Rich v. First Mercury Ins. Co.
| Decision Date | 27 August 2020 |
| Docket Number | CIVIL ACTION NO. 2:19-cv-00290 |
| Citation | 482 F.Supp.3d 511 |
| Parties | Gary W. RICH, et al., Plaintiffs, v. FIRST MERCURY INSURANCE COMPANY, et al., Defendants. |
| Court | U.S. District Court — Southern District of West Virginia |
John J. Polak, Atkinson & Polak, Charleston, WV, for Plaintiffs.
Don C. A. Parker, Spilman Thomas & Battle, Charleston, WV, for Defendants.
Pending before the Court are cross-motions for summary judgment filed by Defendant First Mercury Insurance Company ("First Mercury"), (ECF No. 15), and Plaintiffs Gary Rich and the Law Office of Gary W. Rich, L.C. (collectively "Mr. Rich," unless otherwise indicated). (ECF No. 17.) For the reasons more fully explained below, First Mercury's motion for summary judgment, (ECF No. 15), is GRANTED , and Mr. Rich's motion for summary judgment, (ECF No. 17), is DENIED .
This action arises out of a dispute between a professional liability insurance carrier and an attorney about the insurance carrier's duty to defend a prior lawsuit. Plaintiff Gary Rich is an attorney who was admitted to the Bar of the State of West Virginia in 1980 and was licensed to practice law in the state from the mid-1990s until 2011. (ECF No. 18 at 2.) He is also the president of the Law Office of Gary W. Rich, L.C., in Monongalia County, West Virginia, where he practiced law during this same period. (Id. ) Defendant First Mercury is a Delaware Corporation with its principal place of business in Southfield, Michigan, and operates as a surplus lines insurer in all fifty states. (Id. )
First Mercury issued a Lawyers Professional Liability Insurance Policy, Policy Number FMLP002987 (the "Policy"), to the Law Office of Gary W. Rich, L.C. as the named insured in 2009. (Id. ) Gary Rich was also an insured under the Policy. (Id. at 3.) The Policy was written on a "Claims Made" basis, as opposed to an "Occurrence" basis. (ECF No. 15 at 10.) The policy period ran from December 1, 2009 to December 1, 2010, and pursuant to its terms, only covered claims first made against an insured during the policy period and reported to First Mercury. (Id. at 10–11.) The Policy was amended via an "Extended Reporting Period Endorsement" that applied to attorneys who ceased the practice of law, such as Mr. Rich. (Id. at 11; ECF No. 15-19 at 2; ECF No. 18 at 2–3.) Pursuant to that Endorsement, claims made during the extended reporting period—in other words, after December 1, 2010—would be deemed to have been made on the last day of the Policy period, subject to the other requirements of the Policy. (ECF No. 15 at 11; ECF No. 15-19 at 2.)
In pertinent part, the insuring agreement of the Policy states as follows:
The Company shall pay on behalf of any INSURED all DAMAGES in excess of the deductible which any INSURED becomes legally obligated to pay as a result of CLAIMS first made against any INSURED during the POLICY PERIOD and reported to the Company in writing during the POLICY PERIOD or within sixty(60) days thereafter, by reason of any WRONGFUL ACT occurring on or after the RETROACTIVE DATE, if any. Coverage shall apply to any such CLAIMS arising out of the conduct of the INSURED'S profession as a Lawyer, or as a Lawyer acting in the capacity of an Arbitrator, Mediator, Neutral, Title Insurance Agent, Notary Public, member, director, office of any Bar Association, its governing board or any of its committees, or as a member of a formal accreditation, ethics, peer review, licensing board, standards review or similar professional board or committee relating to the practice of law.
(ECF No. 15-19 at 18 (emphasis in original).)
The Policy defines numerous terms, several of which are critical to the adjudication of these motions. First, the Policy defines a "claim" as follows:
CLAIM means a demand made upon any INSURED for DAMAGES, including, bit [sic ] not limited to, service [sic ] suit or institution of arbitration proceedings against any INSURED.
(Id. at 19; ECF No. 17-2, Ex. 1-A at 6.) "Damages" is also defined by the Policy, in relevant part:
(ECF No. 15-19 at 11; ECF No. 17-2, Ex. 1-A at 18.) Next, and in relevant part, the Policy defines "professional services," as follows:
PROFESSIONAL SERVICES means any services arising out of the conduct of the INSURED'S profession as a Lawyer[.]
(ECF No. 15-19 at 20; ECF No. 17-2, Ex. 1-A at 7.) Finally, the Policy defines the term "wrongful act":
(ECF No. 15-19 at 20; ECF No. 17-2, Ex. 1-A at 7.) With the essential terms of the Policy established, the Court will now recount the litigation that preluded the current action.
On January 13, 2012, Mr. Rich, by counsel, filed an action for a declaratory judgment (the "Simoni Litigation") in the United States District Court for the Northern District of West Virginia against Joseph Simoni, Ph.D. ("Dr. Simoni").1 (ECF No. 18 at 4.) Dr. Simoni had assisted Mr. Rich in the investigation and prosecution of several lawsuits in Fairmont and Spelter, West Virginia (the "Fairmont and Spelter litigation"). (Id. ; ECF No. 16 at 1.) These lawsuits were settled in January 2008 and November 2010, respectively. (ECF No. 18 at 4.) A dispute subsequently arose between Mr. Rich and Dr. Simoni regarding Dr. Simoni's compensation for the services he provided in that prior litigation. (ECF No. 16 at 1; ECF No. 18 at 4.) Mr. Rich eventually initiated a declaratory judgment action against Dr. Simoni, in which Mr. Rich sought a declaration that Dr. Simoni was not entitled to any compensation from Mr. Rich for the services provided in the Fairmont and Spelter litigation. (ECF No. 16 at 1–2; ECF No. 18 at 4.) Mr. Rich was eventually successful in this litigation. (ECF No. 16 at 2.)
During the declaratory judgment action, Dr. Simoni filed a counterclaim against Mr. Rich. (ECF No. 16 at 2; ECF No. 18 at 5.) The counterclaim asserted causes of action for quantum meruit, unjust enrichment, breach of implied contract, negligent misrepresentation, conversion, and estoppel. (ECF No. 18 at 5.) In response to this counterclaim, Mr. Rich filed third-party complaints against three law firms (the "third-party law firms") that had served as co-counsel with Mr. Rich during the Fairmont and Spelter litigation. (Id. at 5–6.) Each law firm subsequently filed its own counterclaims against Mr. Rich in response.2 (Id. )
The current dispute between Mr. Rich and First Mercury arises out of the declaratory judgment action against Dr. Simoni. At issue is whether First Mercury was obligated to provide Mr. Rich with a legal defense for the counterclaims asserted against him by Dr. Simoni and the third-party law firms. The following is the relevant timeline of events that ultimately led to the current dispute between the parties.
Before the litigation between Mr. Rich and Dr. Simoni began in earnest, Dr. Simoni, through counsel, sent a demand letter to Mr. Rich on March 26, 2010. (ECF No. 15–12; ECF No. 16 at 13.) Mr. Rich was out of the country when this letter was sent, but after learning of it, discussed its contents with his personal counsel. (ECF No. 20 at 11.) Mr. Rich and his counsel did not respond to this letter because Dr. Simoni would be an important witness in any potential retrial of the Spelter matter, and they did not want there to be anything that might threaten his credibility. (Id. at 12.)
Dr. Simoni again sent a demand letter in November 2011 and attached two draft complaints asserting various causes of action against Mr. Rich. (Id. ) Mr. Rich was in Saudi Arabia at the time, and therefore did not become aware of the letter until approximately December 19, 2011. (Id. ) Mr. Rich had the letter forwarded to his personal attorney, who reviewed the letter and draft complaints on December 21, 2011. (Id. ) Mr. Rich and his attorney discussed the letter on December 30, 2011. (Id. ) Thereafter, Mr. Rich filed a complaint for declaratory judgment against Dr. Simoni on January 13, 2012. (Id. at 13.)
Dr. Simoni, as previously noted, filed a counterclaim in that action on April 26, 2012. (See ECF No. 18 at 5.) Following Dr. Simoni's counterclaim, Mr. Rich's counsel attempted to notify First Mercury of the counterclaim by faxing a letter on April 27, 2012 to the fax number set forth in the Policy. (ECF 20 at 13; ECF No. 15–13.) First Mercury, however, never received this letter. (ECF No. 16 at 15.) In fact, the fax confirmation page indicates an error in transmission and that the fax was not sent. (ECF No. 21-1.)
Then, following the counterclaims asserted by the third-party defendant law firms, Mr. Rich's counsel again reported the counterclaims to First Mercury on February 28, 2013.3 (ECF No. 20 at 13; ECF No. 21 at 9.) On April 29, First Mercury's claim administrator acknowledged receipt of the notice of claims sent on February 28. (ECF No. 20 at 13; ECF No. 21 at 9.) The claims administrator, however, denied coverage for the counterclaims, stating that "[t]he Simoni dispute does not arise out of conduct of the Insured's profession as a Lawyer, but rather involves a business dispute over the division of fees." (ECF No. 20 at 14; ECF No. 17–3 at 6.)
On May 1, 2015, Judge Keeley granted summary judgment in favor of Mr. Rich and the law firms regarding Dr. Simoni's claims. (ECF No. 15–16.) Then, on January 20, 2016, the third-party law firms filed a consolidated Amended Counterclaim against Mr. Rich. (ECF No. 15–11.) This consolidated counterclaim asserted two claims for breach of contract and one for implied indemnity for attorney fees...
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