Wesco Ins. Co. v. Wood

• Decision Date: 27 September 2017
• Docket Number: No. 15 C 7190,15 C 7190
• Citation: Wesco Ins. Co. v. Wood, No. 15 C 7190 (N.D. Ill. Sep 27, 2017)
• Parties: WESCO INSURANCE COMPANY, Plaintiff, v. BARI WOOD; LAW OFFICES OF BARI WOOD, P.C.; JOHN E. GIERUM, solely in his capacity as Trustee for the bankruptcy estate of Jonathan F. Glick; and AMERICAN ZURICH INSURANCE COMPANY, Defendants. AMERICAN ZURICH INSURANCE COMPANY, Cross-Plaintiff, v. BARI WOOD; LAW OFFICES OF BARI WOOD, P.C.; and JOHN E. GIERUM, solely in his capacity as Trustee for the bankruptcy estate of Jonathan F. Glick, Cross-Defendants. BARI WOOD, Counterplaintiff, v. WESCO INSURANCE COMPANY and AMERICAN ZURICH INSURANCE COMPANY, Counterdefendants.
• Court: U.S. District Court — Northern District of Illinois

WESCO INSURANCE COMPANY, Plaintiff, v. BARI WOOD; LAW OFFICES OF BARI WOOD, P.C.; JOHN E. GIERUM,

solely in his capacity as Trustee for the bankruptcy estate of Jonathan F. Glick;

and AMERICAN ZURICH INSURANCE COMPANY, Defendants.

AMERICAN ZURICH INSURANCE COMPANY, Cross-Plaintiff, v. BARI WOOD; LAW OFFICES OF BARI WOOD, P.C.; and JOHN E. GIERUM,

solely in his capacity as Trustee for the bankruptcy estate

of Jonathan F. Glick, Cross-Defendants.

BARI WOOD, Counterplaintiff, v. WESCO INSURANCE COMPANY and AMERICAN ZURICH INSURANCE COMPANY, Counterdefendants.

No. 15 C 7190

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

September 27, 2017

Judge Ronald A. Guzmán

MEMORANDUM OPINION AND ORDER

This is an insurance-coverage dispute in which the parties seek declaratory relief regarding the obligations of Wesco Insurance Company ("Wesco") and American Zurich Insurance Company ("Zurich") under lawyers professional liability policies issued to the Law Offices of Bari Wood and/or the Law Offices of Bari Wood, P.C. ("Wood, P.C."). The primary issues are whether a potential claim was sufficiently reported to Zurich during the policy period and the applicability of certain exclusions in the policies. Wesco, Zurich, and Wood all move for summary judgment under Federal Rule of Civil Procedure 56. Zurich also moves to strike the report and bar the testimony of Wesco's expert witness, Charles D. Henderson. For the reasons explained below, Zurich's motion for summary judgment is granted; Zurich's motion to strike Henderson's report and bar his testimony is denied as moot; Wesco's motion for summary judgment is granted in part and denied in part; and Wood's motion for summary judgment is denied.

MATERIAL FACTS AND PROCEDURAL BACKGROUND

The facts are generally undisputed. Zurich issued a Lawyers Professional Liability Insurance Policy (the "Zurich Policy") to the Law Offices of Bari Wood on a "claims made and reported" basis, for the policy period of May 6, 2013 to May 6, 2014 (the "Zurich Policy Period"). Subject to limitations and exclusions, the policy contains a duty to defend claims based on an act or omission in Wood's rendering or failing to render legal services for others. (Dkt. No. 93-1, Zurich Policy at 1.) Specific provisions of the Zurich Policy are set out below in the Court's discussion of the parties' summary judgment motions.

On May 18, 2013, Jonathan F. Glick, who is not a party to this case, filed a Chapter 7 bankruptcy petition, which was assigned Case Number 13 B 20989 (the "Glick Bankruptcy"). On March 5, 2014, during the Zurich Policy Period, four of Glick's creditors (the "MovingCreditors") filed a "Joint Motion for Authority to Issue Rule 2004 Subpoenas on Individuals and/or Entities Owned, Controlled, Affiliated or Related to the Debtor, Jonathan Glick" (the "Motion for Leave"). Those individuals included Bari Wood. In the motion, the Moving Creditors noted that Glick had stated in his bankruptcy schedules that he had been an officer of thirty-seven business entities within the preceding six years, and that Glick had testified at the meeting of creditors that many of those entities were insolvent. (Dkt. No. 93-3, Mot. for Leave at 2.) The Moving Creditors further stated that they had learned that certain corporations Glick operated and held in a Glick-controlled trust were in fact not insolvent, so they sought leave to serve subpoenas in order to obtain information about contributions made to Glick-controlled trusts, the timing of those contributions, and payments made by and among various of Glick's business entities. (Id. at 3-8.) That information, they said, would enable them to determine Glick's "true financial condition." (Id. at 8.) The Moving Creditors sought documents from Bari Wood as well as her deposition. (Id. at 9.) They stated that she was "the in-house general counsel for most of the Glick companies" and sought information from her "with respect to testimony related to Play Makers Group, LLC and the invoicing and correspondence handled by Bari Wood," in order "to understand the various payments made by [Glick] on behalf of Play Makers Group, LLC among other things." (Id. at 4, 6.)

On March 7, 2014, Wood reported the Motion for Leave to her insurance broker, M.G. Welbel and Associates, Inc. ("Welbel"), which on the same date faxed and emailed to Zurich a copy of the Motion for Leave; requested "pre claims assistance" on Wood's behalf; and requested that Zurich contact Wood by phone or at her email address, "bari@bwoodlaw.com." (Dkt. Nos. 27-1; 93-3.) In a letter dated March 10, 2014 from Zurich Team Manager Laurence Grob (the "Grob Letter"), Zurich acknowledged receipt of the information; identified the matterwith a claim number and the assigned claim handler, Louis Peraggine; stated that Peraggine would contact Wood; and further stated that "[f]or effective notice," her policy required that the following information be sent to Zurich: "[t]he description of the alleged act or omission"; "[t]he identities of the claimants or potential claimants"; "[t]he identities of the responsible insured(s)"; and "[t]he date and circumstances by which the insured(s) first became aware of the alleged act or omission." (Dkt. No. 101-5.) The Grob Letter bears the email address "bari@woodlaw.com," not Wood's correct email address. Wood says that she did not receive the Grob Letter via email or U.S. Mail; rather, she received it months later, in June 2014, when Welbel emailed her a copy. (Dkt. No. 101-4, Dep. of Bari Wood at 69-71.)

On March 10, 2014, Peraggine telephoned Wood to discuss the Motion for Leave. Peraggine recalled that he and Wood discussed, among other things, the motion and subpoena, the background of the Glick entities and the bankruptcy, and what type of work Wood performed for the Glick entities. (Dkt. No. 101-12, Dep of Louis A. Peraggine at 42-43.) Peraggine also said that Wood answered all of his questions. (Id. at 52-53.) Wood says that Peraggine did not tell her that she needed to take any further action by way of notice to Zurich. (Wood Dep. at 50.)

On March 25, 2014, Wood completed and signed a Zurich form titled "Notice of Circumstance/Claim Reporting Form—Lawyers Professional Liability Insurance Policy" ("Notice of Circumstance Form"), which instructed that it be completed for "each claim or circumstance that could result in a claim." (Dkt. No. 27-2.) Wood identified her law office as the applicant; stated that March 7, 2014 was the date she "first had reason to believe that a claim might be made or an incident (circumstance) report made"; and, in response to the question that sought the names of the claimants or potential claimants, stated: "None at this time. Please see Number 8." (Id.) In response to Question 8, which asked for a "[d]escription of [the] alleged actor omission," Wood stated: "On 3/7/14 Bari Wood received a Motion for Leave to Issue 2004 [sic] Subpoenas in Case No. 13-20989, which is a bankruptcy matter. A copy of said motion was delivered to Zurich on 3/7/14." (Id.) She further stated that "business transaction/advice" was the area of practice from which the circumstance that could result in a claim arose. (Id.)

On March 26, 2014, Wood signed a Zurich form titled "Lawyers Professional Liability Insurance Application" (the "2014 Application"), which had been completed by Welbel, to seek renewal of her insurance policy. Wood checked the "Yes" box in response to Question 37, which asked: "Is any Attorney in Question 2 [Wood] . . . aware of any circumstance, incident, act, error or omission that could result in a claim or suit against the applicant or any predecessor or any of the former or current Attorneys or employees of the Applicant?" (Dkt. No. 27-3 at 4.) Wood attached an additional sheet to the 2014 Application further explaining her answer to Question 37 as follows: "Applicant has provided Zurich with a Motion for Authority to Issue Rule 2004 Subpoena in relation to Case Number 13-20989." (Id. at 5.) On March 27, 2014, Welbel submitted the Notice of Circumstance Form and 2014 Application to Zurich.

In the Glick Bankruptcy, the court granted the Motion for Leave, and on April 8, 2014, a subpoena for document production and deposition was issued to Wood. She forwarded a copy of the subpoena to Zurich on June 17, 2014. In a July 23, 2014 letter to Wood (the "Reservation of Rights Letter"), Peraggine acknowledged Zurich's receipt of the subpoena; notified Wood that Zurich had retained "pre-suit counsel for the limited purpose of assisting [Wood] with responding to the subpoena" in the Glick Bankruptcy; reserved the right to deny coverage based on a number of specifically-identified policy provisions and exclusions; and generally reserved all rights and defenses available under the Zurich Policy. (Dkt. No. 23-6.) Subsequently, attorney Thomas Pontikis assisted Wood with producing documents in response to the subpoenaand testifying at her deposition. Pontikis also regularly reported to Peraggine on the events of the bankruptcy proceeding.

Zurich did not renew the Zurich Policy, which expired on May 6, 2014. Wood obtained insurance from Wesco, which issued to the Law Offices of Bari Wood, in reliance on the representations Wood made in the 2014 Application,¹ a Lawyers Professional Liability Policy (the "First Wesco Policy") on a "claims made and reported" basis, for the policy period of May 6, 2014 to May 6, 2015 (the "First Wesco Policy Period"). Wesco later issued, to the Law Offices of Bari D. Wood, P.C., a Lawyers Professional Liability Policy (the "Second Wesco Policy") on a "claims made and reported' basis, for the policy period of May 6, 2015 to May 6, 2016 (the "Second Wesco Policy Period"). Subject to limitations and exclusions, the policies contain a duty to defend Wood on claims for damages that arose out of an act or omission in rendering or failing to render legal services. (Dkt. No. 101-1, First Wesco Policy at 1-2; Dkt....