News & Events

Fifth Circuit affirms $34 million verdict against legal malpractice carrier — exclusion, read literally, “renders the coverage illusory and is facially absurd.”

Readers of Law360 may recall a 2014 story about a Texas jury that rendered a $34 million dollar verdict against OneBeacon Insurance Company.  According to Law360, the Jury found that OneBeacon “knowingly failed to attempt, in good faith, to reach a prompt and fair settlement” of a claim made against a law firm insured by OneBeacon.  The Fifth Circuit has just affirmed the judgment entered on that verdict.  In so doing the Fifth Circuit had this to say about the prior acts exclusion (emphasis supplied):

The district court could not apply the literal policy language because of the extreme overbreadth of the wrongful act definition used in the exclusion: “any actual or alleged act, error, omission or breach of duty arising out of the rendering or the failure to render professional legal services.”  On its face, this covers every single thing an attorney does or does not do, wrongful or not. As written, then, the exclusion renders the coverage illusory and is facially absurd. Indeed, OneBeacon concedes that the exclusion requires some modification; it simply disagrees with the district court’s approach.Countless cases emphasize the fact that, ordinarily, the carrier has absolute control over the wording of the policy.  Prudent carriers will take note of this decision — and take a fresh look at their own policies.

Countless cases emphasize the fact that, ordinarily, the carrier has absolute control over the wording of the policy.  Prudent carriers will take note of this decision — and take a fresh look at their own policies.

 

Robert M. (“Bob”) Frey