M.R.S. Antiques in the Utica insurance claim regarding the theft. In 1997, Utica denied M.R.S. Antiques’ claim due to the “dishonest acts exclusion” of their policy. The policy denies coverage for a loss caused by dishonest acts committed by anyone with an interest in the property. Utica mistakenly quoted the wrong policy in their letter informing M.R.S. Antiques that they were denying the claim. However, the policy quoted in the letter is materially the same as the policy that covers M.R.S. Antiques in this claim.

Issue: Whether the lower court erred in dismissing the client’s case where the attorney did not pursue a legal action against an insurance company who mistakenly cited an incorrect policy when denying client’s insurance claim?

Ruling: No. The error made by the insurance company and the lawyer’s failure to pursue a cause of action against them for their mistake would not have changed the outcome of the underlying matter. The policy incorrectly cited by the insurance company was only slightly different than the policy that actually covered M.R.S. Antiques. The “dishonest acts exclusion” still applies because Margaret Schorsch claimed David Schorsch, an employee with an interest in the company, committed the theft. This clearly applies as an exclusion under the insurance policy, proving that coverage was properly denied.

Lesson: Even if an error was committed in the underlying matter by opposing counsel which goes unnoticed by their adversary, that does not guarantee a legal malpractice claim. A client must prove their attorney’s negligence was the proximate cause of their damages.

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Posted in: But for-Proximate Cause, Case Within a Case, Insurance, Litigation, New York