Robert R. Joseph v. Certain Underwriters at Lloyd's London ( 2020 )

SECOND DIVISION
MILLER, P. J.,
MERCIER and COOMER, JJ.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
https://www.gaappeals.us/rules
DEADLINES ARE NO LONGER TOLLED IN THIS
COURT. ALL FILINGS MUST BE SUBMITTED WITHIN
THE TIMES SET BY OUR COURT RULES.
June 15, 2020
In the Court of Appeals of Georgia
A20A0111. JOSEPH v. CERTAIN UNDERWRITERS AT
LLOYD’S LONDON.
A20A0112. HILL, KERTSCHER & WHARTON, LLP et al. v.
CERTAIN UNDERWRITERS AT LLOYD’S LONDON.
MERCIER, Judge.
In this dispute concerning coverage under a professional liability insurance
policy, the insureds, the law firm of Hill, Kertscher & Wharton, LLP (“HKW”) and
two of its attorneys, Robert Joseph and Douglas Kertscher, appeal from the trial
court’s denial of their motion for summary judgment and the grant of summary
judgment in favor of the insurer, Certain Underwriters at Lloyd’s London
(“Underwriters”). For the following reasons, we affirm the trial courts’ denial of
summary judgment to the insureds, and we reverse the trial court’s grant of summary
judgment to Underwriters.
Summary judgment is proper when there is no genuine issue as to any material
fact and the moving party is entitled to a judgment as a matter of law. Matjoulis v.
Integon Gen. Ins. Corp., 226 Ga. App. 459, 459 (1) (486 SE2d 684) (1997); OCGA
§ 9-11-56 (c). We review the grant or denial of a motion for summary judgment de
novo. Woodcraft by MacDonald, Inc. v. Ga. Cas. & Sur. Co., 293 Ga. 9, 10 (743
SE2d 373) (2013).
The relevant facts are undisputed. Joseph and HKW provided legal services to
Daryl Moody and his companies beginning in 2014. In January 2015, HKW
represented Moody’s company in a breach of contract action against Robert Miller
and a limited liability company of which Miller was a 50% shareholder (“Miller’s
LLC”), in Fulton County Superior Court. Approximately four months later, HKW
appeared on behalf of Moody and Miller’s LLC, who were named as defendants in
a California action initiated by Miller.1 Miller accused HKW of having a conflict of
interest, and the parties exchanged correspondence concerning the alleged conflict.
Miller later moved in both the Georgia action and the California action to have
HKW, Kertscher, and a second HKW attorney disqualified from representing Moody
1
In both the Georgia and California actions, other parties were named but they
are not relevant to these appeals.
2
and his company, alleging that HKW sued Miller’s LLC in one action and attempted
to represent the LLC in another action, and that HKW also formerly represented
Miller through Joseph. On September 25, 2015, the Fulton County Superior Court
granted Miller’s motion to disqualify, finding that Joseph had previously represented
Miller and Miller’s LLC, and that the prior representation was directly related to the
claims HKW sought to pursue on behalf of Moody’s company. HKW subsequently
withdrew as counsel in the California case.
On November 4, 2015, Kertscher was notified that Moody’s new counsel,
Douglas Chandler, would be entering an appearance in the Fulton County action on
behalf of Moody and that Chandler would need Moody’s files. On November 5, 2015,
Chandler sent a letter to Kertscher, again informing him that Moody had retained his
firm, expressing displeasure that HKW had threatened litigation to collect fees and
expenses allegedly owed to HKW by Moody, and requesting that HKW not “destroy
or alter any documents, information or materials related to the representation
provided to Mr. Moody or any company with which he is or was affiliated.” Chandler
also asked Kertscher to contact him if he was interested in discussing “the execution
of a [statute of limitation] tolling agreement between HKW and Mr. Moody.”
3
On January 15, 2016, HKW purchased a professional liability insurance policy
from Underwriters effective January 17, 2016 to January 17, 2017. On July 26, 2016,
Chandler sent another letter to Kertscher “to follow up on our claims notice letter to
you dated November 5, 2015.” Chandler requested that Kertscher forward Moody’s
files and provide the name and contact information for HKW’s insurance “adjuster
assigned to this matter.” Kertscher forwarded this letter to Underwriters. On January
10 or 11, 2017, a few days prior to the expiration of the policy, Chandler sent another
letter to Kertscher outlining Moody’s claims, including claims that HKW gave
improper advice and failed to raise a defense in the California action, causing Moody
to suffer “personal damage.” Chandler asked HKW to sign a tolling agreement that
would extend the statute of limitation and threatened to immediately file suit if the
tolling agreement was not signed and received by January 13. HKW forwarded this
letter to Underwriters “[s]hortly after receiving it.”
On April 28, 2017, Moody and three of his companies (collectively, “Moody”)
filed a complaint for legal malpractice and breach of fiduciary duty against HKW,
Kertscher, and Joseph. HKW notified Underwriters of the complaint in May 2017
after being served, and Underwriters agreed to provide HKW with an initial defense,
but reserved its right to limit or deny coverage.
4
On May 16, 2017, Underwriters filed a complaint seeking a declaratory
judgment that HKW, Joseph, and Kertscher were not entitled to coverage under the
policy and that it had no legal duty or liability to provide a defense or indemnify them
for any judgment or settlement. Underwriters subsequently filed a motion for
summary judgment, and Joseph, Kertscher, and HKW filed a joint cross-motion for
summary judgment. Following a hearing, the trial court granted Underwriter’s motion
and denied the cross-motion. In Case No. A20A0111, Joseph appeals from the trial
court’s order. HKW and Kertscher appeal from the same order in Case No.
A20A0112.
The trial court’s ruling was based upon two grounds. The court concluded that
(1) the policy does not cover the malpractice suit because the claim was made prior
to the policy’s effective date, and (2) the insureds had pre-policy knowledge of
circumstances, acts, errors, and omissions that they could have reasonably expected
to be the basis of a claim or suit.
As with any contract, in construing the terms of an insurance
policy, we look first to the text of the policy itself. Words used in the
policy are given their “usual and common” meaning, see OCGA §
13-2-2 (2), and the policy should be read as a layman would read it and
not as it might be analyzed by an insurance expert or an attorney. Where
the contractual language is explicit and unambiguous, the court’s job is
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simply to apply the terms of the contract as written, regardless of
whether doing so benefits the carrier or the insured. This is so because
Georgia law permits an insurance company to fix the terms of its
policies as it sees fit, so long as they are not contrary to the law, thus
companies are free to insure against certain risks while excluding others.
However, when a policy provision is susceptible to more than one
meaning, even if each meaning is logical and reasonable, the provision
is ambiguous and, pursuant to OCGA § 13-2-2 (5), will be construed
strictly against the insurer/drafter and in favor of the insured.
Georgia Farm Bureau Mut. Ins. Co. v. Smith, 298 Ga. 716, 719 (784 SE2d 422)
(2016) (citations and punctuation omitted). The relevant provisions of the policy are
as follows. The policy states that it is a “claims made and reported insurance policy,”
and that “[c]overage is limited to liability for only those claims that are first made
against the insured and reported to Underwriters during the policy period” – January
17, 2016 to January 17, 2017.2 (Emphasis supplied.) With regard to coverage, the
policy provides:
I. INSURING AGREEMENT
A. CLAIMS MADE AGAINST THE INSURED
2
HKW was the named insured, and the firm’s attorneys were insured under the
policy “with respect to acts, errors or omissions in Professional Services in the law
practice.”
6
Underwriters agree to pay on behalf of the Insured, all sums which
the Insured may be legally obligated to pay as Damages to others, up
to the Limit of Liability, resulting from:
1. A Claim seeking Damages caused by a negligent act, error or
omission in Professional Services provided by, or that should have
been provided by the Insured or any person for whose acts an
Insured, as a lawyer or notary public, is legally responsible;
2. A Claim seeking Damages for Personal Injury . . .
The Claim must be made against an Insured during the Policy Period.
The Claim must be based on an Incident that wholly occurs on or after
the Retroactive Date.[3] The Insured must provide written notification
to the Underwriters of the Claim while this Insurance Policy is in effect.
In addition, Underwriters will cover Claims arising from Incidents as
follows:
3
The declarations page of the policy provides a retroactive date of September
23, 1999. The policy also contains a “Retroactive Date Schedule Endorsement,”
which provides a specific retroactive date for each lawyer. The endorsement states
that “coverage is provided to the lawyers listed herein for acts, errors or omissions or
personal injuries which occurred on or after the Retroactive Date shown.” The
retroactive date listed for Joseph is July 22, 2005, and the date listed for Kertscher is
September 23, 1999. However, for purposes of our analysis, we will simply refer to
the policy’s 1999 retroactive date.
7
1. Prior Incidents: Underwriters will cover Claims arising from an
Incident that occurred before the Effective Date of this Insurance
Policy if the following conditions are met:
a. The Insured involved did not have knowledge of the Incident prior
to the Effective Date of this Insurance Policy;
b. The Insured was not aware of any Incident which could reasonably
be expected to be the basis for a Claim; and
c. The Claim results from an Incident which occurred on or after the
Retroactive Date and is reported to Underwriters while this agreement
is in effect.
2. Reported Incidents: Underwriters will cover Claims made against an
Insured after this Insurance Policy ends, if: . . . .
(Emphasis supplied.)4
4
The policy defines “Claim” as “a demand received by an Insured for money
or services including the service of Suit.” “Damages” is defined as “a monetary
judgment or settlement which the Insured is legally obligated to pay for any Claim
to which this insurance applies. Damages shall not include Fines, Sanctions or
Penalties or any other monetary amounts that are uninsurable under any applicable
law.” And “Incident” is defined as “any circumstance, act, error or omission which
an Insured could reasonably expect to be the basis of Claim or Suit covered by this
8
1. The insureds contend that the trial court erred in concluding that Moody’s
claim was first made prior to the policy’s January 2016 effective date. Specifically,
the court found that Moody first made claims on November 4 and November 5, 2015,
when HKW was asked to preserve documents and materials related to its
representation of Moody and suggested that HKW sign a tolling agreement. The court
concluded that these communications constituted a demand for services under the
policy’s definition of a “claim” – “a demand received by an Insured for money or
services including the service of Suit.”
The policy does not define the term “services,” and we have found no Georgia
cases analyzing the meaning of a demand for services as a claim in a professional
liability insurance policy. However, the Eleventh Circuit has analyzed a claims-made
professional liability policy that defined “claim” as “the receipt by [the insured] of a
demand for money or service.” Nat. Fire Ins. v. Bartolazo, 27 F3d 518, 519 (11th Cir.
1994). In Bartolazo, the insured (a physician) received a letter from a former patient’s
attorney “requesting [the] patient’s records in connection with [a] claim for medical
malpractice and other relief.” Id. The court concluded that the letter “merely
requested [the patient’s] medical records and alluded to a claim for malpractice,” and
Insurance Policy.”
9
that it made no demand for money or services. Id. See also Trice v. Employers
Reinsurance Corp., 1997 U.S. App. LEXIS 19921, slip op. at 9-10 (II) (7th Cir. 1997)
(unpublished) (where “claim” defined in policy as “a demand for money or service,”
the court concluded that “[r]equests for information -- even if they allude specifically
to the possibility of a lawsuit -- do not constitute a ‘demand for money or services’
within the meaning of a claims-made policy”). Id. at 9-10.5 Thus, contrary to the trial
court’s conclusion, the November correspondence did not constitute demands for
service and therefore were not “claims” under the policy.6 The trial court therefore
5
The cases cited by the trial court are not controlling. Simpson & Creasy, P.C.
v. Continental Cas. Co., 2012 U.S. Dist. LEXIS 161599 (S.D. Ga. 2012), does not
hold that a demand for the client’s files constituted a demand for services. The trial
court likely intended to cite Simpson & Creasy, P.C. v. Continental Cas. Co., 453
Fed. Appx. 868 (11th Cir. 2011). But in that case, the appellate court held that a letter
acknowledging a client’s claim that her attorney owed her money was a claim under
a professional liability policy as a demand for money. Id. at 870-871 (III). The trial
court also cited Continental Cas. Co. v. Jewell, Moser, Fletcher, & Holeman, 2005
U.S. Dist. LEXIS 49167 (E.D. Ark. 2005), which is distinguishable from the facts
here involving a request for client files. In that case, the district court held that a
complaint seeking injunctive relief to require a party to produce documents and
surrender all files and trust account funds was a demand for services. Id. at 5-6.
6
The trial court also concluded that Miller made pre-policy related claims.
Under “Limits of Liability and Deductible,” the policy provides that two or more
claims arising out of a single act shall be treated as a single claim, and shall be
considered first made at the time of the earliest claim arising out of such act, error or
omission in professional services. The court concluded that Miller made pre-policy
claims in an October 2015 letter from his counsel requesting Kertscher’s professional
10
erred in finding that Moody’s claim was first made prior to the effective date of the
policy.
2. The trial court also erred in finding no coverage as a matter of law based on
the Prior Incidents clause.
(a) As an initial matter, we must address the insureds’ argument that the Prior
Incidents clause is ambiguous and therefore cannot be enforced. The policy first
provides coverage for claims seeking damages caused by an insured’s negligent act,
error or omission in professional services; the claim must be made against the insured
during the policy period and must be based on an incident that occurs on or after the
1999 retroactive date. The policy then provides that “in addition,” the insurer will
cover claims arising from “Prior Incidents,” i.e., incidents that occurred before the
effective date of the policy, if: (1) the insured did not have knowledge of the incident
before the effective date of the policy, (2) the insured was not aware of any incident
which could reasonably be expected to be the basis for a claim, and (3) the claim
liability insurance information and his April 2015 motion to disqualify HKW and its
attorneys. However, even if Miller’s letters and motion to disqualify arose out of the
same act that is the basis of Moody’s claim, they do not demand money or services
and therefore do not meet the policy’s definition of a claim, rendering the “Limits of
Liability and Deductible” provision inapplicable here.
11
results from an incident which occurred on or after the retroactive date and is reported
during the policy period.
The insureds argue that the language prior to “in addition” provides coverage
for pre-policy incidents, while the language after “in addition” excludes such
incidents. They argue further that the phrase “in addition” would lead a reasonable
insured to believe that additional coverage is provided, “rather than a hidden policy
exclusion.”
While the policy could have been drafted more precisely, “[a]n insurance
contract will be deemed ambiguous only if its terms are subject to more than one
reasonable interpretation. The policy should be read as a layman would read it and not
as it might be analyzed by an insurance expert or an attorney.” State Farm Mut. Ins.
Co. v. Staton, 286 Ga. 23, 25 (685 SE2d 263) (2009) (citations and punctuation
omitted; emphasis supplied). Further,
while an ambiguity is to be construed in favor of the insured, this
[C]ourt may not strain the construction of the policy so as to discover an
ambiguity. In other words, the rule of liberal construction of an
insurance policy cannot be used to create an ambiguity where none, in
fact, exists. Thus, where the language fixing the extent of liability of an
insurer is unambiguous and but one reasonable construction is possible,
the court must expound the contract as made.
12
Id. (citations and punctuation omitted). Viewing the policy as a whole and giving a
reasonable and unstrained interpretation to the language before and after “in
addition,” we hold that the policy is not ambiguous.
The language before “in addition” states that the policy provides coverage for
claims seeking damages and explains that such claims must, among other things, be
based upon an incident that occurs on or after the 1999 retroactive date – which
would include those incidents that occur before or during the policy period beginning
January 2016. Considering the policy as a whole, without question it covers those
claims (made and reported during the policy period) that are based upon incidents
occurring during the policy period. For example, under Section V of the policy, an
insured is required to report to Underwriters those incidents the insured becomes
aware of during the policy period.
The language after “in addition” does not exclude coverage as the insureds
argue, but rather explains under what circumstances the policy will cover claims for
pre-policy incidents. The term “in addition” commonly means that what is to follow
is additional. While the insureds assert that the term leads an insured party to believe
that additional coverage follows, a more reasonable interpretation is that the term
means an additional explanation follows, especially here where it follows
13
immediately after the description of claims covered and is under the same
subheading, “Claims Made Against the Insured.” The insureds would have us ignore
the language after “in addition” as “repugnant” to coverage, but we cannot construe
the policy in a manner that would render any of its provisions meaningless. See Flynt
v. Life of the South Ins. Co., 312 Ga. App. 430, 435-437 (1) (718 SE2d 343) (2011)
(“[A]n insurance policy, like other contracts, should not be construed in a manner that
would render any of its provisions meaningless or mere surplusage . . . . Courts must
avoid giving the contract a construction which entirely neutralizes one provision if
it is susceptible of another which gives effect to all of its provisions.” (citations and
punctuation omitted)). The plain language of the policy provides coverage for claims
arising from pre-policy incidents (occurring after the 1999 retroactive date) if the
insured had no knowledge of the incident prior to the policy’s 2016 effective date and
was not aware of an incident that could reasonably be expected to be the basis for a
claim.
(b) Alternatively, the insureds assert that even if the policy is not ambiguous,
the trial court erred in granting summary judgment to Underwriters based on what the
insureds allegedly knew – and could have reasonably anticipated – prior to the
January 2016 effective date. We agree. Again, the policy covers claims for incidents
14
occurring before the effective date only if the insured did not have knowledge of the
incident prior to that date and was not aware of any incident which could reasonably
be expected to be the basis for a claim. The trial court found that the conflict of
interest allegations, the disqualification of HKW and Kertscher in the Georgia action,
Miller’s demand letters requesting HKW’s insurance information, and Moody’s
request for a tolling agreement, are all pre-policy incidents that the insureds could
have reasonably expected to be the basis of a claim. However, we cannot conclude
as a matter of law that the insureds could have reasonably expected these incidents
to be the basis of Moody’s claim.
Generally, questions of reasonableness are for the jury. See, e. g., JNJ
Foundation Specialists, Inc. v. D. R. Horton Inc., 311 Ga. App. 269, 278 (3) (b) (717
SE2d 219) (2011) (in most cases, reasonableness of a failure to give notice is a
question for the trier of fact); Norfolk & Dedham Mut. Fire Ins. Co. v. Cumbaa, 128
Ga. App. 196, 199 (2) (196 SE2d 167) (1972) (no error in submitting to the jury the
issue of reasonableness in timing of insured’s reporting of incident to insurer). In this
case, we cannot find that the pre-policy letters of the conflict of interest allegations
necessarily provided grounds for reasonably anticipating a malpractice claim from
Moody. The pre-policy letters from Moody made no request for HKW’s insurance
15
information, and Moody’s suggestion of a tolling agreement between HKW and
Moody arguably was based upon HKW’s threat to sue Moody to collect fees and
expenses. And although the insureds could have reasonably expected Miller’s
demand letters requesting HKW’s insurance information to be the basis of a claim by
Miller, whether they could have reasonably expected those letters to be the basis of
a claim by Moody is not an issue for the court to decide summarily. The issue of
whether the insureds could have reasonably expected that these pre-policy
communications would give rise to Moody’s claim should be decided by a jury. The
trial court therefore erred in granting summary judgment to Underwriters on this
ground. See Rockhill Ins. Co. v. Southeastern Cheese Corp., 2020 U.S. Dist. LEXIS
60995, slip op. at 26 (3) (C) (1) (S.D. Ala. 2020) (only a jury can resolve whether
insured reasonably expected claims under policy when it completed policy
application); Allstate Ins. Co. v. Justice, 229 Ga. App. 137, 140 (2) (493 SE2d 532)
(1997) (jury had to determine meaning of policy’s “reasonably expected” language).
The trial court erred in finding that Moody’s claim was first made prior to the
effective date of the policy. And because issues of fact remain as to the insureds’ pre-
policy knowledge/reasonable expectation of the incident giving rise to Moody’s
claim, the trial court erred in granting summary judgment to Underwriters based upon
16
the Prior Incidents clause. Accordingly, we affirm the trial court’s denial of the
insureds’ motion for summary judgment, and reverse the grant of summary judgment
to Underwriters.
Judgments affirmed in part and reversed in part. Miller, P. J., and Coomer, J.,
concur.
17