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AIG unit not liable to cover late-filed attorney malpractice claim

AIG unit not liable to cover late-filed attorney malpractice claim

An American International Group Inc. unit and its policy administrator are not obligated to provide coverage under a legal malpractice claims-made policy because of a late claim, says a federal appeals court in affirming a lower court ruling.

David and Cynthia McCarty successfully sued their former attorney, Springfield, Ohio-based Miguel Pedraza, for malpractice after they had hired him to defend them and he neglected to file an answer to the complaint, which resulted in a default judgment of more than $150,000 being entered against them, according to Tuesday’s ruling by the 6th U.S. Circuit Court of Appeals in Cincinnati in David C. McCarty; Cynthia K. McCarty, Miguel A. Pedraza v. National Union Fire Insurance Co. of Pittsburgh, Pa.; Administrators for the Professions of Delaware Inc. and American International Group Inc.

In January 2011, the McCartys filed a malpractice action against Mr. Pedraza that resulted in them obtaining a $275,800 judgment against him in January 2015, according to the ruling.

Mr. Pedraza had a claims-made malpractice policy with National Union, a unit of New York-based AIG, and New Hyde Park, New York-based policy administrator Administrators covering Feb. 21, 2010, through Feb. 21, 2011, which allowed for reporting up to 60 days following the end of the period, according to the ruling.

The McCartys formally notified Administrators about the potential claim in December 2011, nearly 10 months after the end of the policy period. National Union denied the claim in part by asserting it did not fall within the scope of the policy’s coverage because it was not timely reported, according to the ruling.

In the ensuing litigation, the U.S. District Court in Dayton, Ohio, issued a ruling in favor of National Union and Administrators, which was unanimously affirmed by the 6th Circuit’s three-judge panel.

“The McCartys do not dispute that their written notice was given beyond the prescribed reporting period, but they nevertheless maintain National and Administrators had actual and constructive notice of the claim because the state-court action against Mr. Pedraza was during the policy period and the court docket was available to the public,” said the ruling.

“The terms of Pedraza’s malpractice insurance policy are unambiguous,” said the ruling, however. “It provides coverage only for claims made against Pedraza during the policy period of February 21, 2010, and February 21, 2011, and promptly reported in writing to the insurer, but in any case no longer than 60 days after the end of the policy period. In this case, that final reporting date is April 22, 2011,” said the ruling.

“There is no provision in the policy that obliges National or Administrators to monitor public dockets, or any suggestion that a public docket somehow supplants the reporting requirement in the policy,” it said.

“Neither the District Court nor this court has the authority to rewrite the policy to insert such a provision,” said the ruling, in affirming the lower court’s ruling.

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