Feldman v. Imperium Ins. Co.
| Decision Date | 05 October 2015 |
| Docket Number | Case No. 8:14-cv-1637-T-30EAJ |
| Court | U.S. District Court — Middle District of Florida |
| Parties | MITCHELL FELDMAN, et al. Plaintiffs, v. IMPERIUM INSURANCE COMPANY, Defendant. |
THIS CAUSE comes before the Court upon: (1) Defendant Imperium Insurance Company's Motion for Summary Judgment (Dkt. 27), Plaintiffs' response in opposition (Dkt. 33), Defendant's reply (Dkt. 41), Plaintiffs' sur-reply (Dkt. 44); and (2) Plaintiffs' Motion for Partial Summary Judgment (Dkt. 28) and Defendant's response in opposition (Dkt. 31). The Court, having reviewed the motions, responses, replies, and record, and being otherwise advised of the premises, concludes that Defendant's motion should be denied and Plaintiffs' motion should be granted.
Plaintiffs Mitchell Feldman and Feldman Morgado, PA (collectively, "Plaintiffs") allege that their professional liability insurer, Defendant Imperium Insurance Company ("Imperium"), wrongfully refused to defend and indemnify Plaintiffs in a state-court malpractice action. (Dkt. 2). Imperium maintains that Plaintiffs knew of the potential fora malpractice claim prior to the policy's effective date, triggering the policy's prior-knowledge exclusion. The relevant facts follow.
Imperium issued a professional liability policy to Feldman Morgado P.A. ("the law firm") as the named insured, with a limit of liability of $1,000,000.00 per claim and in the aggregate. (Dkt. 27-7 at 11). The policy covered other insureds, including Mitchell Feldman ("Feldman"), a partner at the law firm, and Jonathan Gilbert ("Gilbert"), an associate at the law firm.1 (Id. at 15). The effective dates were December 20, 2012, to December 20, 2013. (Id. at 11). The policy was a claims-made and reported policy, providing coverage for claims first made while the policy was in force and reported no later than 60 days after the termination of the policy. The policy also provided that coverage was limited to covered acts committed after the applicable retroactive date. (Id.). The applicable retroactive date for Feldman was December 21, 2009, and the applicable retroactive date for Gilbert was April 12, 2010. (Id. at 15).
The malpractice action
On April 12, 2013, while the policy was in effect, Chad Ketchum ("Ketchum"), a former client of the law firm, filed an action in state court alleging that Feldman, Gilbert, and the law firm breached their professional duties in handling Ketchum's personal injury lawsuit. (Dkt. 27-1; Dkt. 8 at 2, ¶ 5). Specifically, Ketchum alleged that he hired the law firm to pursue a claim for injuries that he suffered while working as a civilian contractor inAfghanistan. (Dkt. 27-1 at ¶¶ 6-7). Feldman, Gilbert, and the law firm filed an action in the U.S. District Court for the Middle District of Florida against BAE Systems Land & Armaments, L.P. and SSG Marvin L. Williams2 ("the tort action"). (Id. at ¶ 8).
While the tort action was pending, Ketchum also had a pending claim for federal workers' compensation benefits under the Longshore and Harbor Workers' Compensation Act ("LHWCA"), and he was receiving temporary total disability indemnity benefits and medical benefits. (Id. at ¶¶ 9, 10). Feldman and Gilbert knew that Ketchum had a federal workers' compensation claim and that he was receiving benefits. (Id. at ¶ 11).
On July 29, 2011, at the advice and urging of Feldman and Gilbert, Ketchum entered into a full and final settlement of the tort action. (Id. at ¶ 12). Feldman and Gilbert did not obtain prior written approval for the settlement from Ketchum's employer, Brown International Corporation d/b/a AAR Integrated Technologies ("Brown") or from Brown's workers' compensation insurer, Zurich American Insurance Company ("Zurich"). (Id. at ¶ 13).
After Zurich learned of the settlement, it terminated Ketchum's right to compensation, effective August 9, 2011, because Ketchum failed to obtain Brown's prior approval of the settlement, in violation of the LHWCA. (Id. at ¶¶ 14, 16). Ketchum alleged that Feldman and Gilbert had a duty to know the law governing third-party tort claim settlement agreements for clients with pending federal workers' compensation claims, and that they hada duty to comply with the provisions of the LHWCA by obtaining prior approval. (Id. at ¶ 17). Ketchum alleged that Feldman and Gilbert breached their duties by having Ketchum enter into a settlement of his tort claim without obtaining the necessary prior approval. (Id. at ¶ 18). As a result, Ketchum alleged that he suffered the loss of his indemnity and medical benefits beginning on August 9, 2011, and that he continues to suffer those losses. (Id. at ¶ 19).
The state-court malpractice action ("the malpractice action") was served on the law firm on June 14, 2013. (Dkt. 28-1 at 1). Gilbert was served on June 17, 2013, and Feldman was served on June 18, 2013. (Id.).
Imperium denies coverage
Imperium received notice of the malpractice action on June 18, 2013. (Dkt. 2 at 56). By letter dated August 29, 2013, Imperium refused to defend or indemnify Feldman and the law firm. (Id. at 47). As one basis for denying coverage, Imperium cited the policy's prior-knowledge exclusion, which provided that the policy did not apply to claims arising out of a wrongful act, "if the insured at or before the effective date knew or could have reasonably foreseen that such wrongful act might be expected to be the basis of a claim." (Id. at 52-55; Dkt. 27-7 at 27). According to Imperium, the undisputed facts showed that Feldman and the law firm knew that the settlement of the tort action caused the loss of Ketchum's workers' compensation benefits and therefore might be expected to be the basis of a malpractice claim. (Dkt. 2 at 55).
On June 10, 2014, Plaintiffs filed a two-count action in the state court. (Dkt. 2). Invoking this Court's diversity jurisdiction, Imperium removed the action on July 1, 2014. (Dkt. 1). In Count I, Plaintiffs request a declaratory judgment that they are entitled to a defense and indemnity for any liability arising out of the claims in the malpractice action. In Count II, Plaintiffs allege that Imperium breached the policy by wrongfully refusing to defend and indemnify Plaintiffs in the malpractice action.
The parties filed their cross-motions for summary judgment on July 31, 2015. (Dkts. 27, 28). Imperium and Plaintiffs rely on different evidence to advance their respective positions as to whether Feldman or Gilbert "knew or could have reasonably foreseen" that the failure to obtain settlement approval "might be expected to be the basis of a claim."
Imperium's evidence relating to prior knowledge
On January 5, 2011, Gilbert's assistant, Wendy Bennet, emailed Ketchum's federal workers' compensation attorney, Capp Taylor, as follows: "Mr. Gilbert is inquiring on whether or not there is a w/c lien that would be claimed if we settled the civil case in our office." (Dkt. 27-2 at 66). Taylor replied: "I have no idea as to whom your third party case is against but wc liens would attach against negligent third parties causing damages that the Fed wc program has paid for and even may involve surplus credit against future wc benefits." (Id.). During his deposition, Gilbert acknowledged that this email informed the law firm that federal workers' compensation liens would attach to any tort case. (Dkt. 27-2, "Gilbert Dep." at 21). Prior to settling, Gilbert did not look into whether settling the tort action would affect the workers' compensation claim. (Gilbert Dep. at 24-25).
By letter dated July 15, 2011, two weeks before the settlement, Zurich informed Gilbert that Zurich was claiming a total lien of at least $144,718.06. (Gilbert Dep. at 22; Dkt. 27-2 at 67). After the settlement, by letter dated August 12, 2011, Zurich informed Gilbert that "[t]he Employer/Carrier has not waived its lien or approved the settlement under section 933 of the Act." (Gilbert Dep. at 33-34; Dkt. 27-2 at 74).3 By letter dated August 16, 2011, Robert Bamdas, an attorney representing Zurich, informed Gilbert that the settlement was not approved by Brown or Zurich as required under Section 933 of the LHWCA, and, as a result, Ketchum's right to future benefits was barred. (Gilbert Dep. at 40-41; Dkt. 27-2 at 75). Bamdas also noted that the settlement of $155,000.00 was "clearly less" than the expected benefits to be paid by Zurich. (Id.).
Gilbert testified that he "probably" first discovered the settlement "potentially impacted" Ketchum's benefits when he received Zurich's August 12, 2011 letter. (Gilbert Dep. at 39). Gilbert testified that he imagined that he would have brought Zurich's August 16, 2011 letter to Feldman's attention, although he did not recall specifically. (Id. at 41-42).
On August 15, 2011, Ketchum's mother, Gale Ketchum, sent Gilbert an email as follows:
(Dkt. 27-2 at 77). Chad Ketchum testified that he asked Gilbert, "can you fix this?" and "I was assured that he would fix it." (Ketchum Dep. at 16-17).
According to Taylor, Ketchum's workers' compensation attorney, he (Dkt. 27-5, "Taylor Dep." at 13). Taylor testified that he did not recall whether Ketchum or his mother ever told him they intended to pursue a malpractice claim, but that "I knew darn well that they were probably going to pursue it, or at least talk to somebody about pursuing it," and the...
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