Jill Cadre & the Cadre Law Firm, LLC v. Proassurance Cas. Co.

• Decision Date: 09 June 2021
• Docket Number: DOCKET NO. A-4969-18
• Parties: Jill CADRE and The Cadre Law Firm, LLC, Plaintiffs-Appellants, v. PROASSURANCE CASUALTY COMPANY, Defendant-Respondent, and All Point Insurance Agency, Defendant.
• Court: New Jersey Superior Court — Appellate Division

468 N.J.Super. 246

257 A.3d 1175

Jill CADRE and The Cadre Law Firm, LLC, Plaintiffs-Appellants,

v.PROASSURANCE CASUALTY COMPANY, Defendant-Respondent,andAll Point Insurance Agency, Defendant.

DOCKET NO. A-4969-18

Superior Court of New Jersey, Appellate Division.

Argued November 2, 2020

Decided June 9, 2021

Francis X. Garrity, North Haven, argued the cause for appellants (Garrity, Graham, Murphy, Garofalo & Flinn, PC, attorneys; Jane Garrity Glass, East Hanover, of counsel; Francis X. Garrity, on the briefs).

Suzanne C. Midlige, argued the cause for respondent (Coughlin, Midlige & Garland, LLP, attorneys; Suzanne C. Midlige, of counsel and on the brief; Michael E. Hrinewski, Morristown, on the brief).

Before Judges Messano, Hoffman and Suter.

The opinion of the court was delivered by

MESSANO, P.J.A.D.

Plaintiff Jill Cadre is a New Jersey attorney who conducts her practice as a limited liability company — The Cadre Law Firm, LLC. Rule 1:21-1B (the Rule ) governs the practice of law as an LLC and, among other things, mandates that attorneys who do so must procure professional liability insurance that provides coverage to the LLC for damages "arising out of the performance of professional services by attorneys employed by the [LLC] in their capacities as attorneys." R. 1:21-1B(a)(4).

Plaintiff purchased a LawyerCare professional liability insurance policy (the Policy) from defendant ProAssurance Casualty Company.¹ In 2015, in preparation for a compliance audit by the Office of Attorney Ethics (OAE), plaintiff discovered that one of her employees, Miguel Mayorga, a paralegal, misappropriated approximately $800,000 of clients' funds held in the LLC's trust account in connection with real estate closings.² Plaintiff notified defendant of a potential claim under the Policy.³ Defendant declined coverage, relying on the Policy's definition of covered "damages," which specifically did not include "misappropriated client funds."

Plaintiff filed a declaratory judgment action in the Law Division; defendant successfully removed the complaint to federal district court on diversity grounds and filed its answer. Plaintiff moved for summary judgment, which the judge denied. In his written opinion, applying standards governing summary judgment motions in the district court, the judge was unable to "find that the proffered evidence poses no genuine issue and requires judgment in favor of [plaintiff]." He denied the motion "at this time." In doing so, the judge rejected some of the same arguments plaintiff now reprises before us.

Plaintiff successfully amended her complaint with defendant's consent and added the insurance broker who procured the Policy, All Point Insurance Agency (All Point), as a defendant. This defeated the district court's diversity jurisdiction, and the matter was remanded to the Law Division. Plaintiff filed an amended complaint adding All Point and alleging it was negligent and breached its fiduciary and contractual obligations by not procuring a policy that complied with the Rule.

Plaintiff moved for summary judgment seeking to reform the Policy to provide coverage for claims resulting from the misappropriated client funds. Defendant cross-moved for summary judgment dismissing the complaint, and the Law Division judge heard oral argument.⁴ In two orders, she denied plaintiff's motion, granted defendant's motion, and dismissed plaintiff's complaint. This appeal followed.

I.

Before turning to plaintiff's arguments, we summarize some additional evidence in the motion record. See Ji v. Palmer, 333 N.J. Super. 451, 463–64, 755 A.2d 1221 (App. Div. 2000) (noting in reviewing the grant of summary judgment, an appellate court limits it review to the motion record (citing Bilotti v. Accurate Forming Corp., 39 N.J. 184, 188, 188 A.2d 24 (1963) )).

Plaintiff had been practicing law as an LLC since 2009 and purchased or renewed a professional liability policy from defendant every year since 2010. In May 2015, OAE requested that plaintiff furnish the certificate of insurance required by the Rule. See R. 1:21-1B(b). Plaintiff, who was unaware of the Rule's requirements at that time, obtained the certificate through All Point and filed it with the Clerk of the Supreme Court.

The Policy's limits were $1 million per claim and $1 million in the aggregate.⁵ Among other things, the Policy insured plaintiff for "all sums ... which [plaintiff became] legally obligated to pay as damages because of any claim ... involving any act, error or omission in rendering or failing to render professional services by [plaintiff] or by any person for whose acts, errors, or omissions [plaintiff] is legally responsible ...." The Policy included the following definitions:

Damages means monetary judgments, awards or settlements, but does not include the return or restitution of legal fees, costs and expenses charged by the Insured, or any allegedly misappropriated client funds or interest thereon.

.... Insured means (1) the Named Insured ... or (5) any non-lawyer who was or is an employee of the Named Insured ... solely while acting within the scope of their employment on behalf of the Named Insured ...;

....

Professional Services means services rendered by an Insured as a provider of legal services in a lawyer- client relationship. Professional services shall also include activities of an Insured as a ... trustee, or in any similar fiduciary capacity ....

[(Emphases added).]

The Policy had several exclusions, but also included the following provision entitled, "Innocent Insureds":

If a claim is made involving the dishonest, criminal, malicious or fraudulent act, error, or omission of an Insured, this policy will apply to any Insured who did not participate in, acquiesce in or fail to take appropriate action after having knowledge of such acts, errors or omissions, provided that such Insured complied with all policy provisions.

Lastly, the Policy provided: "The terms of this policy which are in conflict with the statutes of the state wherein this policy is issued are hereby amended to conform to such statutes."

Upon discovering Mayorga's defalcation, plaintiff restored the funds to her trust account and directed All Point to place defendant on notice of the loss. Defendant's declination letter stated:

[I]t appears the only funds you seek are those funds which have been misappropriated from your law firm's trust account through the conduct of your former employee .... The return or restitution of such misappropriated funds is not included within the definition of damages covered by the Policy.

Based upon the foregoing, there is no coverage available for the present ... [c]laim for reimbursement to your trust account of the misappropriated funds.

According to Karen Blohm, defendant's Marketing Director, the company began issuing professional liability policies to attorneys in New Jersey in 2008, and the specific form policy at issue — LCP 100 (2/12) — "ha[d] been in use since 2012 and contain[ed] the same definition of damages." Since then, defendant issued the Policy to more than 2000 New Jersey attorneys.

Defendant submitted hundreds of pages of documents to the New Jersey Department of Banking and Insurance (DOBI) seeking approval of the Policy before ever issuing it. As part of its review, DOBI submitted questions, comments, and suggested revisions to defendant regarding the proposed Policy, including the Policy's definitions and exclusions. DOBI did not object to or request any revision to the Policy's definition of "damages" or the scope of coverage, and it ultimately approved the Policy as issued to plaintiff. Defendant's general counsel testified at his deposition that before issuing professional liability policies for attorneys in New Jersey, the legal department "did not investigate or assess or research ... any statutes or anything else that govern[s] and regulate[s] the conduct of attorneys in ... New Jersey."

II.

Plaintiff urges us to reverse the Law Division's orders and remand the matter for entry of judgment declaring that the Policy provides coverage "for breach of a fiduciary obligation that results in misappropriation of client funds." We consider each of plaintiff's arguments, conclude none of them compel reversal and affirm.

A.

When reviewing the grant of summary judgment, we apply the "same standard as the motion judge." Globe Motor Co. v. Igdalev, 225 N.J. 469, 479, 139 A.3d 57 (2016) (quoting Bhagat v. Bhagat, 217 N.J. 22, 38, 84 A.3d 583 (2014) ).

That standard mandates that summary judgment be granted "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law."

[ Templo Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 224 N.J. 189, 199, 129 A.3d 1069 (2016) (quoting R. 4:46-2(c) ).]

Like "the trial court[, we] must ‘consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party.’ " Friedman v. Martinez, 242 N.J. 449, 472, 231 A.3d 719 (2020) (quoting Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540, 666 A.2d 146 (1995) ).

We owe no deference to the motion judge's legal analysis or interpretation of a statute. The Palisades At Fort Lee Condo. Ass'n v. 100 Old Palisade, LLC, 230 N.J. 427, 442, 169 A.3d 473 (2017) (citing Zabilowicz v. Kelsey, 200 N.J. 507, 512, 984 A.2d 872 (2009) ). Similarly, "we review legal determinations based on an interpretation of our court rules de novo." Occhifinto v. Olivo Constr. Co., LLC, 221 N.J. 443, 453, 114 A.3d 333 (2015) (citing State ex rel. A.B., 219 N.J. 542, 554–55, 99 A.3d 782 (2014) ).

So, too, interpretation of an insurance policy is a question of law subject to our de novo review. Estate of...