Academic journal article Defense Counsel Journal

Malpractice Insurer's Disclaimer of Coverage Was Too Late

Academic journal article Defense Counsel Journal

Malpractice Insurer's Disclaimer of Coverage Was Too Late

Article excerpt

INSURANCE COVERAGE

An insurer did not disclaim coverage quick enough to get off the hook for a legal malpractice action that had been on file for more than two years before it decided that a policy exclusion could come into play. The Second Circuit held that prejudice to the insured law firm, Bluestein & Sandner, was presumed based on Chicago Insurance Co.'s lengthy delay in disclaiming coverage for a professional negligence action against the firm. Bluestein & Sander v. Chicago Insurance Co., 276 F.3d 119 (2002).

CIC had issued a lawyers' professional liability insurance policy to the Bluestein firm in 1996. The coverage specifically excluded any claims seeking the return of legal fees paid to the firm. In July 1997, a former client of the firm, DFJ Capital Corp., filed a legal malpractice action that listed "legal fees" as part of the damages sought. CIC received the complaint shortly after it was filed and retained counsel, which answered the complaint and conducted discovery. About nine months after CIC received DFJ's interrogatory answers, which stated that it was claiming legal fees it had paid to the Bluestein firm, the insurer disclaimed coverage for the fees. …

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