Wednesday, January 28, 2009

Same Or Related Insurance Claims

In an action brought by the Oregon State Bar Professional Liability Fund and two lawyers in a law firm, the Oregon Court of Appeals held that the trial court had correctly granted a declaratory judgment. The defendants were investors in a business enterprise who sued two attorneys insured by the Fund. The business objective was to provide continuing education to dentists. The claim against the one of the lawyers was settled for the full amount of coverage and the defendants sought additional payment fron the second lawyer.

The court here concluded that the coverage provided to the lawyers was limited to $300,000 for the "same or related" claim and that the claims brought were related. Thus, the second lawyer had no additional coverage under the insurance policy:

...we conclude that the [insurance policy's] definition of the phrase "same or related claims" is not ambiguous or reasonably susceptible to more than one plausible meaning.  Indeed, the phrase is broadly defined and expressly encompasses a number of considerations that are clear on their face.  Pursuant to the policy definition, two claims are the "same or related" where they arise out of any of the listed categories between which there is a causal or logical connection or common bond or nexus.

The evidentiary record on summary judgment demonstrates that the claims at issue in this case fall within the Plan's definition as the "same or related" as a matter of law.  The clients represented by both attorneys were the same or were at least connected to one another.  The business enterprise was started by the organizers for the purpose of providing continuing education to dentists.  As part of that business enterprise, Case formed an LLC and performed legal work to assist the organizers in securing investors.  Newton thereafter changed the form of the business, whose purpose remained the same, and did legal work to retain the investments made by the same investors.   Moreover, the professional malpractice claims against both attorneys arise out of the efforts of Case and Newton to retain the same investment funds for the organizers.  Case's failure to properly comply with securities laws gave rise to the later employment of Newton, who sought to remedy what Case had not accomplished.   Additionally, as evidenced by the amended complaint, the claims by the investors against Newton and Case sought the same damages.  Indeed, the complaint specifically refers to the investors' original investments in the company as the basis of their claim for damages against Case.  Likewise, in the demand for relief against Newton, the investors sought to recover their original investments in the company. 

We conclude, therefore, that the claims against Case and Newton are the "same or related" as that term is defined within the Plan.  Accordingly, the trial court correctly concluded that the $300,000 limit of coverage applies to Newton's coverage under the Plan.

(Mike Frisch)

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