Hullverson Law Firm, P.C. v. Liberty Insurance Underwriters, Inc.
Docket: No. 4:12-CV-1994 CAS
Court: District Court, E.D. Missouri; June 11, 2014; Federal District Court
Plaintiffs Mark Becker, Thomas Burke, John E. Hullverson, Thomas C. Hullverson, Stephen H. Ringkamp, and The Hullverson Law Firm, P.C. filed a motion for summary judgment regarding Count I of their amended complaint against Liberty Insurance Underwriters, Inc., which also filed a cross motion for summary judgment on the same count. The Court, after reviewing the motions, decided to grant the plaintiffs’ motion and deny Liberty’s motion.
The case involves a lawyers professional liability insurance policy issued by Liberty to The Hullverson Law Firm, P.C. The plaintiffs' five-count complaint includes a request for declaratory relief (Count I), breach of contract (Count II), vexatious refusal to pay (Count III), bad faith failure to defend and indemnify (Count IV), and disciplinary defense cost reimbursement (Count V). The underlying issue stems from a lawsuit filed by James E. Hullverson, Jr. against the plaintiffs, alleging violations of the Lanham Act and Missouri Supreme Court Rules of Professional Conduct due to misleading advertising. James Hullverson claimed that the Hullverson Law Firm falsely advertised the presence of attorneys who had not practiced there since 2000, leading to client confusion between his active law firm and the Hullverson Law Firm.
Despite the plaintiffs' denial of liability in the underlying suit and their request for defense and indemnity, Liberty denied coverage. Both parties are seeking summary judgment on Count I, which pertains to coverage under the insurance policy. The Court referenced the standard for summary judgment under Federal Rule of Civil Procedure 56(c), noting that it is appropriate when there are no genuine disputes of material fact and the moving party is entitled to judgment as a matter of law. The Court emphasized that cross motions for summary judgment must be evaluated independently.
Filing cross motions for summary judgment does not imply an absence of material fact disputes or automatically lead to a full merits determination. The court accepts certain facts as true for evaluating these motions. Liberty issued a lawyers professional liability insurance policy (number LPA300976-0111) covering the Hullverson Law Firm from October 26, 2011, to October 26, 2012, with the Hullverson Law Firm and all plaintiffs as insureds. James Hullverson, a licensed attorney since 1978 and a shareholder at the firm until 1998, filed a complaint on January 27, 2012, against the firm and its attorneys regarding advertising practices, which he later voluntarily dismissed. On January 31, 2012, the plaintiffs informed Liberty of Hullverson's complaint and requested defense and indemnification under the policy, which Liberty initially denied. After months of additional demands, Liberty agreed to defend under a reservation of rights starting October 3, 2012, but refused to indemnify for prior legal fees and expenses. At all times, the policy remained active, premiums were paid, and the claim was reported within the policy period, with the plaintiffs adhering to the policy's conditions. The policy's coverage clause specifies that it covers damages exceeding a deductible, provided claims are made during the policy period, reported in writing, and stem from wrongful acts occurring within the policy timeframe. Definitions within the policy clarify that a "claim" includes demands for money or services, while "damages" refer to monetary judgments or settlements, excluding fines, statutory penalties, and amounts deemed uninsurable.
Named insured refers to the individual or entity specified in the policy's Declarations, including any predecessors. Personal injury includes injuries resulting from offenses during the named insured's advertising activities, such as copyright or trademark infringement. Professional legal services are defined as legal activities performed for clients by a lawyer, and these are considered professional services even if some tasks are done by nonlawyers. A wrongful act encompasses any actual or alleged act, error, omission, or personal injury related to the provision or failure to provide professional legal services. The term "you" includes professional corporations and their shareholders, employed lawyers, and those who qualified before or during the policy period for coverage.
The policy excludes claims made by one insured against another unless there exists an attorney/client relationship. Jurisdiction is based on diversity of citizenship, requiring application of Missouri substantive law. Federal courts must adhere to interpretations of state law by the state's highest court. If the Missouri Supreme Court has not addressed a specific issue, federal courts may reference relevant state precedents and reliable data. Under Missouri law, interpreting the meaning of an insurance policy is a legal question, with policy language given its plain meaning in line with the parties' intentions. Unambiguous insurance policies are enforced as written, and reasonable interpretations should favor coverage rather than defeat it.
Plaintiffs contend that James Hullverson’s claim involves an advertising injury, which should be covered by the professional liability policy. In contrast, Liberty argues that the claim does not stem from professional legal services, a requirement for coverage, and also claims that the damages sought do not fit the policy's definition of damages, with the insured versus insured exclusion further negating coverage.
The policy in question provides coverage for damages resulting from a 'wrongful act' during the policy period, which includes acts, errors, omissions, or 'personal injury' related to the rendering of 'professional legal services.' 'Personal injury' encompasses injuries from offenses during advertising activities, including various forms of intellectual property infringement. The underlying suit involves allegations by James Hullverson, which the parties agree constitute an advertising injury under the policy. Hullverson claims violations of the Lanham Act, prompting a dispute over whether this injury arises from the rendering of professional legal services.
Plaintiffs contend that advertising is essential to professional legal services and is regulated by Missouri's Rules of Professional Conduct, asserting that such activities inherently relate to legal services performed for clients. Conversely, Liberty argues that advertising is distinct from the actual rendering of legal services, emphasizing that advertising benefits the firm itself rather than serving clients.
The court notes the absence of Missouri case law on whether advertising injury qualifies for coverage under a lawyer's professional liability policy. A Texas case, Atlantic Lloyd’s Insurance Co. v. Susman Godfrey, LLP, is cited, where a court determined that a law firm's solicitation letter did not constitute a 'professional service' under its commercial general liability policy, providing a relevant comparison despite the differing nature of the policies involved.
Dr. Likover brought a defamation lawsuit against a law firm, which then sought coverage from its commercial general liability insurer. The insurer denied coverage based on a policy exclusion for incidents arising from professional services. The court analyzed the contents of a solicitation letter sent by the firm and determined it did not provide legal advice or counsel, but merely acknowledged the recipient's status as a former client and invited contact. Consequently, the court concluded that the letter did not constitute a professional service, making the exclusion inapplicable.
The document references precedents from other jurisdictions regarding professional liability and advertising practices. In Colony Insurance Co. v. Fladseth, a federal court ruled that an insurer was obligated to defend a law firm against claims of fraud and professional negligence, as the actions in question were administrative rather than legal services. Similarly, in Reliance National Insurance Co. v. Sears, Roebuck & Co. Inc., the Massachusetts court held that billing practices do not qualify as professional services, distinguishing them from the rendering of legal advice that requires specialized training and ethical standards.
Additionally, the excerpt includes a comparison to cases involving insurance agents and unsolicited faxes. In BCS Insurance Co. v. Big Thyme Enterprises, the court found that unsolicited fax advertising did not meet the criteria for professional services under the agency's liability policy. Overall, the key takeaway is that certain administrative and business activities, including billing and advertising practices, do not fall under the definition of professional services for insurance coverage purposes.
Insured parties in a case similar to the plaintiffs argued that the approval required for advertisements constituted a professional service. The court dismissed this claim, asserting that sending unsolicited faxes does not equate to the provision of professional services as defined in the lawyers' professional liability policy. The contested actions involved the Hullverson Law Firm's use of the names of its attorneys in various advertisements and alleged cyber-piracy linking an attorney’s name to the firm’s website. The court determined that these injuries did not stem from the rendering or failure to render legal services, as advertising is incidental to a law firm's operations and does not involve the specialized legal knowledge of the attorneys. The court clarified that while legal advertising is regulated, this does not reclassify it as a professional service. The policy’s language explicitly delineates professional legal services as those performed for clients, and advertising activities are merely invitations for potential clients. The court also noted that Missouri law requires a holistic interpretation of insurance policies, and if one provision appears to grant coverage while another seems to negate it, this creates ambiguity favoring coverage.
The policy defines personal injury to include advertising injury, specifically injuries stemming from trademark and trade name infringement. However, it limits coverage for advertising injury by stipulating that such injuries must arise from the rendering of professional legal services. The Court determined that a law firm’s advertising does not qualify as rendering professional legal services, thus negating coverage for injuries related to advertising. Although the policy suggests coverage for the Hullverson Law Firm’s advertising, the wrongful act definition effectively eliminates it. Liberty’s hypothetical scenario—asserting that a law firm’s advertising expertise could lead to a lawsuit—does not satisfy the policy’s condition, as the misrepresentation occurred within the advertising context, separate from professional services.
Furthermore, while the policy includes coverage for trademark and trade name infringement, Liberty has not provided a viable interpretation that allows for such coverage related to advertising. Under Missouri law, ambiguities in the policy are resolved in favor of the insured, implying that the definition of personal injury is rendered illusory by its requirement that injuries must arise from professional legal services.
Regarding damages, Liberty contends that the underlying suit’s claims for equitable relief, restitution of fees, and treble damages do not meet the policy’s definition of "damages." The underlying suit sought various forms of relief, including accounting for profits from Rule violations and payment of damages, interest, costs, and attorney fees.
Under the policy, Liberty defines damages to exclude various categories such as fines, punitive damages, and legal fees. The Court finds that certain damage requests in the underlying suit align with the policy's definition of damages, particularly the claim for all profits gained from violations of the Lanham Act, which encompasses monetary relief and compensatory damages. The Lanham Act allows recovery of the defendant’s profits and damages sustained by the plaintiff. Liberty contends that as the insured is a law firm, the claimed profits are effectively the return of legal fees and thus excluded from damages. However, the terms 'return' and 'restitution' imply that the fees in question must originate from the injured party, which is not applicable here since James Hullverson seeks profits from the law firm's advertising, not the return of any fees he paid.
While some damages requested by Hullverson, such as costs and treble damages, are excluded by the policy, others are not, establishing that coverage is triggered. Additionally, Liberty argues that the policy's insured versus insured exclusion applies since Hullverson is considered an insured. Under Missouri law, the insurer bears the burden to prove that policy exclusions are applicable, with such exclusions interpreted strictly against the insurer. The policy stipulates that claims between insureds are not covered unless an attorney/client relationship exists.
The term "you" in the insurance policy encompasses various parties associated with the named insured, including partnerships, professional corporations, and their respective lawyers and shareholders. Specifically, it includes: (b) partners in a partnership, (c) shareholders in a professional corporation, (d) employed lawyers, and (e) individuals who qualified before the policy period but no longer do, or who qualify during the period while performing legal services for the insured.
The insured versus insured exclusion aims to prevent collusion by disallowing claims where a corporation sues its own officers or directors to recover losses. The court determines that James Hullverson does not qualify as "you" under the policy since he has not been a lawyer or member of the Hullverson Law Firm since 1998. Although he qualified under subparagraph (e) prior to the policy period, his claims do not arise from legal services performed for the firm, which disqualifies him from coverage under that subparagraph as well.
The court agrees with the plaintiffs that the policy's language ensures coverage for lawyers previously employed by the firm if allegations arise from their professional services. The exclusion does not prevent coverage for a former employee’s claims against the firm. The court finds Liberty Insurance Underwriters, Inc. has failed to demonstrate the exclusion applies, resulting in coverage for Hullverson's claims under the policy.
As such, the court grants the plaintiffs' motion for summary judgment against Liberty on Count I, while denying Liberty's motion for summary judgment on the same count. A declaratory judgment will follow, and Count IV of the complaint was previously dismissed. Related familial connections among the Hullversons are noted.
