Is there a duty to defend under a claims made policy when the insurer has notice of alleged malpractice before the policy period, but the insured is not sued until the policy period actually commences? In what appears to be a harsh result, the Tenth Circuit determined the notice and filing of suit were a single act. Therefore, the wrongful act commenced before the policy period, negating coverage. See Berry & Murphy, P.C. v. Carolina Casualty Ins. Co., No. 09-1004, 2009 U.S. App. LEXIS 24812 (10th Cir. Nov. 12, 2009).
The Burkhardts hired Seth Murphy, an attorney with the insured firm Berry & Murphy, to file suit on their behalf for an alleged assault by Joseph Ciri. In January 2005, Murphy filed the Burkhardts' complaint against Ciri. Murphey then left Berry & Murphy and moved to a new firm, taking the Ciri case with him.
In March 2006, Murphey filed a motion to withdraw as counsel because the Burkhardts were not cooperating in pursuing their claims against Ciri. In April 2006, Ciri filed a motion to dismiss for failure to prosecute. The motion was based on failure to file disclosures, to produce medical records and billings, and to disclose expert witnesses and information on non-expert witnesses. In May 2006, the court granted Murphey's motion to withdraw and in June granted without prejudice the motion to dismiss the Ciri lawsuit.
Subsequently, the Burkhardts hired a new lawyer, Cindy Tester, and successfully moved to have the Ciri lawsuit reinstated. Ms. Tester wrote to Murphy in January 2007, advising that he put his malpractice carrier on notice for failure to properly prosecute the Ciri case. Murphey put the carrier for his new firm, Carolina Casualty, on notice. Carolina Casualty also happened to be the insurer for Murphey's old firm, Berry & Murphey. Murphy, however, did not inform his prior partner, Timothy H. Berry, of the letter. The claims-made policy issued to Timothy H. Berry, P.C., the successor of Berry & Murphy, was not effective until February 6, 2008.
In January 2008, the Burkhardts filed a malpractice suit against Berry & Murphey and its successor, Timothy H. Berry, P.C., based on the alleged mis-handling of the Ciri lawsuit. Berry accepted service and gave notice to Carolina Casualty. Berry asserted he had no prior knowledge of the Tester letter. Carolina Casualty denied coverage because the alleged malpractice claim was first made when the Tester letter was sent to Murphey in May 2006, prior to inception of the policy. The district court concluded there was no duty to defend or indemnify because a claim was first made more than one year prior to the policy period.
On appeal, the Tenth Circuit considered whether the Tester letter and the malpractice suit involved a single claim under the policy. Only the second claim, the malpractice lawsuit, fell within the policy period. The policy defined "claim" as "a written demand for monetary or non-monetary relief including, but not limited to, a civil . . . proceeding." The policy further provided that all claims based upon the same wrongful act were considered a single claim. If the Tester letter was a claim and was a "related wrongful act" to the malpractice suit, the Tester letter was the first notice of a single claim.
The court concluded that the acts of malpractice alleged in the Tester letter and the malpractice suit were logically or causally connected. Therefore, they were considered one "claim" under the policy. Murphey was a partner of the named insured when the alleged malpractice took place. Therefore, because Murphey & Berry was first notified of the claim before the policy was in effect, Carolina Casualty had no duty to defend or indemnify.
