The Illinois Court of Appeal found that an innocent law partner was entitled to coverage under the firm's malpractice policy despite misrepresentations made by another partner. Illinois State Bar Association Mutual Ins. Co. v. Law Office of Tuzzolino and Terpinas, 2013 Ill. App. LEXIS 816 (Ill. Ct. App. Nov. 22, 2013).
Tuzzolino and Terpinas were law partners. Tuzzolino agreed to file a complaint for a client, but neglected to do so. The case was dismissed. Nevertheless, for the next 18 months, Tuzzolino led the client to believe that the matter was pending. The client eventually checked the court file and learned the case had dismissed. Tuzzolino offered the client $670,000 to settle any claims against him.
Following this settlement offer, Tuzzolino attempted to renew the firm's malpractice policy. The renewal form asked if there were any circumstances which might give rise to a claim that had not been reported. Tuzzolino checked the box marked "no." Tuzzolino then signed and submitted the form. Terpinas did not see or sign the form.
Subsequently, Terpinas received a lien letter from an attorney hired to represent Tuzzolino in the pending malpractice claims against him. This was the first Terpinas heard of the claims against his partner. Terpinas reported the malpractice suit against his partner to the insurer.
The insurer then filed a complaint to rescind the policy and for other relief against the firm and its partners. The trial court eventually rescinded the policy in its entirety and found the insurer had no duty to defend Terpinas or the firm in the malpractice suit pursued by Tuzzolino's client.
The appellate court considered the common law innocent insured doctrine. The doctrine applied where two or more insureds have a policy and one of the insured commits an act that would normally void the policy. The innocent insured doctrine preserved coverage for the innocent insureds where a reasonable person would not understand that the wrongdoing of a co-insured would prevent recovery under the policy.
The court held that the doctrine preserved coverage for Terpinas. The judgment of the trial court was reversed.
