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CNA unit wins in legal malpractice litigation

Posted On: Dec. 23, 2019 2:55 PM CST

CNA unit

A CNA Financial Corp. unit is not obligated to defend or indemnify a Connecticut attorney whose former client won a $1.5 million jury award on charges including theft under terms of the insurer’s professional liability policy, said a federal appeals court, in affirming a lower court ruling.

A client of attorney Laurence V. Parnoff Sr. won the award in a 2013 state lawsuit, according to Friday’s ruling by the 2nd U.S. Circuit Court of Appeals in New York in Continental Casualty Co. v. Laurence V. Parnoff, Sr.

The U.S. District Court in Hartford held in a 2018 ruling that CNA unit Continental Casualty was not obligated to defend or indemnify Mr. Parnoff under the professional liability policy it had issued to the attorney.

The ruling was upheld by a unanimous three-judge appeals court panel.  Continental’s policy provides the insurer will pay damages and expenses in connection with the performance of legal services, said the ruling.

Furthermore, a policy exclusion provides damages do not include “punitive or exemplary amounts” or the “multiplied portion of multiplied awards.”

The district court correctly concluded the underlying litigation was not covered by the policy, because the relief the attorney’s client sought “did not fall within the covered damages, and, moreover, fell within an exclusion,” said the appeals court.

The client’s lawsuit “sought to recover disputed legal fees that Parnoff had transferred from an escrow account to a personal account in his and his wife’s names while the dispute over the legal fees was on appeal in state court,” said the ruling. The client was not seeking damages in connection with the performance of legal services, it said.

In addition, the “treble damages that (the client) sought for her civil theft claim was also excluded from coverage” while her request for punitive damages “was expressly excluded by the Policy’s exception for ‘punitive or exemplary amounts,’” it said, in affirming the lower court ruling.

CNA’s attorneys could not be reached for comment, while contact information for Mr. Parnoff could not be immediately located.

The South Carolina Supreme Court held in a divided opinion issued in March that an insurer can file a legal malpractice lawsuit against the law firm it hired to represent its insured when the insurer has a duty to defend.