Bianco Prof'l Ass'n v. Home Ins. Co.

• Decision Date: 05 November 1999
• Docket Number: No. 95–589.,95–589.
• Citation: 740 A.2d 1051,144 N.H. 288
• Court: New Hampshire Supreme Court
• Parties: BIANCO PROFESSIONAL ASSOCIATION and another. v. The HOME INSURANCE COMPANY.

144 N.H. 288

740 A.2d 1051

BIANCO PROFESSIONAL ASSOCIATION and another.

v.The HOME INSURANCE COMPANY.

No. 95–589.

Supreme Court of New Hampshire.

Nov. 5, 1999.

Rehearing Granted in Part Nov. 5, 1999.

Wiggin & Nourie, P.A., of Manchester (Gordon A. Rehnborg, Jr. and Doreen F. Connor, on the brief, and Mr. Rehnborg orally), for the plaintiffs.

Nelson, Kinder, Mosseau & Gordon, P.C., of Manchester (Robert M. Daniszewski, on the brief), and Cetrulo & Capone, of Boston, Massachusetts (David A. Grossbaum, on the brief and orally), for the defendant.

PER CURIAM.

The defendant, The Home Insurance Company (Home), appeals a ruling of the Superior Court (Conboy , J.) granting a petition for declaratory judgment in favor of the plaintiffs, Bianco Professional Association (Bianco P.A.), James J. Bianco, Jr., Michael J. Farley, and Eric G. Falkenham. The court found coverage under two claims-made professional liability policies issued by Home. We affirm in part and reverse in part.

The trial court found the following facts. On June 11, 1988, Lester Martin suffered personal injuries at Contoocook Campgrounds. On June 17, after meeting with Falkenham, who was an attorney with Bianco P.A., Lester and Theresa Martin retained Bianco P.A. to represent them in their claim against Contoocook Campgrounds, Inc. (Campgrounds). Falkenham worked on the Martins' case until August 1989 when he transferred the matter to Farley, who also worked for Bianco P.A. On June 17, 1991, six days after the statute of limitations had lapsed, Farley discovered that the Martins' writ had not yet been filed; it was subsequently delivered to the sheriff. In December 1991, the Campgrounds filed a pleading in superior court raising the statute of limitations as a defense.

On March 1, 1992, Bianco P.A. renewed its claims-made professional liability policy with Home, and on March 9, 1992, Farley left Bianco P.A. On June 29, 1992, the Campgrounds filed a motion to dismiss the Martins' case, which the trial court granted on November 23, 1992. By December 1992, the Martins had discharged Bianco P.A. and its attorneys and retained the law firm of Devine & Nyquist to appeal the dismissal of the Campgrounds suit and to represent them in a possible malpractice suit against Bianco P.A. Falkenham left Bianco P.A. on January 29, 1993, to work for the law firm of Devine, Millimet & Branch. On February 3, 1993, knowing that the trial court had dismissed the Martins' suit and that Falkenham had communicated with the Martins and their new attorneys about the missed statute of limitations, Bianco applied to renew the Bianco P.A. policy with Home for an additional year of coverage beginning March 1, 1993. By that time, both Farley and Falkenham had left the firm. Bianco completed the renewal application, listing the firm's attorneys to be covered under the new policy, but not disclosing the Martin incident.

On March 24, 1993, an attorney from Devine & Nyquist wrote a demand letter to Bianco identifying a potential malpractice claim against Farley and Bianco P.A. Two days later, Bianco informed Home of the Martins' potential claim.

We affirmed the dismissal of the Martins' case by the superior court. See Martin v. Contoocook Campgrounds, Inc., No. 92–768 (N.H. November 5, 1993). The Martins filed a malpractice suit against Bianco P.A., Bianco, Farley, and Falkenham in May 1994. On May 27, the attorney representing Bianco P.A., Bianco, Falkenham, and Farley in the Martins' malpractice suit notified Home of the suit. On May 31, Devine, Millimet & Branch also notified Home under its policy of the claim against Falkenham. The plaintiffs subsequently filed a petition for declaratory judgment in superior court seeking coverage under their professional malpractice insurance policies.

The trial court ruled that Home is obligated to provide a defense and extend coverage for all of the plaintiffs regarding the Martins' malpractice claim under the 1993–1994 Bianco P.A. policy, and to provide excess coverage to Falkenham under the Devine, Millimet & Branch policy. Home appealed. We issued an opinion dated April 13, 1999. The plaintiffs moved for reconsideration. We granted the motion in part, see Sup.Ct. R. 22, and withdrew our April 13 opinion.

On appeal, Home argues that: (1) Bianco and Falkenham had a duty to notify Home of a potential claim in 1992 because they had a reasonable expectation that a malpractice claim would be asserted against them personally; (2) Bianco and Falkenham were required to give notice of the Martins' potential claim against Bianco P.A. and Farley during the 1992–1993 policy year; (3) because Farley and Bianco P.A. breached their duty to report the Martins' potential claim, Home was not required to show prejudice from the late notices before denying coverage; and (4) the failure of Bianco to disclose the Martins' potential claim on the Bianco P.A. renewal application constituted a material misrepresentation that voided the policy.

First, we address Home's argument that Bianco and Falkenham had a duty in 1992 to notify Home that the Martins might bring a claim against them individually. The trial court found that neither Bianco nor Falkenham were aware or should have become aware that the missed statute of limitations would reasonably be expected to be the basis of a claim or suit against them individually until the actual claim was made.

The Home policy during the 1992–1993 year limited coverage to "any claim or claims first made against the Insured and reported to the Company during the policy period." It provides, in relevant part, that a claim is first made if

during the policy period ... the Insured shall have the knowledge or become aware of any act or omission which could reasonably be expected to give rise to a claim under this Policy and shall during the policy period ... give written notice thereof to the Company in accordance with Condition VII.

Condition VII requires the insured to give written notice "as soon as practicable" after the insured becomes "aware of any act or omission which would reasonably be expected to be the basis of a claim or suit."

The interpretation of an insurance policy is a question of law for this court to decide. Weeks v. St. Paul Fire & Marine Ins. Co., 140 N.H. 641, 643, 673 A.2d 772, 774 (1996). "We take the plain and ordinary meaning of the policy's words in context, and we construe the terms of the policy as would a reasonable person in the position of the insured based on more than a casual reading of the policy as a whole." High Country Assocs. v. N.H. Ins. Co. , 139 N.H. 39, 41, 648 A.2d 474, 476 (1994).

Because the Home policy does not define the phrase, "reasonably be expected," we look to New Hampshire law for guidance. We addressed the meaning of this phrase in Shaheen, Cappiello, Stein & Gordon, P.A. v. Home Insurance Co. , 143 N.H. 35, 719 A.2d 562 (1998), which concerned professional liability insurance policy provisions nearly identical to those in this case. Following Shaheen's guidance, we hold that the inquiry is what a reasonable attorney would have done under similar circumstances. See id . at 38, 719 A.2d at 565. If an attorney in good faith would not reasonably believe that liability would result from an incident, act, or omission, notice is timely if given promptly after the attorney receives notice that a claim will in fact be made. See id . "Whether the insured acted reasonably in providing notice of a potential claim is a question of fact for the trial court." Id . at 40, 719 A.2d at 566. In this case, where the trial court had an opportunity to observe the demeanor and credibility of witnesses, we will uphold its findings unless they "are unsupported by the evidence or are erroneous as a matter of law." Hawthorne Trust v. Maine Savings Bank, 136 N.H. 533, 536, 618 A.2d 828, 830 (1992) (quotation omitted).

We consider each attorney in turn. The trial court found that Bianco never actively controlled or supervised the handling of the Martins' file. There was testimony that neither he nor Farley expected him to supervise Farley's work and that the Martins' case was a "run of the mill case" that required no special guidance from another attorney.

Contrary to Home's argument, the fact that Bianco was the sole shareholder of the firm and had ultimate supervisory authority over the firm's cases does not make him vicariously liable as a matter of law for the tortious conduct of other firm employees. Except as otherwise provided by law, the personal liability of a shareholder of a professional corporation is no greater than that of a shareholder of a business corporation. See RSA 294–A:17, IV (1987). Generally, a corporate shareholder is personally liable only for his own acts. See RSA 293–A:6.22(b) (Supp.1998) (recodifying and amending RSA 293–A:25, I (1987)). Home cites no legal authority to support its argument that vicarious liability attendant in a partnership attaches among members of a corporation. Therefore, we need not address Home's argument.

An employee of a professional corporation is not liable for other employees' conduct "unless he is at fault in appointing, supervising, or cooperating with them." RSA 294–A:17, II (1987). Home does not allege that Bianco was at fault in appointing, supervising, or cooperating with Farley; it contends that Bianco is liable by virtue of his appointment and nominal supervision of Farley. Home's argument fails, however, because under RSA 294 –A:17, II liability is contingent on fault. Further, while Home is correct that practicing law in a professional corporation does not alter Bianco's responsibilities as an attorney, see Petition of N.H. Bar Ass'n , 110 N.H. 356, 357, 266 A.2d 853, 854 (1970), Bianco's personal liability as a member of a professional association is a matter separate from his culpability as an attorney under the rules of professional conduct, see id . We express no opinion as to the latter.

Similarly, we are not persuaded that Falkenham reasonably...