Carolina Cas. Ins. Co. v. Law Offices of Robert M. Pears, P.C.

• Decision Date: 10 April 2013
• Docket Number: Case No.: 2:12-CV-01828-RDP
• Parties: CAROLINA CASUALTY INSURANCE COMPANY, Plaintiff, v. LAW OFFICES OF ROBERT M. PEARS, P.C., et. al., Defendants.
• Court: U.S. District Court — Northern District of Alabama

CAROLINA CASUALTY INSURANCE COMPANY, Plaintiff,

v.LAW OFFICES OF ROBERT M. PEARS, P.C., et. al., Defendants.

Case No.: 2:12-CV-01828-RDP

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION

DONE and ORDERED: April 10, 2013

MEMORANDUM OPINION

This matter is before the court on Plaintiff Carolina Casualty Insurance Company's Motion for Summary Judgment (Doc. # 44). The matter has been fully briefed. (Docs. # 24, 45, 46, 47, 50). For the reasons stated below, the court concludes that Plaintiff's Motion (Doc. # 44) is due to be granted.

I. Facts¹

In August 2010, Defendant Robert M. Pears, President of The Law Offices of Robert M. Pears, P.C. ("the Pears Firm"), completed a CNA Lawyers' Professional Liability Insurance application G-130953-A (Ed. 03/02). (Doc. # 44-2, p. 5 at ¶14; pp. 32-36). The CNA application form contained the following question and the following response by Pears:

After inquiry, is any attorney in the firm aware of:

30. any act or omission that may reasonably be expected to be the basis of a claim against them, the firm, any predecessor firm, or against any current or former attorney of the firm, while affiliated with the firm.

Response: No.

(Doc. # 44-2, p. 5 at ¶16; p. 42).

Pears also completed a Carolina Casualty Lawyers' Professional Liability Insurance Incorporated Proposal Form LPL 29501 (rev. 04-09) on August 18, 2010 for the Carolina Casualty policy effective August 19, 2010 to August 19, 2011. (Doc. # 44-2, p. 5 at ¶15; pp. 37-48). The Carolina Casualty Incorporated Proposal Form incorporated by reference the CNA application for Lawyers Professional Liability Insurance. (Doc. # 44-2, p. 5 at ¶17). The Carolina Casualty Incorporated Proposal Form contained the following question and the following response:

1. Is the Applicant Firm or any lawyer in the Applicant Firm aware of any fact, circumstance or situation that might reasonably be expected to result in any professional liability claim or suit against the Applicant Firm, or any predecessor in business, or any past or present lawyers in the Applicant Firm.

Response: No.

IT IS UNDERSTOOD AND AGREED THAT THE INSURER SHALL NOT BE LIABLE TO MAKE ANY PAYMENT FOR DAMAGES OR CLAIMS EXPENSE IN CONNECTION WITH ANY CLAIM MADE AGAINST ANY INSURED BASED UPON, OR ARISING OUT OF, DIRECTLY OR INDIRECTLY RESULTING FROM OR IN CONSEQUENCE OF, OR IN ANY WAY INVOLVING ANY PROFESSIONAL LIABILITY CLAIM OR SUIT, FACT, CIRCUMSTANCE, OR SITUATION SET FORTH OR THAT SHOULD HAVE BEEN SET FORT IN THE INSURED'S RESPONSE TO QUESTION 1.

(Doc. # 44-2, pp. 5-6 at ¶17; 37).

The Carolina Casualty underwriters were also supplied with the August 7, 2009 completed Navigators Insurance Company application for lawyers' professional liability insurance which contained the following question and following response:

9. B. In the last five years, has any lawyer included in Question 4C been the subject of a reprimand, complaint, disciplinary action, revocation, suspension or refused admissions to the Bar, by any bar association court or administrative agency, etc? If yes, please provide dates and details on the SUPPLEMENT #1, Item D2.

Response: Yes, 90 day suspension - 2006.

(Doc. # 44-2, p. 6 at ¶18; p. 51).

The Navigators Insurance Company application for lawyers' professional liability insurance also contained the following question and response:

9. C. Does any lawyer included in Question 4C know of an act or omission that may reasonably be expected to be the basis of a claim against them, the firm, any prior or predecessor firm, or against any current or former attorney of the firm, while affiliated with the firm? If "yes", complete SUPPLEMENT #2 for each circumstance/incident.

Response: No

(Doc. # 44-2, p. 6, ¶18; p. 51).

At no time following the completion of the CNA application and the Carolina Casualty Incorporated Proposal Form did Pears or the Pears Firm supplement or modify the responses on either the CNA application or the Carolina Casualty Incorporated Proposal Form. (Doc. # 44-2, p. 6 at ¶19; Doc. # 44-3, ¶10).

The CNA application stated the following:

Applicant hereby represents, after inquiry, that the information contained herein and in any supplemental applications or forms required hereby, is true, accurate and that no material facts have been suppressed or misstated. Applicant acknowledges a continuing obligation to report to the Company as soon as practicable any materialchanges in all such information, after signing the application and prior to issuance of the policy, and acknowledges that the Company shall have the right to withdraw or modify any outstanding quotations and/or authorization or agreement to bind the insurance based upon such changes.

Further, Applicant understands and acknowledges that:

1. If a policy is issued, the Company will have relied upon, as representations: the application, and any supplemental applications, and any other statements furnished to the Company in conjunction with this application, all of which are hereby incorporated by reference into this application and made a part hereof.

2. This application will be the basis of the contract and will be incorporated by reference into and made a part of such policy; and

3. Applicant's failure to return to its current insurance company any claim made against it during the current policy term, or act, omission or circumstances which Applicant is aware of which may give rise to a claim before the expiration of the current policy may create a lack of coverage.

Applicant hereby authorizes the release of claim information to the Company from any current or prior insurer of the Applicant.

(Doc. # 44-2, pp. 6-7 at ¶20; 48).

The Carolina Casualty Incorporated Proposal Form stated the following:

Please Read Carefully

The undersigned acting on behalf of all proposed Insureds, declare that the statements set forth herein and in the attached application (or Proposal Form) are true and correct and that thorough efforts have been made to obtain sufficient information to facilitate from each Insured proposed for this insurance to facilitate the proper and accurate completion of both the Carolina Casualty Incorporated Proposal Form and the attached application (or Proposal Form).

The undersigned agrees that the particulars and statements contained in the Proposal Form and any material submitted herewith are their representations and that they are material and are the basis of the insurance contract. The undersigned further agree that the Proposal Form and any material submitted herewith shall be considered attached to and a part of the Policy. Any material submitted with the Proposal Form shall be maintained on file (either electronically or paper) with the Insurer and shall be deemed to be attached hereto as if physically attached.

It is further agreed that:

If any significant change in the condition of the applicant is discovered between the date of this Proposal Form and the Policy Inception date, which would render this Proposal Form inaccurate or incomplete, notice of such change will be reported in writing to the Insurer immediately;

Any Policy, if issued, will be in reliance upon the truth of such representations; This Proposal Form has been completed as respects the entire Applicant Firm; The signing of this Proposal Form does not bind the undersigned to purchase the insurance.

(Doc. # 44-2, pp. 7-8, ¶21; 38).

In reliance on the August 18, 2010 CNA application and the August 18, 2010 Carolina Incorporated Proposal Form, Carolina Casualty issued the 2010-2011 Carolina Casualty policy no. 9997500 to the Pears Firm. (Doc. # 44-3 at ¶19). The 2011-2012 Carolina Casualty policy no. 91047656 was auto-renewed on the basis of the materials submitted for the 2010-2011 Carolina Casualty policy, including the August 18, 2010 CNA application and the August 18, 2010 Carolina Incorporated Proposal Form. (Doc. # 44-3 at ¶19).

The 2010-2011 Carolina Casualty policy and the 2011-2012 Carolina Casualty policy (hereinafter referred to as the "Carolina Casualty policies") both provide, on the Policy Form LP 29300 (04-09):

In consideration of the payment of the premium and in reliance on all statements in the Proposal, and all other information provided to the Insurer, and subject to all the provisions of this Policy, the Insurer and Insureds agree as follows:

***

General Conditions

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ProposalThe Proposal is the basis of this Policy and is incorporated in and constitutes a part of this Policy. A copy of the Proposal Form(s) is attached hereto. Any materials submitted with the Proposal Form(s) shall be maintained on file with the Insurer and shall be deemed to be attached hereto, as if physically attached. It is agreed by all Insureds that the statements in the Proposal are their representations, that they are material and that this Policy is issued in reliance upon the truth and accuracy of such statements.

***

(Doc. # 44-2, pp. 8 at ¶23; 15, 20; 25, 30).

It is undisputed that Pears' applications contained misrepresentations. Although Pears disclosed a 90-day suspension by the Alabama State Bar in 2006 on the Navigators Insurance application, he did not disclose that he had pled guilty to a violation of Rule 1.15(a) ("Safekeeping Property") of the Alabama Rules of Professional Conduct or that his suspension was for unethical trust account practices. (Doc. # 44-2, p. 55 and Doc. # 44-4, pp. 72, 100-104). Nor did Pears disclose on any of the insurance applications that on August 27, 2007, the Disciplinary Board of the Alabama State Bar in case no. ASB 06-146(A) ordered that Pears receive a Public Reprimand without General Publication after Pears pled guilty to violations of Rule 1.3 ("Diligence") and Rule 1.4(a) ("Communications") of the Alabama Rules of Professional Conduct in connection with his failure to file a lawsuit on behalf of a client within the applicable statue of limitations. (Doc. # 44-2, pp. 32-64; Doc. # 44-4, pp. 72, 96-99).

Pears also failed to disclose on any of the insurance applications, or...