Elliott v. Continental Cas. Co.

• Decision Date: 22 February 2007
• Docket Number: No. 2006-CC-1505.,2006-CC-1505.
• Citation: 949 So.2d 1247
• Parties: Howard P. ELLIOTT, Jr. v. CONTINENTAL CASUALTY COMPANY.
• Court: Louisiana Supreme Court

949 So.2d 1247

Howard P. ELLIOTT, Jr. v. CONTINENTAL CASUALTY COMPANY.

No. 2006-CC-1505.

Supreme Court of Louisiana.

February 22, 2007.

Allen & Gouch, Scott Fry Davis, David Scranton Daly, Metairie, for Applicant.

Howard Payne Elliott, Jr., Baton Rouge, for Respondent.

Prior report: 938 So.2d 61.

TRAYLOR, Justice.

We granted certiorari in this case in order to determine whether the trial court erred in denying Defendant's motion for summary judgment. Defendant, a legal malpractice insurer, issued a lawyers' professional liability policy to Plaintiff. During the time that this policy was in effect, Plaintiff was involved in several fee disputes with another attorney. As a result of the fee disputes between Plaintiff and this other attorney, the attorney filed a "Petition for Declaratory Judgment, Legal Fees Due, and Injunction" against Plaintiff, and in his amended petition, the attorney alleged that Plaintiff referred a client to him without informing him that the client's cause of action had prescribed. Further, the attorney suggested that Plaintiff was the one who had allowed the client's cause of action to prescribe. Thus, the attorney claimed that he was induced to enter into an attorney-client contract with a client having a prescribed cause of action, and as such, the attorney argued that he suffered certain monetary damages. Because the attorney alluded to Plaintiff's possible malpractice (i.e., allowing the client's cause of action to prescribe), Plaintiff asserted that Defendant had a duty to defend him in this underlying litigation. Defendant, however, argued that the professional liability policy did not cover any litigation couched in terms of a fee dispute. For the reasons that follow, we reverse the trial court's denial of summary judgment and grant summary judgment in favor of Defendant.

FACTS AND PROCEDURAL HISTORY

Madro Bandaries and Howard P. Elliott, Jr. are both practicing attorneys in the State of Louisiana, and in the past, they have worked on various cases together.¹ After working together on several cases, fee disputes arose between the parties, and ultimately, Mr. Elliott filed a lawsuit against Mr. Bandaries, seeking to obtain those fees he believed he was due. As a result of the litigation initiated by Mr. Elliott, Madro Bandaries, APLC ("Bandaries") filed a "Petition for Declaratory Judgment, Legal Fees Due, and Injunction" against the instant Plaintiff Howard P. Elliott, Jr. ("Elliott") on January 28, 2004, as Bandaries asserted that Elliott was fraudulently attempting to obtain said legal fees. On June 22, 2004, Bandaries filed an amended petition. Within the amended petition, the following paragraph was included:

Defendant, Howard P. Elliott, Jr., pursuant to discovery requests by plaintiff, produced a copy of a contract with "Gary L. Ring," said agreement being dated May 29, 2000. This was the same "Gary Ring" mentioned in Paragraph 9 of plaintiff's original pleadings, and whom Howard P. Elliott, Jr. referred to Madro Bandaries, APLC on or about September 15, 2000, with plaintiff contracting with Ring on November 14, 2000. At no time did Howard P. Elliott, Jr. inform plaintiff, or his associates that he had allowed Ring's cause of action to prescribe while he represented Ring. Ring's cause of action, a citation for carrying an oversized load, took place on March 9, 2000, with the citation providing that Ring, to preserve his rights, had to file suit with in [sic] "90 days" of this date or on or about June 9, 2000. Plaintiff would not have accepted this case if he had known that Howard P. Elliott, Jr. had allowed the matter to prescribe. To date, plaintiff has incurred costs/advances in the amount of $15,745.00 and work in the amount of $18,090.80 with little or no chance of recovering same in that the matter has been before the Louisiana Supreme Court on two occasions on the basis that Ring's claim has prescribed, thus plaintiff asks the Court to order that Howard P. Elliott, Jr. reimburse plaintiff for these amounts.²

At the time the litigation between Bandaries and Elliott began, Elliott had a "Lawyers Professional Liability Policy" in effect with the instant Defendant Continental Casualty Company ("Continental"), which policy was effective from October 16, 2003, through October 14, 2004. Pursuant to the mandates of the insurance policy — a "claims made and reported policy"³ — Elliott forwarded Bandaries' claim to Continental, in addition to submitting a request that Continental defend him in the action. However, Continental declined to provide a legal defense in the action, as Continental maintained that this policy did not provide coverage in fee dispute matters. Thus, on September 23, 2004, Elliott initiated the action that is currently before this Court.

In his petition against Continental, Elliott argued that the allegations contained within Bandaries' petition and amended petition (including those allegations of legal malpractice) pertain to Elliott's actions/inactions while acting in his professional capacity as a lawyer. As such, Elliott maintained that his professional liability insurer had a duty to defend him against such claims. In response to Elliott's petition, Continental filed a motion for summary judgment on July 5, 2005. Continental argued that the litigation between Bandaries and Elliott involved a fee dispute, and as such, Continental contended that such litigation fell outside of the coverage provided by the professional liability policy.

On November 21, 2005, the trial court denied Continental's motion for summary judgment, and in its written reasons for said judgment, the trial court found:

After reviewing the record and the arguments of the parties, the Court finds that there are questions of fact which preclude the granting of the motion. Clearly there is a question as to whether or not the language of the policy itself would allow for [Continental] to defend the plaintiff in a suit where the plaintiff has the potential [to] incur certain costs that his former business associate incurred as a result of the plaintiff's negligence in allowing one of their client's claims to prescribe. The language in the policy defines legal services as services performed by the insured for others as a lawyer. The policy further provides that the company shall have the right and duty to defend in the insured's name and on the insured's behalf if any of the allegations of the claim are groundless, false, or fraudulent. The policy excludes coverage for any claim arising out of any dishonest, fraudulent, criminal or malicious act or omission by an insured. However, the policy goes on to state that [Continental] shall provide an insured with a defense of such a claim unless or until the dishonest, fraudulent, criminal or malicious act or omission has been determined by any trial verdict, court ruling, regulatory ruling or legal admission. The "omission" perpetrated by Elliott, allowing the Ring case to prescribe, falls within the purview of omissions as stated in the policy thereby triggering [Continental's] duty to defend.⁴

Continental filed a writ application with the First Circuit Court of Appeal; however, on May 16, 2006, the First Circuit Court of Appeal, in a 2-to-1 decision, denied Continental's writ application. Thereafter, Continental sought review from this Court, and we granted its writ application on October 6, 2006.

LAW AND DISCUSSION

A. Continental's Duty To Defend

Continental avers that the trial court erred in refusing to grant its motion for summary judgment, as Continental argues that the insurance policy in question clearly does not provide coverage to Elliott under the instant circumstances. Furthermore, Continental asserts that its duty to defend Elliott in the underlying litigation was never "triggered," as was suggested by the trial court. With respect to an insurer's duty to defend its insured(s), it is well-settled that an insurer's duty to defend is much broader in scope than the insurer's duty to provide coverage.⁵ Even the language of the policy issued by Continental in the instant case recognized this well-settled notion, as the contract provided that "[t]he Company shall have the right and duty to defend in the Insured's name and on the Insured's behalf a claim covered by this Policy even if any of the allegations of the claim are groundless, false or fraudulent."⁶ In Steptore v. Masco Const. Co., Inc., 93-2064 (La.8/18/94); 643 So.2d 1213, this Court stated:

The insurer's duty to defend suits brought against its insured is determined by the allegations of the plaintiff's petition, with the insurer being obligated to furnish a defense unless the petition unambiguously excludes coverage. Meloy v. Conoco, Inc., 504 So.2d 833, 838 (La.1987); American Home Assurance Co. v. Czarniecki, 255 La. 251, 230 So.2d 253 (1969); Leon Lowe & Sons, Inc. v. Great American Surplus Lines Ins. Co., 572 So.2d 206 (La.App. 1st Cir.1990); Benoit v. Fuselier, 195 So.2d 679 (La. App. 3d Cir.1967). Accordingly, the insurer's obligation to defend suits against its insured is generally broader than its obligation to provide coverage for damage claims. Czarniecki, supra 230 So.2d at 259. Thus, if, assuming all of the allegations of the petition to be true, there would be both coverage under the policy and liability of the insured to the plaintiff, the insurer must defend the insured regardless of the outcome of the suit. Id. An insured's duty to defend arises whenever the pleadings against the insured disclose even a possibility of liability under the policy. Meloy, supra.⁷

Thus, we must look at Bandaries' pleadings against Elliott in order to ascertain whether Continental had a duty to defend.

It appears that one particular paragraph in Bandaries' amended pleading has set off the instant litigation. That paragraph, which we referenced earlier in this opinion, says, in pertinent part:

At no time did Howard P. Elliott, Jr. inform plaintiff, or his...