Colip v. Clare
| Decision Date | 09 June 1994 |
| Docket Number | No. 93-1921,93-1921 |
| Citation | 26 F.3d 712 |
| Parties | Gary D. COLIP, Plaintiff-Appellant, v. Alan E. CLARE, one of the Underwriters at Lloyd's, London, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Michael E. Brown (argued), Jeffrey A. Doty, Kightlinger & Gray, Indianapolis, IN, for plaintiff-appellant.
Stanley C. Fickle, Michael Rosiello (argued), Barnes & Thornburg, Indianapolis, IN, for defendant-appellee.
Before LAY, * COFFEY and ROVNER, Circuit Judges.
Plaintiff Gary D. Colip appeals the grant of summary judgment in favor of Alan Edward Clare, an underwriter at Lloyds of London, an insurance carrier, whose syndicate provided Colip's Indianapolis law firm, Dillon & Cohen, with malpractice insurance. We affirm.
In 1984, Dillon & Cohen, seeking to obtain legal malpractice liability insurance, contacted one of its local insurance agents, Ron Newmark of Affiliated Agencies, Inc. ("Affiliated"). Due to several recent claims against the Dillon & Cohen law firm, Affiliated was unable to procure malpractice insurance for the firm, so Affiliated sent Dillon & Cohen's application through a series of insurance brokers, until it reached Clare's syndicate at Lloyd's of London. For a yearly premium of $19,530, Clare's syndicate offered to provide the Dillon & Cohen law firm with $1 million in malpractice coverage for all malpractice claims based on acts or omissions occurring after the inception of the policy. The record discloses that after receiving the $19,530 price quote, Dillon & Cohen asked how much the premium would be "to [cover] prior acts as well." Clare responded that for an additional premium of $24,412.50 ($43,942.50 total), it offered "full back coverage" for malpractice claims based on acts or omissions occurring prior to the policy's inception.
Clare's two offers were circulated through the chain of brokers back to Associated and finally to Dillon & Cohen. Although Colip and the firm now claim that they intended to purchase the policy providing "full back coverage" for malpractice claims based on acts or omissions occurring prior to the policy's inception date, they ordered and paid for the less expensive ($19,530) premium to Affiliated for coverage from August 15, 1984, to August 15, 1985. Consistent with the law firm's payment of the lower premium, Affiliated sent Dillon & Cohen a letter dated August 27, 1984, stating that the policy (Emphasis added.) There is no indication in the record that Dillon & Cohen subsequently purchased the tail coverage recommended by Affiliated. Affiliated later forwarded to Dillon & Cohen a "cover note," dated October 8, 1984, again confirming that as of August 15, 1984, Clare's syndicate had insured the law firm for $1 million for all claims based on conduct arising during the covered period, i.e. August 15, 1984, to August 15, 1985. The phrase "retroactive date inception" appeared on the cover note's face page under the heading "special conditions." As we will discuss hereafter, the phrase "retroactive date inception" was known in the insurance industry as meaning that the policy would not provide coverage for malpractice claims based on acts or omissions occurring before the inception date of the policy, August 15, 1984.
Dillon & Cohen renewed the policy the following year for another one-year term, and again received a cover note stating "retroactive date inception," i.e. that the policy would insure against all claims of malpractice based on acts or omissions occurring between the policy's inception date, August 15, 1984, and its new expiration date, August 15, 1986. On May 2, 1986, while the policy was in effect, one of the law firm's attorneys, Gary Colip, was sued for malpractice arising out of his 1983 preparation of allegedly false and misleading private placement memoranda in connection with the sale of limited partnerships in an oil drilling venture. Colip submitted an insurance claim to Clare, and Clare denied coverage, concluding that the act or acts forming the basis of the malpractice Invoking diversity jurisdiction, Colip filed a declaratory judgment action against Clare seeking a determination that the insurance policy obliged Clare to provide coverage. Clare answered denying that Colip was covered and filed a motion for summary judgment. The district court granted Clare's summary judgment motion, determining that the policy did not provide coverage for malpractice claims based on acts or omissions occurring before August 15, 1984, and that the malpractice suit against Colip was based on acts committed prior to the policy's inception date, August 15, 1984. In response to Colip's argument that the meaning of the phrase "retroactive date inception" was unclear, the court noted that the meaning was well-known to the brokers who procured the insurance on the firm's behalf, as well as to Affiliated, and that as a legal matter the knowledge of the agent was imputed to the principal. The court also observed that Dillon & Cohen was given an opportunity to purchase the more expensive ($43,942.50) policy which would have given the law firm coverage for claims based on acts or omissions occurring prior to August 15, 1984, coverage it now wishes it had purchased. In addition, the court pointed out that Affiliated had advised Dillon & Cohen that the insurance that the firm selected "would not pick up prior acts" and that Affiliated had "strongly advise[d]" Dillon & Cohen "to obtain the tail coverage." Colip appeals.
claim against Colip occurred prior to the date of the policy's inception.
Colip raises the following issues: 1) whether the policy is ambiguous; 2) whether the malpractice claim against him is based on acts occurring before the policy's inception date; 3) whether summary judgment is appropriate in light of the fact that the court had not ruled on three of his discovery motions; and 4) whether the brokers who procured the insurance policy at issue were acting as his agents.
We recently stated the standard of review for summary judgments:
Summary judgment is appropriate 'if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.' Fed.R.Civ.P. 56(c). This court reviews 'issues decided on summary judgment de novo, and ... resolve[s] all reasonable inferences in favor of the nonmoving party,' Kennedy v. United States, 965 F.2d 413, 417 (7th Cir.1992), '[h]owever, the non-moving party may not simply rest on his pleadings, but must demonstrate by specific evidence that there is a genuine issue of triable fact.' Swanson v. Village of Lake in the Hills, 962 F.2d 602, 603-04 (7th Cir.1992).... Rule 56(c) requires entry of summary judgment if the nonmoving party fails to come forth with evidence to refute the allegations of the moving party in the motion for summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 322-24, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986).
Hickey v. A.E. Staley Mfg., 995 F.2d 1385, 1388 (7th Cir.1993). As a federal court sitting in diversity, we apply state law--in this case, Indiana's--to resolve substantive questions and federal law to resolve procedural and evidentiary issues. See Mercado v. Ahmed, 974 F.2d 863, 866 (7th Cir.1992).
Noting that the policy does not define the term "retroactive date inception," Colip contends that the provisions of the policy are ambiguous as to whether acts or omissions occurring prior to August 15, 1984, are covered. Specifically, he points to the following language:
1. Professional Liability and Claims Made Clause: To pay on behalf of the Insured all sums in excess of the deductible amount stated in the Declarations which the Insured shall become legally obligated to pay as damages as a result of CLAIMS FIRST MADE AGAINST THE INSURED DURING THE POLICY PERIOD:
a) by reason of any act, error or omission in professional services rendered or that should have been rendered by the Insured or by any person for whose acts, errors or omissions the Insured is legally responsible, and arising out of the conduct of Insured's profession as a lawyer or notary public;
* * * * * *
PROVIDED ALWAYS THAT such act, error or omission ... happens:
aa) during the policy period, or
bb) prior to the policy period, provided that prior to the effective date of this policy:
1. the Insured did not give notice to any prior insurer of any such act, error [or] omission, and
2. the Insured did not have a basis to believe that the act, error or omission ... was a breach of professional duty or may result in a claim, and
3. there is no prior policy or policies which provide insurance for such liability or claim, whether or not the available limits of liability of such prior policy or policies are sufficient to pay any liability or claim or whether or not the deductible provisions and amount of such prior policy or policies are different from this policy.
Colip also argues that he intended to purchase insurance that provided coverage for malpractice claims based on acts...
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