The Georgia Court of Appeals has held that correspondence to an insured attorney from a former client’s new counsel potentially alluding to a malpractice suit did not constitute a claim and that questions of fact remained as to whether the correspondence gave the insured a basis to reasonably expect a claim. Joseph v. Certain Underwriters at Lloyd’s London, 2020 WL 3168543 (Ga. Ct. App. June 15, 2020).

A lawsuit was filed against the insured law firm for legal malpractice and breach of fiduciary duty after the law firm was disqualified from representing the claimant in an earlier suit because of a conflict of interest.  Following the law firm’s disqualification, and prior to the inception of the law firm’s claims-made insurance policy, the claimant’s new attorney sent multiple letters to the law firm requesting the claimant’s documents, directing the law firm not to “destroy or alter any documents, information or materials related to the representation provided to” the claimant, and noting that the law firm could contact the claimant’s lawyer if the firm was interested in discussing a tolling agreement.

Two months later, the law firm’s professional liability policy incepted.  The policy provided coverage for claims first made against the insured “during the Policy Period.”  The policy provided coverage for “Claims arising from an Incident that occurred before the Effective Date of” the policy, but only if “[t]he Insured involved did not have knowledge of the Incident prior to the Effective Date” and “[t]he Insured was not aware of any Incident which could reasonably be expected to be the basis for a Claim” (the Prior Knowledge Condition).

During the policy period, the claimant’s attorney sent additional letters requesting the law firm’s insurance information, outlining the claimants’ malpractice allegations, and requesting that the law firm sign a tolling agreement.  The law firm promptly tendered these letters to the insurer.  The claimant later filed suit.  The carrier defended the suit under a reservation of rights and filed a declaratory judgment action.

The trial court granted summary judgment in favor of the insurer, concluding that the policy did not afford coverage because the “Claim” was first made prior to the policy’s inception and because the insured law firm had pre-inception knowledge of circumstances, acts, errors and omissions that it could have reasonably expected to be the basis of a claim and, therefore, that the Prior Knowledge Condition had not been satisfied.

The appellate court reversed, holding that the pre-inception letters from the claimant’s attorney did not constitute a “Claim” under the policy because they did not assert any “demand for money or services.”  With respect to the Prior Knowledge Condition, the appellate court held that the provision was not ambiguous.  Nontheless, the court could not conclude, as a matter of law, that the law firm could “reasonably anticipat[e] a malpractice claim” based on the pre-policy period correspondence.  In particular, with respect to counsel’s pre-inception inquiry regarding a tolling agreement, the appellate court reasoned that counsel could have been suggesting a tolling agreement in connection with the law firm’s prior demand that the claimant pay its outstanding legal bills.

Concluding that questions of fact precluded a determination as to whether the Prior Knowledge Condition had been satisfied, the appellate court reversed the grant of summary judgment to the insurer.