Navigators Ins. Co. v. Baylor & Jackson, PLLC
| Decision Date | 28 August 2012 |
| Docket Number | Civil Action No. 12–242 (JEB). |
| Citation | 888 F.Supp.2d 55 |
| Court | U.S. District Court — District of Columbia |
| Parties | NAVIGATORS INSURANCE COMPANY, Plaintiff, v. BAYLOR & JACKSON, PLLC, Brynee K. Baylor, and Dawn R. Jackson, Defendants, and World Class Construction Management Group LLC, Sheldon Arpad, Diana Arpad, and William Barrett, Intervenors. |
OPINION TEXT STARTS HERE
Marc Evan Rindner, Richard Albert Simpson, Wiley Rein, LLP, Washington, DC, for Plaintiff.
Wendell C. Robinson, Law Offices of Wendell C. Robinson, Washington, DC, for Defendants.
In 2010, Plaintiff Navigators Insurance Company issued a professional-liability policy to the D.C. law firm of Baylor & Jackson, PLLC. The Firm subsequently sought coverage during the reporting period for a lawsuit arising out of its representation of Milan Group, LLC. After the Policy had lapsed, five additional actions were filed against the Firm in connection with its representation of Milan. Navigators determined that it would treat all six actions as a single claim under the Policy's related-claims provision, making all potentially eligible for coverage. After reviewing the underlying actions, however, Navigators concluded that it need not defend or indemnify the Firm in any of the six suits because all were subject to the Policy's exclusion for claims involving loss or misappropriation of assets within the Insured's control. In addition, Navigators ultimately uncovered misrepresentations in the Firm's application for coverage that it believed rendered the entire Policy null and void.
In February of this year, Navigators filed this suit against the Firm and its two partners, Brynee Baylor and Dawn Jackson, seeking a declaratory judgment that the Policy is void ab initio or, in the alternative, that the six underlying actions are excluded from coverage because of the nature of the claims alleged. Having initially agreed to cover the first action, Navigators also requested that the Court permit it to recoup the money it expended in defense of that suit.
None of the Defendants ever answered, and default was entered against them on May 25. Intervenors Sheldon and Diana Arpad, World Class Construction Management Group, LLC, and William Barrett, who were plaintiffs in some of the six actions, then successfully moved to intervene as Defendants. Navigators has now moved for default judgment against the original Defendants and for summary judgment against the Intervenors. Because the Court finds that coverage for all six actions is barred by the exclusion for claims alleging misappropriation of assets, it will award Navigators judgment on that basis without reaching its other arguments. It will additionally require Defendants to repay certain sums Navigators paid in defense costs.
On July 27, 2010, the law firm of Baylor & Jackson applied for a professional-liability policy from Navigators Insurance Company. See Motion for Summary Judgment (Mot.), Attachment 1 (Declaration of Marc Rindner), Exh. 1 (Declaration of Olga Brown), ¶ 7 & Exh. 1–A (Initial Application). The Firm represented in its application that it had not been the subject of a professional-liability claim or suit in the preceding five years, nor did any of its members know of existing circumstances that might lead to such a claim. See Initial Application at 8. Dawn Jackson signed the application on the Firm's behalf, indicating that the responses contained therein were “[a]ccurate, true and complete to the best of [her] knowledge” and that “[n]o material facts ha [d] been suppressed or misstated.” Id., at 9–10.
Based on these representations, Navigators issued a professional-liability insurance policy to the Firm for the claims-made-and-reported policy period of August 1, 2010, to August 1, 2011. See Brown Decl., ¶ 12 & Exh. 1–E (Policy), Section 1.A. Subject to certain specified conditions, the Policy covers
all sums in excess of the retention that the Insured shall become legally obligated to pay as damages and claim expenses as a result of a claim first made against the Insured and reported in writing to the Company during the policy period or the extended reporting period (if applicable), by reason of an act or omission, including personal injury, in the performance of professional services by the Insured or by any person for whom the Insured is legally liable....
Id. “Damages” are defined as “any compensatory sum and includes a judgment, award or settlement, provided any settlement is negotiated with the Company's written consent,” and “claim expenses” include all “reasonable and necessary fees, costs and expenses resulting from the investigation, adjustment, negotiation, arbitration, mediation, defense or appeal of a claim,” provided they are incurred by attorneys designated by the Insurance Company or by the Insured with the prior written consent of the company. See Policy, Sections III.C, III.E.
There are, however, a number of circumstances under which the policy does not require Navigators to defend or pay a claim against the Insured. See Policy, Section IV. Particularly relevant here is Exclusion K, which precludes coverage for damages or expenses with respect to any claim
[b]ased on or arising out of the loss or destruction of or diminution in the value of any asset in the Insured's care, custody or control or out of the misappropriation of, or failure to give an account of, any asset in the Insured's care custody or control, including the commingling of funds[.]
Policy, Section IV.K. The Policy is also conditioned on truthful answers in the application and underwriting process. Accordingly, “[a]ny material misrepresentation or concealment by the Insured, or the Insured's agent, will render the policy null and void and relieve the Company from all liability [t]herein.” Policy, Section V.M.4.
Although the Firm represented in its Initial Application that no professional-liability claims had been lodged against it in the preceding five years, see Brown Decl., Exh. 1–A at 8, the Firm was in fact actively defending against two legal-malpractice suits at the time it submitted its application to Navigators. One claim, filed on July 9, 2008, alleged breach of contract and professional negligence, see Boucree, et al. v. Fidelity National Title Insurance Co. of NY, et al., Case No. 2008 CA 004951 B (D.C.Super.Ct.), and the other, filed approximately 13 months later, alleged legal malpractice. See Thomas, et al., v. Brynee K. Baylor, et al., Case No. 24–C09–00500 (Cir. Ct., Baltimore City, Md.); see also Brown Decl., ¶ 13; Rindner Decl., Exh. 3 ( Boucree Docket); Exh. 5 ( Thomas Docket).
Between March 2011 and January 2012, six additional actions were brought against the Firm (and/or its partners, Baylor and Jackson) [“Underlying Actions”], all of which arose out of the Firm's representation of Milan Group, LLC:
(1) Latitude 30 Group, LLC v. Cornerstone Lenders Group, Inc., et al., No.2011–CA–2493 (Cir. Ct., Duval County, Fla.);
(2) Princeton Developments, LLC v. Brynee K. Baylor, et al., No. 11–cv–4471 (N.D.Cal.);
(3) Kuman Banque, LLC v. Brynee K. Baylor, et al., No. 11–cv–4472 (N.D.Cal.);
(5) Sheldon Arpad, et al. v. Brynee K. Baylor, et al., No. 12–cv–69 (D.D.C.); and
(6) SEC v. The Milan Group, Inc., et al., 11–cv–2132 (D.D.C.).
See Rindner Decl., Exh. 13 () at 1–2, 6; Exh. 14 () at 1; Am. Compl., ¶ 3. Each of the Underlying Actions alleges that the Firm misappropriated or otherwise lost funds that were deposited into its trust account. See generally Rindner Decl., Exhs. 6–11 (Complaints in Underlying Actions).
The Firm sought coverage from Navigators for each of these six suits. Because the Latitude 30 action was based on conduct that allegedly occurred during the policy period, Navigators agreed to defend the Firm in that matter while retaining the right to obtain reimbursement if it were later determined that the Policy did not cover the claim. See Rindner Decl., Exh. 12 ().
In a letter dated February 3, 2012, Navigators notified the Firm that while all six actions would be treated as a single claim made and reported during the policy period in accordance with the Policy's related-claims provision, it would not be covering any of the Underlying Actions because it had concluded that they were barred by Exclusion K. See Letter from Navigators' counsel regarding Underlying Actions dated Feb. 3, 2012, at II.A, II.A.A. The letter notes that “the use of the Firm's escrow account to funnel funds from defrauded investors is a hallmark of the scheme allegedly perpetrated by Ms. Baylor and her cohorts at issue in the Underlying Actions.” Id. at II.A.A. Because the Complaints in all six cases allege “the loss or misappropriation of monies that were entrusted to the Firm and were in its care, custody and control pursuant to the parties' escrow agreements,” Navigators concluded that “Exclusion K applies to bar coverage in its entirety....” Id.
On February 13, 2012, Navigators filed the instant suit against Baylor & Jackson and its two partners, seeking a declaration that the Underlying Actions are outside the scope of the Policy's coverage. See Compl., ¶¶ 4–5. It also requests “that the Court award ... a money judgment against Baylor and the Firm in the amount of any and all claim expenses paid by Navigators in connection with the Latitude 30 action.” Id. at 15.
Navigators amended its Complaint on March 7, 2012, to include an additional claim based on misrepresentations it discovered in...
To continue reading
Request your trial
-
Sec. Title Guarantee Corp. of Balt. v. 915 Decatur ST NW, LLC
...Policy. See Stevens , 801 A.2d at 69–70. "[A]ny facts outside of these documents ‘are irrelevant.’ " Navigators Ins. Co. v. Baylor & Jackson, PLLC , 888 F. Supp. 2d 55, 61 (D.D.C. 2012) (quoting Am. Registry of Pathology v. Ohio Cas. Ins. Co. , 461 F. Supp. 2d 61, 66 (D.D.C. 2006) ). The Di......
-
Burk & Reedy, LLP v. Am. Guar. & Liab. Ins. Co.
...F.Supp.2d 61, 70 (D.D.C.2003) (Walton, J.) (alteration and internal quotation marks omitted); see also Navigators Ins. Co. v. Baylor & Jackson, PLLC, 888 F.Supp.2d 55, 61 (D.D.C.2012) (“As [the insured] is headquartered in the District [of Columbia] and several of the [u]nderlying [a]ctions......
-
Burk & Reedy, LLP v. Am. Guarantee & Liab. Ins. Co.
...Supp. 2d 61, 70 (D.D.C. 2003) (Walton, J.) (alteration and internal quotation marks omitted); see also Navigators Ins. Co. v. Baylor & Jackson, PLLC, 888 F. Supp. 2d 55, 61 (D.D.C. 2012) ("As [the insured] is headquartered in the District [of Columbia] and several of the [u]nderlying [a]cti......
-
21ST Century N. Am. Ins. Co. v. Nationwide Gen. Ins. Co.
...the No-Fault Law regarding vehicles operated in the District. (Mot. at 4, 5.) Plaintiff relies on Navigators Ins. Co. v. Baylor & Jackson, PLLC, 888 F.Supp.2d 55, 61 (D.D.C. 2012), which found that "the jurisdiction with the most significant interest has been interpreted to be either the pl......