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Insurer loses legal malpractice ruling in reversal

Posted On: Jun. 5, 2020 2:13 PM CST


A federal appeals court has reversed its previous ruling and reinstated litigation filed by a law firm against its legal malpractice insurer.

In 2015, a group of investors hired Dallas attorney Gaylene Lonergan to help close a real estate deal, according to Thursday’s ruling by the 5th U.S. Circuit Court of Appeals in New Orleans in Landmark American Insurance Co. v. Lonergan Law Firm PLLC; et al; Christopher Dillon Snell, et al.

At the time, Ms. Lonergan held a professional liability insurance policy with Landmark, a unit of Atlanta-based RSUI Group Inc. The investors sued Ms. Lonergan, and after Landmark refused to defend her in the suit, the case proceeded to a bench trial in state court in 2017, according to the ruling. The court ruled in the investors’ favor.

Landmark filed suit in U.S. District Court in Fort Worth, Texas, seeking a declaration it did not have to defend Ms. Lonergan under the policy because she had failed to report the claim to it during the policy period, as she was obligated to do, said the ruling.

The investors argued Ms. Lonergan had in fact reported the claim in April 2016 in a claim supplement as part of her application to renew her insurance policy with Landmark. The district court ruled in favor of Landmark and was initially upheld by the 5th Circuit.

However, after receiving a petition for an en banc rehearing, the court withdrew its initial opinion and ruled in the plaintiffs’ favor.

The ruling said investors argued that a claim supplement had provided the relevant information in the case within the policy period. 

“Considering the terms of Landmark’s policy before us in this case, we agree with the Investors,” said the opinion. Landmark does not dispute that it received the Claim supplement during the Policy Period.

“Lonergan therefore ‘reported’ – provided information of – the claim to Landmark as required by the Policy,” said a three-judge appeals court panel, in ruling in the plaintiffs’ favor, and remanding the case for further proceedings.

The ruling states “Even though we hold that Lonergan reported her claim under the Policy, we decline to reach the issue of whether she breached the Policy notice conditions or whether any such breach may have prejudiced Landmark.”

Attorneys in the case did not respond to requests for comment.

In December, a federal appeals court affirmed a lower court and held a CNA Financial Corp. unit was 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.