Clauson & Atwood v. Professionals Direct Insurance Company
Filing
27
///ORDER granting 18 Motion for Summary Judgment; striking 19 Objection to 18 Cross Motion for Summary Judgment and Cross-Motion for Summary Judgment. PDIC's motion for summary judgment is GRANTED. Clauson and C&A's cross-motion for summary judgment is STRICKEN as untimely. The clerk shall enter judgment accordingly and close the case. So Ordered by Chief Judge Joseph N. Laplante.(jb)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Clauson & Atwood
v.
Civil No. 12-cv-199-JL
Opinion No. 2013 DNH 075
Professionals Direct Insurance Co.
v.
K. William Clauson et al.
MEMORANDUM ORDER
This is an insurance coverage dispute.
Plaintiff Clauson &
Atwood, a New Hampshire law firm, seeks a declaratory judgment
that defendant Professionals Direct Insurance Company (“PDIC”),
its professional liability insurer, must provide coverage against
a malpractice claim brought by a former client.
PDIC has
counterclaimed, seeking a declaratory judgment that it need not
provide coverage, and moved for summary judgment on both its
counterclaim and Clauson & Atwood’s declaratory judgment claim.
PDIC notes that the insurance policy in question is a “claimsmade and reported” policy that provides coverage only for claims
that are both “made” and “reported” during the policy period, and
argues that the malpractice claim against Clauson & Atwood falls
outside the scope of the policy because it was “made,” as defined
by the policy, well before the policy period.
This court has jurisdiction of this action under 28 U.S.C.
§ 1332 (diversity).
The parties declined oral argument, which
this court customarily holds on dispositive motions.
After due
consideration of the parties’ submissions, the court grants
summary judgment in PDIC’s favor.
Although Clauson & Atwood has
made a valiant effort to argue that the claim against it was
first “made” within the policy period, its position is contrary
to the unambiguous policy language defining what a “claim” is and
when it is “made.”
I.
Applicable legal standard
Summary judgment is appropriate where “the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
P. 56(a).
Fed. R. Civ.
A dispute is “genuine” if it could reasonably be
resolved in either party’s favor at trial.
See Estrada v. Rhode
Island, 594 F.3d 56, 62 (1st Cir. 2010) (citing Meuser v. Fed.
Express Corp., 564 F.3d 507, 515 (1st Cir. 2009)).
A fact is
“material” if it could sway the outcome under applicable law.
Id. (citing Vineberg v. Bissonnette, 548 F.3d 50, 56 (1st Cir.
2008)).
In analyzing a summary judgment motion, the court “views
all facts and draws all reasonable inferences in the light most
favorable to the non-moving party.”
2
Id.
II.
Background1
Clauson & Atwood (“C&A”2) is a New Hampshire law firm in
which K. William Clauson is a partner.
In 2007, James Yager
retained C&A and Clauson to represent him in a lawsuit arising
from the unauthorized cutting of timber on his property.
C&A
filed an action in New Hampshire Superior Court on Yager’s behalf
in December of that year, alleging that Mighty Oaks Realty, LLC
was liable to Yager for common law trespass and statutory timber
trespass, see N.H. Rev. Stat. Ann. § 227-J:8, for this alleged
cutting.
When Mighty Oaks presented undisputed evidence that the
cutting had in fact been performed by a third party, D.H.
Hardwick & Sons, Inc., the Superior Court granted summary
judgment in Mighty Oaks’ favor in an August 2008 order.
C&A
appealed the Superior Court’s decision to the New Hampshire
Supreme Court, which affirmed in an unpublished opinion.
In June 2008, prior to the Superior Court’s grant of summary
judgment in favor of Mighty Oaks, C&A filed a second Superior
1
This section briefly recounts the key facts, drawn from the
parties’ joint stipulated statement of material facts. See
document no. 17. The court incorporates that statement, in its
entirety, by reference.
2
Clauson & Atwood was formerly known as Clauson, Atwood &
Spaneas, including during many of the events related herein. As
the name change is irrelevant to the issues presented by PDIC’s
motion for summary judgment, the court will simply refer to the
firm as “C&A” both pre- and post-name change to avoid unnecessary
confusion.
3
Court timber trespass action on Yager’s behalf, this time against
D.H. Hardwick & Sons.
That action also progressed to the summary
judgment stage, and in June 2010, the Superior Court granted
summary judgment to the defendant, holding that Yager’s lawsuit
was barred by the state’s three-year statute of limitations for
personal actions.
See N.H. Rev. Stat. Ann. § 508:4, I.
After
the Superior Court denied Yager’s motion to reconsider, C&A
appealed both the grant of summary judgment and the denial of
reconsideration to the New Hampshire Supreme Court on his behalf.
In the meantime, Yager retained new counsel at Orr & Reno,
P.A., who contacted Clauson in January 2011 to notify him that
Yager had a possible legal malpractice claim against C&A if the
pending New Hampshire Supreme Court appeal proved unsuccessful.
The following month, Orr & Reno sent Clauson a confirmatory
letter, which stated, in pertinent part:
Orr & Reno has been retained by James Yager to serve as
counsel in regard to a possible malpractice claim
against [C&A] arising out of [C&A’s] representation of
Mr. Yager in regard to timber trespass and common law
trespass claims against Mighty Oaks Realty, LLC, and
D.H. Hardwick & Sons, Inc. Please provide a copy of
this letter and the enclosure to your carrier. . . .
While we have advised Mr. Yager that any claim against
[C&A] would probably not be deemed to have arisen until
2009 or 2010, we are also aware that a court could
possibly rule that the statute of limitations began to
run in March, 2008.
Accordingly, in order to ensure that Mr. Yager’s right
to file a lawsuit against [C&A] is not compromised, he
4
has instructed us either to file a lawsuit against
[C&A] before the end of February [2011], or to enter
into a tolling agreement.
The letter enclosed a proposed tolling agreement that would toll
the statute of limitations on Yager’s possible malpractice claims
against C&A and Clauson one year, to allow time for the New
Hampshire Supreme Court to resolve Yager’s pending appeal from
the Superior Court’s orders granting summary judgment to D.H.
Hardwick & Sons.
Clauson and C&A executed the tolling agreement
on February 9, 2011, and returned it to Orr & Reno.
At the time, C&A carried professional liability insurance
through PDIC.
The policy then in force was a “claims-made and
reported” policy that provided coverage “for only those claims
that are first made against [C&A] and first reported to [PDIC] or
[its] authorized agents . . . DURING the policy period.”
Despite
this–-and notwithstanding Orr & Reno’s request that Clauson send
a copy of its February 2011 letter to his insurer–-C&A did not
provide the letter, or otherwise report the “possible malpractice
claim” to which it referred, to PDIC during the period of that
policy, which ended on September 29, 2011.
This, C&A and Clauson
say, is because they believed that (1) Yager’s pending appeal to
the New Hampshire Supreme Court would be successful; and (2)
Yager had agreed to “postpone” any claim against them.
5
In September 2011, C&A applied for a new policy with PDIC.
Question 7 of the policy application asked, “In the last 12
months, has any firm member become aware of any incident, fact,
circumstance, act or omission that could result in a professional
liability claim against the firm or any former firm member?”
C&A
answered the question “No,” and did not otherwise disclose Orr &
Reno’s notice of “a possible malpractice claim,” the tolling
agreement, or the facts and circumstances of its representation
of Yager.
Clauson executed the application on behalf of C&A.
PDIC approved the application and issued a “claims-made and
reported” policy to C&A for the policy period of September 29,
2011 (the date of expiration of C&A’s then-current policy) to
September 29, 2012.
On September 15, 2011, only days after C&A had submitted its
application to PDIC, the New Hampshire Supreme Court issued an
unpublished order affirming the Superior Court’s grant of summary
judgment to D.H. Hardwick & Sons.
C&A received a copy of the
order on September 19, 2011, and promptly forwarded it to Yager.
C&A did not, however, report the decision to PDIC.
On December 14, 2011, Orr & Reno wrote to Clauson on Yager’s
behalf, enclosing a draft declaration for a writ of summons
alleging legal malpractice by both C&A and Clauson.
The draft
declaration alleged that C&A and Clauson had breached their duty
6
of care to Yager by failing to file the action against D.H.
Hardwick & Sons within the limitations period.
C&A forwarded the
letter and draft declaration to PDIC.
On February 10, 2012, Orr & Reno filed a legal malpractice
lawsuit on behalf of Yager against Clauson and C&A, who requested
that PDIC provide defense and indemnity coverage for the suit.
After completing a coverage investigation, PDIC declined to
defend or indemnify Clauson and C&A.
C&A responded by filing
this action, in New Hampshire Superior Court, seeking a
declaration that PDIC must provide coverage under the policy
issued in September 2011.
PDIC removed the action to this court
and filed a counterclaim against C&A and a third-party complaint
against Clauson, both seeking a declaration that it is not
required to provide such coverage.
The parties agreed that the relevant facts were undisputed,
that discovery was unnecessary, and that the most efficient way
to resolve this action was by summary judgment.
to Modify Discovery Plan (document no. 16).
See Consent Mot.
Pursuant to an
agreed-upon schedule, the parties submitted a joint statement of
stipulated facts, and PDIC filed a motion for summary judgment,
which Clauson and C&A have opposed.3
3
The opposition filed by Clauson and C&A purports to be a
“cross-motion for summary judgment” as well. The filing
therefore violates Local Rule 7.1(a)(1), which provides that
7
III. Analysis
The issue presented for this court’s resolution is a narrow
one, as the parties agree on quite a lot.
They agree that the
relevant policy is the policy running from September 29, 2011 to
September 29, 2012.
They agree that as a “claims-made and
reported” policy, that policy provides coverage only if a claim
is both “made” and “reported” within the policy period.
See,
e.g., Catholic Med. Ctr. v. Exec. Risk Indem., Inc., 151 N.H.
699, 703 (2005) (claims-made insurance policies “provide
liability coverage for claims that are made against the insured
and reported to the insurer during the policy period”).
They
agree that Yager’s claim against Clauson and C&A was “reported”
during the policy period.
They disagree, however, as to whether
that claim was first “made” during the policy period.
It plainly
“[o]bjections to pending motions and affirmative motions for
relief shall not be combined in one filing.” Wholly apart from
that, however, is the fact that this “cross-motion” is untimely–as is the opposition itself. On December 18, 2012, the Court
granted the parties’ joint motion to modify the discovery plan,
which required cross-motions for summary judgment to be filed “on
or before January 14, 2013” and oppositions “on or before
February 4, 2013.” Consent Mot. to Modify Discovery Plan
(document no. 16) at 2. In direct contravention of this order,
and despite their agreement to this schedule, Clauson and C&A did
not file their combined opposition and cross-motion until
February 13, 2013. The cross-motion is therefore stricken as
untimely, though the court will consider the arguments in the
accompanying memorandum (such as they are) when ruling on PDIC’s
motion.
8
was not, and the policy therefore provides no coverage for the
claim.
The interpretation of insurance policy language is a
question of law for the court.
Doe, 161 N.H. 73, 75 (2010).
Concord Gen. Mut. Ins. Co. v.
The court “interprets an insurance
policy in the same manner as any other contract.”
Family Mut. Ins. Co., 142 N.H. 144, 146 (1997).
Hudson v. Farm
“Policy terms
are construed objectively; where the terms are clear and
unambiguous, [the court] accord[s] the language its natural and
ordinary meaning,” id., and “need not examine the parties’
reasonable expectations of coverage,” Colony Ins. Co. v. Dover
Indoor Climbing Gym, 158 N.H. 628, 630 (2009).
But, “[i]f the
language of the policy is reasonably susceptible to more than one
interpretation and one interpretation favors coverage, the policy
will be construed in favor of the insured and against the
insurer.”
Hudson, 142 N.H. at 146.
Under New Hampshire law,
PDIC, as the insurer, bears the burden of proving lack of
coverage.
N.H. Rev. Stat. Ann. § 491:22-a; see Colony Ins., 158
N.H. at 630; Hudson, 142 N.H. at 146.
Paragraph A.2 of the policy defines “when a claim is first
made.”
In pertinent part, it provides:
9
A claim is first made against you[4] at the earlier of
the following:
a) when you first receive oral or written notice
that a claim has been made or will be made against
you; or
b) when you first receive information or have
knowledge of specific circumstances involving a
particular person or entity which could reasonably
be expected to result in a claim; or
c) when you first receive notice of a disciplinary
proceeding.
Ins. Policy (document no. 17-10) at 2, ¶ A.2 (boldface omitted).
The policy further defines “claim” as:
a) a demand or suit for money or services you receive,
including any arbitration proceedings to which you are
required to submit or to which you have submitted with
our consent; or
b) when you first receive oral or written information
or have knowledge of specific circumstances involving a
particular person or entity which could reasonably be
expected to result in a demand or suit for money or
services; or
c) when you first receive oral or written notification
of any disciplinary proceeding.
Id. at 4, ¶ D (boldface omitted).
For present purposes, the court can limit its analysis to
subsection b) of both definitions.
When those subsections are
read in conjunction, they indicate that a claim is made when the
insured first learns of “specific circumstances involving a
4
“You” refers, of course, to the insured parties, including
Clauson and C&A. See Ins. Policy (document no. 17-10) at 5-6.
10
particular person or entity which could reasonably be expected to
result in a demand or suit for money or services.”
When, then,
did Clauson and C&A first learn of the “specific circumstances”
involving Yager “which could reasonably be expected to result in
a demand or suit for money or services”?
PDIC suggests this occurred no later than February 2011,
when Orr & Reno wrote to Clauson notifying him that Yager had
retained it “to serve as counsel in regard to a possible
malpractice claim against [C&A] arising out of [its]
representation of Mr. Yager in regard to timber trespass and
common law trespass claims against Mighty Oaks Realty, LLC, and
D.H. Hardwick & Sons, Inc.” and instructed it “to file a lawsuit
against [C&A] before the end of February [2011]” unless C&A
signed a tolling agreement.
Given the express threat of a
lawsuit in the letter, that is not an unreasonable suggestion.
Indeed, in light of that threat, and the accompanying request to
“provide a copy of this letter . . . to your carrier,” the
conclusion that Clauson and C&A learned upon receiving the letter
that their representation of Yager “could reasonably be expected
to result in a demand or suit” seems inescapable.
Cf. Mut. Real
Estate Holdings, LLC v. Houston Cas. Co., No. 10-cv-236, 2011 WL
3902774, *5 (D.N.H. Sept. 6, 2011) (McCafferty, Mag. J.)
11
(concluding that demand letter threatening litigation was claim
made under policy).
Clauson and C&A nonetheless argue that Yager had not made a
claim against them by sending the letter.
The court has
struggled to decipher exactly what the bases for this argument
are, but with little success, as the discussion in the memorandum
largely fails to engage the language of the insurance policy or
coherently support Clauson’s and C&A’s position.
As best the
court can tell, it appears that Clauson and C&A are pressing four
theories, none of which survives close scrutiny.
First, they appear to be arguing that Yager had made no
“claim” against them because they subjectively believed they had
not committed any malpractice, a belief fortified by the fact
that Orr & Reno’s February 2011 letter contained no “supporting
factual allegations.”
Memo. in Supp. of Obj. to Summ. J.
(document no. 20) at 4.
But the definition of “claim” in the
policy includes all circumstances that “could reasonably be
expected to result in a demand or suit for money or services,”
and does not include any limitation that the demand or suit be
meritorious.
Indeed, the policy itself contemplates that some
“claims” may not have any merit, providing that PDIC has “the
exclusive right to investigate, defend, and/or settle any claim
made under this policy, even if the allegations are groundless,
12
false or fraudulent.”
Ins. Policy (document no. 17-10) at 3, ¶ B
(boldface omitted; emphasis added).
It follows that Clauson’s
and C&A’s belief that they had not committed malpractice, even if
well-founded, does not exclude Yager’s allegations of malpractice
from the policy’s definition of “claim.”5
Second, they characterize Orr & Reno’s February 2011 letter
as “a reasonable request for an extension of time to investigate
whether there might be a claim,” rather than a notice of a
potential “demand or suit for money or services.”
Memo. in Supp.
of Obj. to Summ. J. (document no. 20) at 6; see also id. at 7
(characterizing letter as “a request to extend the statute of
limitations for the purpose of investigation of whether the
client has a possible claim”).
thinking.
That is little more than wishful
On its face, the letter did not so much as hint that
5
As another judge of this court has noted in similar
circumstances, moreover, in light of PDIC’s obligation “to defend
all claims, not just those that are legitimate or valid, it would
not be reasonable to read the Insuring Agreement as including a
trigger of coverage that is not activated unless and until a
third party makes a legitimate or valid claim against an
insured.” Mut. Real Estate, 2011 WL 3902774 at *6.
It also bears noting that even if Clauson’s and C&A’s
subjective belief as to the merit of the malpractice allegations
against them could exclude those allegations from the definition
of “claim,” as they suggest, then no “claim” has been made
against them yet, anyway, as they assert that they “continue[] to
be of the opinion that objectively there was no malpractice and
that no objective malpractice has ever been shown or even
alleged.” Memo. in Supp. of Obj. to Summ. J. (document no. 20)
at 8-9. This exposes the absurdity of their argument.
13
Orr & Reno needed more “time to investigate whether there might
be a claim”; nor did the accompanying tolling agreement include
any language suggesting that Orr & Reno had not yet completed its
investigation of Yager’s claim against Clauson and C&A.
Quite to
the contrary, it stated that Orr & Reno was prepared “to file a
lawsuit against [C&A] before the end of February.”
It also made
clear that the purpose of the accompanying tolling agreement was
not to allow Orr & Reno additional time to investigate Yager’s
claim, but to enable Clauson “to focus [his] energy on reversing
the trial court’s summary judgment order” in the appeal then
pending before the New Hampshire Supreme Court.
Third, Clauson and C&A seek to analogize the present case to
the New Hampshire Supreme Court’s decision in Shaheen, Cappiello,
Stein & Gordon, P.A. v. Home Insurance Co., 143 N.H. 35 (1998).
In that case, the plaintiff law firm had inadvertently omitted
from a proposed prenuptial agreement a critical provision that
unambiguously would have entitled its client to sole ownership of
the marital home upon divorce.
Id. at 36-37.
This omission
later came to light in divorce proceedings in which the firm
represented the same client.
Id. at 37.
Rather than report the
omission to its insurer, the firm reported it to the client, who
expressed confidence in the firm’s abilities and requested that
it continue to represent her in the divorce.
14
Id.
The firm did
so, arguing to the marital master that the client was entitled to
sole ownership of the home notwithstanding the omission.
Id.
When that argument proved unsuccessful, the firm finally reported
the omission to the carrier, which denied coverage for the
ensuing malpractice suit, claiming the notice had been untimely.
Id. at 37-38.
The New Hampshire Supreme Court, construing policy
language that provided a claim was made, and a reporting
requirement triggered, if the insured became “aware of any act or
omission which could reasonably be expected to give rise to a
claim,” held that the insurer was required to provide coverage.
Id. at 40-41.
The court reasoned that, in light of the unsettled
nature of the law regarding prenuptial agreements and the
client’s expression of continued confidence in the firm after the
omission was disclosed to her, the firm could have had no
reasonable expectation of a claim against it (and no claim would
be made under the policy) until the marital master’s ruling.
Id.
Clauson and C&A seem to be arguing that they, like the firm
in that case, could have had no reasonable expectation that Yager
would bring a claim against them unless and until the New
Hampshire Supreme Court affirmed the Superior Court’s grant of
summary judgment to D.H. Hardwick & Sons.
There are, however,
several key facts distinguishing this case from Shaheen.
Here,
Yager retained malpractice counsel, who then affirmatively put
15
Clauson and C&A on notice of his intention to bring suit against
them in the February 2011 letter.
This is several degrees
removed from the client’s expression of continued confidence in
the law firm in Shaheen, which tended to indicate that she had no
intention of pursuing any malpractice claim at that time.
Furthermore, at the time the omission from the prenuptial
agreement in Shaheen became clear, and until the marital master
ruled against the client, the firm still could harbor a
reasonable belief that the client would prevail in the divorce
case due to the unsettled state of the law.
By the time the
February 2011 letter was sent in this case, in contrast, the
Superior Court had already rejected Clauson’s and C&A’s arguments
on behalf of Yager, which would tend to cast serious doubt on the
likely success of those same arguments on appeal.6
Shaheen
therefore does not help Clauson and C&A.
Fourth and finally, Clauson and C&A appear to argue in the
alternative that even if Yager’s claim was “made” prior to the
policy period, PDIC should still be required to provide coverage
because it has “suffered no prejudice.”
6
Memo. in Supp. of Obj.
Clauson’s and C&A’s reliance on Shaheen also suffers from a
more fundamental flaw. Even if, as they intimate, they could not
have anticipated Yager’s suit until the New Hampshire Supreme
Court affirmed the grant of summary judgment to D.H. Hardwick &
Sons, the Supreme Court did so on September 15, 2011, and Clauson
and C&A learned of that result on September 19, 2011–-before the
relevant policy period.
16
to Summ. J. (document no. 20) at 12.
They assert that “[u]nless
the insurer was prejudiced by the late notice [of a claim], the
insured’s failure to timely report the claim is not material
breach of the policy that would exclude the insurer from
performance.”
Id. (citing Dover Mills P’ship v. Commercial Union
Ins. Co., 144 N.H. 336, 339 (1999)).
argument is entirely inapposite.
As PDIC points out, that
“An insurer must show prejudice
to deny coverage under an occurrence policy,”7 but “[t]here is no
requirement that an insurance company prove it was prejudiced due
to lack of notice under a claims made policy” like that at issue
in this case.
Bianco Prof’l Ass’n v. Home Ins. Co., 144 N.H.
288, 296 (1999).
And in any event, this is not a case where the
insured gave the insurer “late notice” of a claim that was made
within the policy period; rather, the insureds here are seeking
coverage for a claim that was made before the policy even took
effect.
Because Yager’s claim was made before the inception of the
relevant policy, and because the policy covers only claims that
are made within the policy period, PDIC is not required to
7
In an occurrence policy, “coverage is triggered by the
occurrence of a negligent act or omission during the coverage
period.” Bates v. Vermont Mut. Ins. Co., 157 N.H. 391, 397
(2008).
17
provide coverage for that claim.
It is entitled to summary
judgment in its favor.
IV.
Conclusion
For the foregoing reasons, PDIC’s motion for summary
judgment8 is GRANTED.
Clauson and C&A’s cross–motion for summary
judgment9 is STRICKEN as untimely.
The clerk shall enter
judgment accordingly and close the case.
SO ORDERED.
____________________________
Joseph N. Laplante
United States District Judge
Dated:
cc:
May 13, 2013
K. William Clauson, Esq.
Mark L. Mallory, Esq.
8
Document no. 18.
9
Document no. 19.
18
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