Former Of Counsel Is Still “Insured Person” After Leaving Law Firm

The Ohio Court of Appeals has held that an “of counsel” attorney was an “Insured Person” under his former law firm’s professional liability policy for purposes of a malpractice action involving allegations that occurred both before and after the attorney worked at the firm.  Gallagher Sharp, L.L.P. v. Miller Goler Faeges Lapine, L.L.P., 2019 WL 2319296 (Ohio Ct. App. May 30, 2019).

Over a year after leaving his job as “of counsel” at a law firm, an attorney and his former law firm were sued for legal malpractice for client abandonment.  The law firm’s insurer accepted notice of the malpractice claim under its professional liability policy and assigned defense counsel to defend the attorney.  The policy at issue provided coverage for loss in excess of the retention, and provided that the law firm would be obligated to pay the retention if an Insured Person was unwilling or unable to do so.  The law firm later refused to pay defense counsel’s invoices, alleging that the attorney was not an “Insured Person” and therefore the law firm was not obligated to pay the retention.

Defense counsel proceeded to file suit against the law firm and attorney for breach of contract and unjust enrichment.  The trial court granted summary judgment to defense counsel, finding the law firm was responsible for defense counsel’s invoices under the policy.  The law firm appealed, alleging that the trial court erred in granting summary judgment because (1) there was no contract between defense counsel and the law firm; (2) the attorney was not an insured; and (3) the court failed to construe the insurance policy in favor of the policyholder.

In the ensuing appeal, the court determined that the law firm was obligated to pay defense counsel’s invoices within the retention for three reasons.  First, under the “intent to benefit” test set forth in Huff v. FirstEnergy Corp., 957 N.E.2d 3, 12 (Ohio 1992), defense counsel was a third-party beneficiary with enforceable rights under the policy, including the right to payment of defense invoices.

Second, the attorney qualified as an “Insured Person” because he was “any natural person who was designated as ‘counsel’ or ‘of counsel’ by the Firm.”  The court rejected the law firm’s argument that the attorney was not eligible for coverage because he was not employed at the law firm at the time of the wrongful acts.  The court instead found that whether the attorney was covered under the policy or whether the insurer had a duty to defend was the insurer’s determination to make and was not at issue on appeal.  If the law firm wanted to challenge the insurer’s coverage determination, then it should have filed a declaratory judgment action.  The court then proceeded to agree with the insurer’s coverage determination, finding that, because the claim against the attorney was made during the policy period of a claims-made policy, the policy provided coverage regardless of when the alleged malpractice occurred.

Third, there was no ambiguity in the policy language, and thus the court did not need to construe the policy in favor of the policyholder and did not err in granting summary judgment to defense counsel on its claim for breach of contract.


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