Reliance Ins. Co. v. St. Paul Ins. Companies

• Decision Date: 05 March 1976
• Docket Number: No. 45554,45554
• Citation: 239 N.W.2d 922,307 Minn. 338
• Parties: , 84 A.L.R.3d 181 RELIANCE INSURANCE COMPANY, Respondent, v. ST. PAUL INSURANCE COMPANIES, Respondent, Louis Bialick, Defendant, Cannon & Wendt Electric Company, Appellant.
• Court: Minnesota Supreme Court

Page 922

239 N.W.2d 922

307 Minn. 338, 84 A.L.R.3d 181

RELIANCE INSURANCE COMPANY, Respondent, v. ST. PAUL INSURANCE COMPANIES, Respondent Louis Bialick, Defendant Cannon & Wendt Electric Company, Appellant.

No. 45554.

Supreme Court of Minnesota.

March 5, 1976.

Syllabus by the Court

Peculiar to a lawyer's professional liability policy is coverage for the failure to act in a timely manner. Therefore, delay by the insured should not be unanticipated in notifying the insurer of an event leading to a claim of malpractice.

It is obvious that such a contract is also for the benefit of the public and unless actual prejudice by such delay is shown, the insurer is required to afford coverage despite delay in notification.

Coulter, Nelson & Sullivan and Lyle R. Frevert, Minneapolis, for appellant.

Carroll, Cronan, Roth & Austin, Frank X. Cronan, Robert M. Austin, and John A. Doyle, Minneapolis, for Reliance.

Meagher, Geer, Markham, Anderson, Adamson, Flaskamp & Brennan, Robert M. Frisbee, O. C. Adamson II, and R. Gregory Stephens, Minneapolis, for St. Paul Companies.

Heard before PETERSON, MacLAUGHLIN and SCOTT, JJ., and considered and decided by the court en banc.

SCOTT, Justice.

This is an appeal from a judgment of the Hennepin County District Court. Reliance Insurance Company brought a declaratory judgment action against St. Paul Insurance Companies, Louis Bialick, and Cannon & Wendt Electric Company to determine whether coverage was afforded by two lawyers' professional liability policies issued by Reliance and St. Paul to Bialick. Cannon & Wendt in a prior action had sought relief against Bialick, alleging that Bialick had committed legal malpractice. The district court ordered judgment declaring that both insurance policies had been breached by Bialick and that neither policy covered the claim of Cannon & Wendt. Defendant Cannon & Wendt appeals from that judgment.

In January 1965 Cannon & Wendt, an Arizona corporation, employed Louis Bialick to enforce a judgment in Minnesota. Receiving no progress report in this matter, the Arizona attorneys for Cannon & Wendt wrote Bialick on August 23, 1968:

'In view of the fact that I have been unable to obtain a reply to my letters directed to your office and in view of the fact this matter has gone much longer than seems to be reasonable or proper, I have been authorized by my client to make demand upon you for immediate accounting and a detailed explanation of the above-captioned matter. It is also necessary to receive not only a report of the status of the matter, but a report with respect to your actions thereto.'

The attorneys wrote Bialick on September 18, 1968:

'On August 23, 1968, I directed a letter to you requesting an accounting or explanation pertaining to the above captioned matter. As of this date I still have not received a reply. This has led my client to have grave misgivings and concerns since there has not been any kind of report to any correspondence or communication of any kind for some time.

'Under these circumstances, I have been directed by Cannon & Wendt Electric Company to immediately terminate your services and this file will be referred to other counsel in your jurisdiction for a complete investigation of this matter or any other action which might be necessary to protect my client's interests.'

Cannon & Wendt subsequently began an action against Bialick for legal malpractice. Bialick was served with a complaint on February 23, 1971, alleging that during such delay the judgment debtor disposed of his assets. On July 26, 1972, Cannon & Wendt served Bialick with notice that default proceedings would be taken against him. On August 3, 1972, Bialick forwarded the notification of default proceedings and the summons and complaint to insurance agent Robert Abrahams. Abrahams notified Reliance Insurance Company on August 4, 1972, which in turn notified the St. Paul Insurance Companies on October 10, 1972.

The insurance policy issued to Bialick by St. Paul Companies covered the period from September 1, 1962, to September 1, 1968, and included the following language:

'As soon as practicable, notice must be given the Company on Insured's receiving information as to any occurrence covered by this policy, with full particulars of any claim arising therefrom. If suit is brought, the Insured must immediately forward to the Company every summons or other process received by him.'

The Reliance policy was issued September 1, 1968, and cancelled on July 19, 1971. The Reliance policy included the following clause:

'Notice of Claim or Suit.

'Upon the insured becoming aware of any act or omission which might reasonably be expected to be the basis of a claim or suit covered hereby, written notice shall be given by or on behalf of the insured to the company or any of its authorized agents as soon as practicable, together with the fullest information obtainable. If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative.'

Both St. Paul Companies and Reliance declined coverage of the Cannon & Wendt claim.

The sole issue before us is: Were the insurers prejudiced by lack of notice of a claim against the insured?

The trial court did...