Law firm appeals case over insurance coverage to high court

By Jessica M. Karmasek | Dec 22, 2011

Richard Lindsay CHARLESTON - A Charleston law firm is asking the West Virginia Supreme Court of Appeals to determine that a circuit court judge erred in granting summary judgment to a legal malpractice insurance company.

Richard Lindsay

CHARLESTON - A Charleston law firm is asking the West Virginia Supreme Court of Appeals to determine that a circuit court judge erred in granting summary judgment to a legal malpractice insurance company.

Richard D. and Pamela E. Lindsay and their firm, Tabor Lindsay and Associates, filed a notice of appeal with the state's high court Nov. 28.

Kanawha Circuit Judge Charles E. King Jr., in an order dated Oct. 26, granted a motion for summary judgment by Attorneys Liability Protection Society Inc., or ALPS, and denied a motion for summary judgment on claims for insurance coverage by the Lindsays.

King said the insurer owed no duty to defend the law firm in a claim over missing money.

In their appeal, the Lindsays argue that King's determination was made based, in part, on the time of the firm's report of Smith's claims, "despite the clear lack of prejudice to ALPS in its duty to defend and indemnify" the firm.

"TL&A asserted that ALPS was not prejudiced by the delay in reporting Plaintiff Smith's claims to it, despite the 'claims-made-claims-reported' policy provisions in the ALPS policy of insurance," the Lindsays wrote.

"Despite the lack of prejudice concerning the time of reporting, the circuit court granted summary judgment in favor of ALPS, premised, in part, on the timing of the report of Plaintiff Smith's claims to ALPS."

In his October ruling, King said the Lindsays failed to first report the claim, made by Ronnie Smith, within the policy period in which it was first made, as required by the insuring clause.

"The undisputed evidence demonstrates that Mr. Smith first asserted his claim during the 2007 policy period and that TL&A did not report it until nearly two years later, during the 2010 policy period," the judge wrote in his 13-page order.

The Lindsays filed a breach of contract suit against ALPS in Kanawha Circuit Court on June 17. In their complaint, they allege the Missoula, Mont.-based insurer denied last year their claim for coverage in a legal malpractice case.

According to their suit, the Lindsays became insured through ALPS in May 2004. Since then and through 2010, they kept the policy current paying all premiums in full.

In January 2008, the Lindsays were named as defendants in a pro se legal malpractice suit filed by Smith. In his suit, Smith, in both his personal capacity and as the administrator of the estate of Nancy E. Smith, alleged the Lindsays misappropriated funds they helped him obtain through settlement of a medical malpractice case in the mid-1990s.

Following its initial filing, Smith amended his complaint twice. The second complaint, which was filed on Sept. 23, included a claim for negligence.

According to the firm's suit, Richard submitted a claim for coverage to ALPS on May 20, 2010, which included details of the minimal discovery completed at that time. Five days later, he received a letter from Jim N. Mickelson, ALPS' claims attorney, that following consultation with the company's coverage counsel, he would receive an answer to his claim.

A month later, the Lindsays say they received a letter from John G. O'Neill denying their claim for coverage. In the letter dated June 23, 2010, O'Neill said the reason for denial was due to the failure of Smith to assert any claims against the Lindsays, and their failure to timely report the filing of the suit to ALPS.

Six days later, the Lindsays again asked for ALPS to provide them coverage in Smith's suit, which it again denied on July 20. After Smith asserted his claim for negligence in his second amended complaint in September, the Lindsays made a third request for coverage, which ALPS denied on Oct. 1.

Following the third denial, the Lindsays filed a third-party complaint against United Bank and the Charleston law firm of DiTrapano, Barrett and DiPiero, requesting a finding they were entitled to coverage in Smith's suit.

The Smiths originally retained DiTrapano's firm in 1990 to represent them in their medical malpractice case. Rudolph L. DiTrapano then enlisted the Lindsays to handle the lawsuit due to their expertise in handling such cases.

The medical malpractice suit was eventually settled in 1995 and the Nancy E. Smith Irrevocable Trust was established at United Bank to receive the proceeds of the settlement.

King, in his order, said the case boiled down to the Lindsays not reporting the claim when they should have.

But the Lindsays question whether Smith's claim was a "potential claim" under the ALPS insurance policy.

The documents supplied by ALPS did not define what is considered to be a potential claim, they argue.

"The circuit court erred by granting ALPS' motion for summary judgment as the discrepancy between the requirements of the 'claims-made-claims-reported' policies of insurance and the language of other materials supplied by ALPS creates an ambiguity in what is expected of an insured in the reporting process," the Lindsays wrote.

The law firm argues it had a "reasonable expectation" of coverage due to the ambiguity.

In September, the Lindsays sued ALPS for bad faith in a separate action filed in the U.S. District Court for the Southern District of West Virginia.

The federal court, in a Nov. 28 order, granted a joint motion to stay the case pending the Lindsays' appeal to the state Supreme Court.

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