A Lawsuit against a Lawyer: No Coverage Given Absence of Allegations of Professional Acts or Omissions

The U.S. Court of Appeals for the Fifth Circuit, reversing a Louisiana district court’s decision, has ruled that a professional liability insurance policy did not cover a lawsuit against a lawyer where it did not allege that the lawyer had engaged in any professional acts or omissions that gave rise to the plaintiffs’ claims.

The Case

A year after a commercial diver reached a multi-million dollar settlement of his personal injury suit for a brain injury he allegedly had sustained during a work-related dive, his employer sued the diver – and the diver’s lawyer.

The company alleged that the diver had exaggerated or fabricated the extent of his injuries, that it had been fraudulently induced to settle, and that it was entitled to restitution from the lawyer of all funds that he had received under the settlement agreement.

The lawyer notified his firm’s professional liability insurance carrier, which declined to provide a defense or coverage. He sued, and the district court found that the insurer had a duty to defend him in the underlying action.

The insurer appealed to the Fifth Circuit.

The Fifth Circuit’s Decision

The circuit court, applying Louisiana law, reversed.

In its decision, it found that the claims filed against the lawyer were “not the type of claims” that were covered by his firm’s insurance policy because they did not “arise out of an act or omission . . . in [the lawyer’s] rendering of or failure to render legal services.” The circuit court reasoned that even though the claims against the lawyer had “some general and remote relation” to his representation of the diver, the action against the lawyer did “not allege a single professional act or omission” by the lawyer that gave rise to those claims.

Instead, the Fifth Circuit declared, the lawyer had been named in the underlying action only because he had received settlement funds for his representation of the diver; in fact, it observed, the complaint specifically alleged that it did “not believe that [the lawyer] . . . [was] aware of [the diver’s] fraud.” Acts or omissions in the rendering of legal services by the lawyer to his client, the diver, simply were “not at issue,” the circuit court concluded.

Accordingly, it rejected the lawyer’s claim against his insurance company.

The case is Edwards v. Continental Cas. Co., 841 F.3d 360 (5th Cir. 2016).