NJ Underlying automobile negligence action; insurance coverage for malpractice.
Student Contributor: Colleen A. Gaedecke
Facts: A New Jersey auto insurance company retained a New Jersey law firm to defend its insured in an auto negligence case.. The malpractice defendant, a partner at the firm, was assigned the case. During his representation, disputes arose between the defendant and the other partners at the firm which led to the firm’s dissolution. The defendant signed a dissolution agreement with the firm relinquishing his status as partner but continuing as trial attorney until his final termination date. As such, the defendant agreed to continue to represent the insurance company. Ultimately, a legal malpractice claim was filed against the defendant as a result of his representation. The defendant filed a third party claim against the firm’s malpractice carrier, asserting that they were obligated to provide him with a defense and indemnification concerning the malpractice claims brought against him. The defendant argued that he was entitled to coverage because he tried the negligence action on behalf of the firm and the file remained the firm’s file at all times. The firm’s malpractice carrier denied him coverage and argued that he was not entitled to coverage because he was not a member of the firm and because the firm surrendered all responsibility for the file when they asked him to handle the case.
Issue: Whether a malpractice insurance carrier is required to defend and provide indemnification to a former partner of the law firm for alleged acts of malpractice committed after the partner’s dissolution from that firm?
The Ruling: Affirming the trial court’s grant of summary judgment in favor of the defendant, the Appellate Court held that the firm’s insurance policy required their carrier to defend the defendant.
1) When the language of the malpractice insurance policy is clear, the courts should not rewrite the insurance policy. But when a policy is ambiguous, the court should interpret the ambiguous phrase in favor of coverage.
2) Also, the court should consider whether adding more precise language would have avoided the matter.
The Lesson: The use of precise language in a malpractice insurance policy may relieve a malpractice insurance carrier from their duty to defend and to indemnify former partners for malpractice. Without such precision, any ambiguity in the policy is usually decided in favor of coverage.