Berry & Murphy, P.C. v. Carolina Cas. Ins. Co.

Decision Date12 November 2009
Docket NumberNo. 09-1004.,09-1004.
Citation586 F.3d 803
PartiesBERRY & MURPHY, P.C.; Timothy H. Berry, P.C., Plaintiffs-Appellants, v. CAROLINA CASUALTY INSURANCE COMPANY, Defendant-Appellee.
CourtU.S. Court of Appeals — Tenth Circuit
586 F.3d 803
BERRY & MURPHY, P.C.; Timothy H. Berry, P.C., Plaintiffs-Appellants,
v.
CAROLINA CASUALTY INSURANCE COMPANY, Defendant-Appellee.
No. 09-1004.
United States Court of Appeals, Tenth Circuit.
November 12, 2009.

[586 F.3d 804]

Steven J. Dawes (Sophia H. Tsai with him on the briefs), of Light, Harrington & Dawes, P.C., for Plaintiffs-Appellants.

Jeffrey A. Goldwater of Lewis Brisbois Bisgaard & Smith, Chicago, Illinois, (Perry

[586 F.3d 805]

M. Shorris, Lewis Brisbois Bisgaard & Smith, Chicago, IL; Patrick Q. Hustead and Melissa W. Shisler, the Hustead Law Firm, Denver, CO, with him on the brief), for Defendant-Appellee.

Before HENRY, Chief Circuit Judge, BRISCOE, and LUCERO, Circuit Judges.

BRISCOE, Circuit Judge.


Plaintiffs-Appellants Berry & Murphy, P.C. and Timothy H. Berry, P.C. ("plaintiffs") appeal the district court's grant of summary judgment to Defendant-Appellee Carolina Casualty Insurance Company ("Carolina Casualty") on plaintiffs' claim for insurance coverage for a malpractice lawsuit. Plaintiffs filed their action in state court and Carolina Casualty removed the case to federal court, alleging diversity jurisdiction under 28 U.S.C. § 1332. The district court concluded that Carolina Casualty had no duty to defend or indemnify plaintiffs because a claim was first made against "an insured" in January 2007— more than one year prior to the policy period.

We have jurisdiction over plaintiffs' timely appeal pursuant to 28 U.S.C. § 1291 and affirm.

I

Oksana and William Burkhardt (the "Burkhardts") hired Seth Murphy, a coshareholder of the law firm of Berry & Murphy, P.C., to represent them in a personal injury suit arising out of an alleged assault by Joseph Ciri (the "Ciri Lawsuit"). In January 2005, Murphy filed a complaint on behalf of the Burkhardts in Colorado state court. The Ciri Lawsuit was governed by Colorado's simplified procedure rule, Colo. R. Civ. P. 16. 1, and Murphy did not opt out of proceeding under Rule 16.1.1

Over a year later, in March 2006, Murphy left Berry & Murphy, P.C. and joined the law firm of Richmond, Neiley, Sprouse, & Murphy, LLC. Murphy took the Ciri Lawsuit with him to his new law firm. About the same time, however, Murphy filed a motion to withdraw as counsel from the Ciri Lawsuit because he was allegedly having a difficult time getting the Burkhardts to cooperate in the prosecution of their claims.

In April 2006, the defendants in the Ciri Lawsuit filed a motion to dismiss for failure to prosecute. The motion to dismiss alleged: (1) failure to supplement initial disclosures regarding damages as required by Colo. R. Civ. P. 26(a); (2) failure to respond to a November 2005 letter from defendants' counsel regarding additional disclosures; (3) failure to produce a release for medical records for the previous five years; (4) failure to produce complete billing information from medical providers; (5) failure to produce employment records in violation of Colo. R. Civ. P. 16.1(k)(1)(B)(ii); (6) failure to disclose any expert witness before the deadline set forth in Rule 16.1(k)(2); and (7) failure to produce non-expert witness information pursuant to Rule 16.1(k)(3). At the end of May 2006, the court orally granted Murphy's motion to withdraw as counsel from the Ciri Lawsuit. Shortly thereafter, on June 27, 2006, the court granted, without prejudice, the defendants' motion to dismiss for failure to prosecute and entered a written order granting Murphy's motion to withdraw.

586 F.3d 806

The Burkhardts then hired new counsel and moved for reconsideration of the order dismissing their lawsuit and for reinstatement of the case. In November 2006, the court granted the Burkhardts' motion. The court also ordered the Burkhardts to file new non-expert witness disclosures which complied with Rule 16.1(k)(3) by December 11, 2006.

On January 10, 2007, Cindy Tester, the Burkhardts' new attorney in the Ciri Lawsuit, sent the following letter to Murphy at Richmond, Sprouse & Murphy, LLC (formerly Richmond, Neiley, Sprouse & Murphy, LLC):

Dear Mr. Murphy:

This is to advise you to put your legal malpractice insurance carrier on immediate notice a[sic] legal malpractice claim that I plan on filing against you on behalf of my clients, Mr. & Mrs. William Burkhardt. The Court recently found that your conduct in handling the Burkhardts' case was so egregious and so woefully inadequate that the case was nearly dismissed. Only through over hundreds of hours of pleadings practice, thousands of dollars paid to experts to obtain expert reports and innumerable hours of work put into this case since I took it over, were we able to somewhat resurrect this case to give the Plaintiffs a chance at their day in Court.

Moreover, the Court made certain findings as to your conduct and culpability regarding the manner in which you handled this case and the way you flagrantly disregarded your duties as an attorney. As such, put your carrier on notice immediately and give me the name of your insurance adjuster, so I may forward your adjuster a complete copy of the transcript of the Court's findings, the recent pleadings that have been filed in this case, which is still very minimally on tract [sic] at best given the plethora of the Defendants recent pleadings trying yet again to have it dismissed (and it was already dismissed once due to your conduct).

The Plaintiffs shall hold you entirely liable for all your misfeasance and malfeasance concerning your egregious inaction in handling and mishandling this case and the extreme amount of mental anguish, hours put into this case and the precarious position that you have put them in through failing to even remotely properly even the most mediocre attorney could handle a case [sic].

I expect to hear from your carrier shortly.

App. at 216-17 [sic throughout] (hereinafter the "Tester Letter"). The Tester Letter was not sent to Murphy's former co-shareholder, Timothy H. Berry, and Berry was not given notice of the letter at the time. Murphy, upon receipt of the Tester Letter, put his law firm's malpractice carrier—which happened to be Carolina Casualty—on notice of the claim.

Defendants in the state court Ciri Lawsuit, having not received the recently court-ordered material by the end of December deadline, next renewed their request for dismissal of the Ciri Lawsuit. In February 2007, the court denied the defendants' request to dismiss, but struck all but eight of the Burkhardts' potential witnesses and required Rule 16.1(k)(3) compliant non-expert witness disclosures for these eight witnesses by March 27, 2007. The Burkhardts failed to comply with the court's order by this new deadline and defendants then filed a second renewed motion to dismiss. The court granted, with prejudice, the second renewed motion to dismiss in December 2007.2

586 F.3d 807

On January 30, 2008, the Burkhardts filed a legal malpractice claim against Seth Murphy and Berry & Murphy, P.C. in the Pitkin County, Colorado district court (the "Malpractice Lawsuit"). The Malpractice Lawsuit generally alleged that Seth Murphy and Berry & Murphy, P.C. missed the deadline for filing a notice to elect exclusion from Simplified Procedures pursuant to Colo. R. Civ. P. 16.1 in the Ciri Lawsuit. The Malpractice Lawsuit also generally alleged that Seth Murphy and Berry & Murphy, P.C. were "negligent" and breached their "fiduciary duty of loyalty" to the Burkhardts. The Malpractice Lawsuit's claimed damages were "loss in the value of a chose, plus litigation costs, attorney fees, and interest." App. at 79.

Berry & Murphy, P.C. was the predecessor firm to Timothy H. Berry, P.C. Timothy H. Berry, P.C. is a Leadville, Colorado professional corporation engaged in the practice of law. As regards the insurance policy for Timothy H. Berry, P.C., "Timothy H. Berry, P.C." was the named insured on a lawyers' professional liability insurance policy issued by Carolina Casualty, an Iowa insurance company. The claims-made insurance policy was effective from February 6, 2008 to February 6, 2009. On July 23, 2008, Timothy Berry accepted service of the Malpractice Lawsuit, and he gave notice to Carolina Casualty of the filing of the Malpractice Lawsuit on that date. Berry alleges he had no knowledge of either the Tester Letter or the Malpractice Lawsuit until he accepted service of the Malpractice Lawsuit on July 23, 2008.

Plaintiffs filed this action to resolve the parties' dispute regarding insurance coverage for the Malpractice Lawsuit. Carolina Casualty denied coverage for the Malpractice Lawsuit on the grounds that the alleged malpractice claim was first made against an insured (i.e., Seth Murphy) prior to the inception of the insurance policy (i.e., via the Tester Letter), thereby falling outside the claims-made coverage of the policy. Plaintiffs' complaint asserts claims for declaratory relief, injunctive relief, breach of contract, and bad faith.

Before the district court, plaintiffs filed a motion for preliminary injunction and a motion for leave to add additional claims. Carolina Casualty and plaintiffs then filed cross-motions for summary judgment. The district court, orally at a motions hearing, granted Carolina Casualty's motion for summary judgment, denied plaintiffs' motion for summary judgment, and found plaintiffs' remaining motions moot. In granting Carolina Casualty's motion, the district court stated:

I'm going to grant [Carolina Casualty's] motion for summary judgment. [Murphy] is an insured. He had notice from this Tester letter that he was going to be accused, or was directly accused of malpractice in the representation of [the Burkhardts] in the Pitkin County case, and that it had been dismissed. And, it isn't just a question of his failing to timely make this election under Colorado Rule 16. 1, it's really the failure to proceed with that lawsuit and make the disclosures, whatever the rule was. And, I think that his further conduct in not notifying his former partner, or firm,...

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