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7th Circuit: no liability insurance coverage for associate’s error

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The 7th Circuit Court of Appeals agreed with a Northern District judge’s conclusion that a Dyer law firm’s professional liability insurer did not have to cover a mistake by an associate in a client’s failed business deal because the firm didn’t timely notify its insurer of a potential malpractice claim.

Koransky Bouwer & Poracky P.C. represented George Novogroder when he sought to buy four drugstores in Ohio from Newtown Oldacre McDonald LLC. Three of the four sales closed without issue; the fourth sale never came to fruition because an associate at the law firm inadvertently misfiled the executed contract. On Feb 22, 2007, Newton’s attorney sent a letter to the firm saying the seller rescinds its signature and declares the contract null and void since it did not receive the executed contract. The associate attempted to fix the problem by sending the contract, but the seller still did not want to continue the sale.

This led to litigation being filed in both Alabama and Ohio in March of that year. Also during this time, Koransky Bouwer & Poracky renewed its professional liability insurance with The Bar Plan Mutual Insurance Co., but did not notify the firm of a potential malpractice claim from Novogroder. When the Alabama court, which concluded it had jurisdiction over the case, ruled in favor of Newtown, Novogroder told the firm he was going to file a malpractice claim over the failed transaction. After receiving a formal notice of claim, the firm notified its insurer in August.

But The Bar Plan concluded through an investigation that the firm knew of the potential malpractice claim in February, before it renewed its policy for another year. Based on language in the policy, the insurer declined to represent the firm or indemnify it. Judge William Lee ruled in favor of the insurer on its motion for summary judgment.

In Koransky, Bouwer & Poracky P.C. v. The Bar Plan Mutual Insurance Co., 12-1579, the 7th Circuit looked at the language of the policy in effect at the time the law firm made its claim and agreed with Lee that the firm did not timely notify The Bar Plan as soon as it had reason to think that the failure to deliver the contract to the seller might result in a claim. The policy required the insurer to be notified if an act or omission “may” give rise to a claim, not just when one is filed.

“It may well be difficult to determine exactly when an act or omission ‘might reasonably be expected to be the basis of’ a malpractice claim. But this case is not a close one. Buyer believed that the parties had formed a binding agreement. However, as a result of Koransky & Bouwer’s failure to deliver the executed contract, Seller refused to complete the deal and active litigation ensued,” Judge Daniel Manion wrote.

“Once the Alabama case was filed, Koransky & Bouwer knew or should have known that the only thing standing between it and a probable malpractice claim was the question of whether the Alabama state court would exercise jurisdiction. No matter how we construe the record, it is clear that a reasonable attorney would have recognized that his failure to deliver the contract, in light of the communications and legal activity that quickly followed, was an omission that could reasonably be expected to be the basis of a malpractice claim.”

 

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  1. You can put your photos anywhere you like... When someone steals it they know it doesn't belong to them. And, a man getting a divorce is automatically not a nice guy...? That's ridiculous. Since when is need of money a conflict of interest? That would mean that no one should have a job unless they are already financially solvent without a job... A photographer is also under no obligation to use a watermark (again, people know when a photo doesn't belong to them) or provide contact information. Hey, he didn't make it easy for me to pay him so I'll just take it! Well heck, might as well walk out of the grocery store with a cart full of food because the lines are too long and you don't find that convenient. "Only in Indiana." Oh, now you're passing judgement on an entire state... What state do you live in? I need to characterize everyone in your state as ignorant and opinionated. And the final bit of ignorance; assuming a photo anyone would want is lucky and then how much does your camera have to cost to make it a good photo, in your obviously relevant opinion?

  2. Seventh Circuit Court Judge Diane Wood has stated in “The Rule of Law in Times of Stress” (2003), “that neither laws nor the procedures used to create or implement them should be secret; and . . . the laws must not be arbitrary.” According to the American Bar Association, Wood’s quote drives home this point: The rule of law also requires that people can expect predictable results from the legal system; this is what Judge Wood implies when she says that “the laws must not be arbitrary.” Predictable results mean that people who act in the same way can expect the law to treat them in the same way. If similar actions do not produce similar legal outcomes, people cannot use the law to guide their actions, and a “rule of law” does not exist.

  3. Linda, I sure hope you are not seeking a law license, for such eighteenth century sentiments could result in your denial in some jurisdictions minting attorneys for our tolerant and inclusive profession.

  4. Mazel Tov to the newlyweds. And to those bakers, photographers, printers, clerks, judges and others who will lose careers and social standing for not saluting the New World (Dis)Order, we can all direct our Two Minutes of Hate as Big Brother asks of us. Progress! Onward!

  5. My daughter was taken from my home at the end of June/2014. I said I would sign the safety plan but my husband would not. My husband said he would leave the house so my daughter could stay with me but the case worker said no her mind is made up she is taking my daughter. My daughter went to a friends and then the friend filed a restraining order which she was told by dcs if she did not then they would take my daughter away from her. The restraining order was not in effect until we were to go to court. Eventually it was dropped but for 2 months DCS refused to allow me to have any contact and was using the restraining order as the reason but it was not in effect. This was Dcs violating my rights. Please help me I don't have the money for an attorney. Can anyone take this case Pro Bono?

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