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A CNA Financial Corp. unit is not obligated to defend an attorney under its professional liability policy because the litigation filed against him is not related to the legal services he provided, says a divided appeals court, in reversing a lower court ruling.
Attorney Thomas R. Edwards, a personal injury attorney with Domengeaux, Wright, Roy, Edwards & Colomb L.L.C. in Lafayette, Louisiana, had represented Andrew Schmidt, a commercial diver, in a personal injury suit the diver had filed against Houston-based Cal Dive International Inc. for a brain injury he had sustained during a work-related dive, according to Wednesday’s ruling by the 5th U.S. Circuit Court of Appeals in New Orleans in Thomas R. Edwards v. Continental Casualty Co.
The parties entered a multimillion-dollar settlement agreement before trial, under which Cal Dive and its insurer paid a lump sum to Mr. Schmidt and funded an additional payment through annuity contracts. Mr. Edwards’ attorney’s fees were paid by Cal Dive through an annuity contract, according to the ruling.
A year after the settlement, Cal Dive and its insurer filed suit against Mr. Schmidt and Mr. Edwards, charging Mr. Schmidt had exaggerated or fabricated the extent of his injuries.
It sought reimbursement of its lump sum payment to Mr. Schmidt and the cost of funding the annuity contracts to Mr. Schmidt and Mr. Edwards.
Cal Dive said Mr. Edwards was unaware of Mr. Schmidt’s alleged fraud. That litigation was dismissed.
Mr. Edwards sought defense and coverage for that lawsuit from Continental Casualty, a unit of Chicago-based CNA, which the insurer denied. Mr. Edwards filed suit against Continental Casualty, and the U.S. District Court in Lafayette, Louisiana ruled in his favor.
The appellate court’s 2-1 ruling held Mr. Edwards was not covered under the policy. “The operative policy language specifies that a ‘claim’ is one ‘arising out of an act or omission, including personal injury in the rendering of or failure to render legal services,’” says the ruling.
“Cal Dive does not allege a single professional act or omission by Edwards that give rise to such claims,” it said. Its complaint “contains no allegations against Edwards, save for his receipt of settlement funds in the nature of attorney’s fees because of his client’s alleged fraud,” said the ruling, in overturning the lower court decision.
The dissenting opinion said Continental’s duty to defend “which was much broader than its duty to provide coverage,” was trigged by Cal Dive’s complaint against Mr. Edwards.
An emergency medical technician working for a Yonkers, New York-based ambulance service was allegedly subjected to unwanted sexual overtures by a company dispatcher while on the job, according to an Aug. 29 ruling by the 2nd U.S. Circuit Court of Appeals in New York in Andrea Vasquez v. Empress Ambulance Service Inc.