Attorney Client Privilege Under Siege in Philadelphia.

An issue that comes up when representing companies is whether the outside attorney defending the company also represents the company’s employees.  The issue is significant since, in Pennsylvania (unlike other states), if there is not an attorney-client privilege, then the attorney is obligated to produce notes of interviews and written communications with interviewed individuals (unless those notes involve the attorney’s mental impressions).

This is the issue that was raised before Judge Rau of the Court of Common Pleas of Philadelphia County (a/k/a trial court in Philly).  In the case, the plaintiff Karen Newsuan was run over by a 46,000 pound front end loader truck that resulted in an above the knee amputation of her right leg.  The plaintiff sued Waste Services, the waste management facility, and an attorney was retained to represent Waste Services.  In the regular course of discovery, the defense attorney identified 16 employee fact witnesses.  He then interviewed them and took their statements.  Privileged, right?

“No” said Judge Rau. She held that because the employees never specifically agreed to retain the attorney before their statements were taken, there was no attorney-client relationship and thus no privilege.  The Waste Services’ attorney was ordered to produce all of the interview notes and statements.

Because the issue involved is one of privilege, an interlocutory appeal is possible in this case and the matter has gone up on appeal.  Where the appellate court ultimately comes down remains to be seen.  But, in the meantime, make sure you/your attorneys are careful (and specific) as to whom you/they represent.  Merely representing the corporate defendant does not, for the moment, mean that your communications with the employees are also guaranteed to be privileged.

For more information about this post, please e-mail Bob at

First Department Enforces Settlement Reached via Emails After Plaintiff Attempted to Renege (NY)

By and large, most personal injury lawsuits settle.  Following discovery and as the liability picture becomes clearer the parties can engage in good faith settlement discussions and equitably resolve the matter. An essential element of good faith negotiations is that the attorneys have the authority to negotiate and settle. Plaintiff attorneys must be in sync with their clients during this phase, since settlement is ultimately a plaintiff client decision.  Once terms are agreed, the attorneys, clients, and carriers reasonably believe the matter is resolved and all that remains is the final paperwork and draft.

Unfortunately, there are occasions when a party either gets cold feet or blatantly reneges on an agreement.  Frustration, consternation, and, in matter of Jimenez v Yanne, motion practice and appeals to enforce settlement follows.    In Jimenez The First Department Appellate Division, reversed the trial court’s decision and granted the defendants’ motion to enforce a settlement agreement.

CPLR Section 2104 states: “an agreement between parties or their attorneys relating to any matter in an action, other than one made between counsel in open court, is not binding upon a party unless it is in a writing subscribed by him or his attorney or reduced to the form of an order and entered…” The trial court rejected the defendants’ argument that a series of emails negotiating and agreeing to the settlement was enforceable.  Defendants’ attorney wrote, “Ok, we can agree to settle this matter for $13,000 to Jimenez and $17,000 to Morales.  Please confirm.  Thanks.”  The trial court note that defendants’’ attorney’s name was not typed at the end of her email.  Plaintiff attorney replied, “All good.  The power of email.” In a following email on the same day, plaintiffs’ attorney emailed, “Are you doing releases?” Plaintiffs’ attorney’s name was not printed at the end of either email.  The court found that as plaintiffs’ attorney did not type is name and the end of his email that confirmed the settlement; the emails do not qualify as signed writings pursuant the N.Y. General Obligations Law or the case law.  Therefore the settlement agreement was not binding upon plaintiff Morales, who changed her mind regarding the settlement.  (Plaintiff Jimenez provided a Stipulation of Discontinuance and a General Release).

In reversing, the appellate division found that the email communications between the plaintiffs’ counsel and defendants’’ counsel sufficiently set forth an enforceable agreement to settle the claims, including that of Morales.  The appellate division noted that plaintiff counsel typed his name at the end of the email accepting defendants’ office, which satisfied the CPLR requirement that settlement agreements be in a “writing subscribed by him or his attorney” in order to be enforceable.

This case highlights potential pitfalls of the negotiating process and the old Yogi Berra adage, “It ain’t over till it’s over.”  Professional ethics dictate that an agreement is an agreement.  Professional practice, however, illustrates that that is not always the case.   The attorneys signing their names to an email took on added significance, which resulted in appellate practice — and added litigation costs — over a relatively modest settlement.    Thanks to Justin Pomerantz for his contribution to this post.  Please email Brian Gibbons with any questions.

Gap In Treatment Not a Toll for Limitations Statute (NY)

The New York statute of limitations for a medical malpractice action is two and a half years. The time begins to accrue either from the date of the malpractice or from the time of last treatment.  So what if a plaintiff stops treating and then goes back to the doctor more than 2 ½ years later?

In Clifford v Kates  plaintiff commenced an action against Dr. Stephen Kates and the various medical institutions with which he was affiliated.  Plaintiff underwent a total hip replacement with Dr. Kates to treat her right hip pain in 2008.  After the surgery, plaintiff was experiencing pain, and followed-up with Dr. Kates for a period of approximately six months into January 2009.  She became disillusioned with the Dr. Kates and sought treatment with various other doctors.  She also consulted with an attorney who sent authorizations to the hospital and Dr. Kates for her medical records for litigation purposes.  In 2011, approximately two years after her last appointment with Dr. Kates, she returned to him once more.

Plaintiff then commenced an action against Dr. Kates in 2013 alleging medical malpractice. Defendants moved for summary judgment, claiming that the action did not fall within the statute of limitations, since it was brought more than 2 ½ half years after plaintiff’s post-surgical treatment with Dr. Kates in 2009.   Plaintiff argued that her visit in 2011 established that the physician-patient relationship was still in effect, and thus her treatment was ongoing until that date.

The Court ruled that the gap called into question the “continuous” nature of the relationship, and in particular held that the service of authorizations stopped the tolling of the statute. As such, the Court granted defendants’ motion for summary judgment.

Thanks to Christopher Gioia for his contribution.

For more information contact Denise Fontana Ricci at .


Court of Appeals Examines “Occurrence” Skirmish (NY)

Some consider insurance coverage law as exciting as watching paint dry on a basement wall.  Others approach the subject matter with enthusiasm, akin to delving into a spirited philosophical argument about the nature of truth, beauty, or excellence.

The understanding of the term “occurrence” in an insurance policy sometimes feels more like philosophy than law.  The subject may involve the exploration of temporal and spatial relationships, the unfortunate event test, and intervening agents and factors.

In Selective Ins Co of America v Rensselaer (COA), the New York’s Court of Appeals recently examined the definition and application of the term “occurrence” used in a police professional liability policy issued to the County of Rensselaer by Selective Insurance Company.   The Policy defined “occurrence” as “an event, including continuous or repeated exposure to substantially the same general harmful conditions, which results in …’personal injury’… by any person or organization arising out of the insured’s law enforcement duties.”  The policy went on to cite four specific examples that were “agreed to constitute one ‘occurrence’.” Of significance, the Policy also contained a deductible of $10,000 per occurrence, inclusive of legal fees and expenses.

In Selective, the County was faced with a class action involving about 800 class members arising out of the County’s policy of strip searching all people entering its jail regardless of the nature of the crimes alleged to have been committed.  The problem was the 2nd Circuit previously declared such policies unconstitutional.  Faced with such bad law, the County and its insurer Selective elected to settle the action for $1,000 per class member and $5,000 for the class representative.

After the settlement funds were paid by Selective, it demanded payment of the Policy’s deductible from the County and argued that the search of each class member was a separate occurrence.  Thus, according to Selective, the County was responsible for the entire indemnity payment of about $800,000 plus associated legal fees.  In response, the County countered that the entire action constituted a single occurrence and refused to pay more than a single $10,000 deductible.

The Court held that the claim of each separate class member constituted a single occurrence.  It emphasized that unambiguous provisions in an insurance policy should be given their plain and ordinary meaning and noted that “a court is not free to alter the contract to reflect its personal notions of fairness and equity.” A good omen for Selective.

The Court of Appeals enforced what it considered the “plain language” of the Selective policy:  the improper strip searches of arrestees over a four-year period constituted separate occurrences under the policy language.  The definition of an “occurrence” in the Policy covered personal injuries to an individual as a result of harmful conditions.  It did not permit the grouping of individuals unless that group was part of an organization.  Each strip search performed over a multi-year period harmed a specific arrestee as an individual and constituted a single occurrence.

The Selective case confirms New York’s reputation as a “pro-insurer” state. The Selective Court’s language should temper a lower court’s urge to re-write a plainly written policy provision.  The Selective decision also highlights the necessity of hammering out before a settlement is reached whether a civil suit involves one or multiple “occurrences,” particularly when a significant policy deductible applies.

If you have any questions, please contact Paul at .


NJ Supreme Court — Late Notice (Without Prejudice) Remains a NJ Policy Defense in Claims Made Policies.

Late notice, in the absence of a showing of “appreciable prejudice” by the insurer, has gone the way of the dodo bird in respect of its viability as the basis for a disclaimer on an occurrence based policy. However, in NJ (and in many other jurisdictions) late notice (even without appreciable or material prejudice) remained a defense in claims made policies (on the theory that timely notice was a material condition of the policy). Whether such a late notice defense was still viable was the question that the NJ Supreme Court decided yesterday in the case of Templo Fuente De Vida Corp., et al. v. National Union Fire Insurance Co. In an unanimous decision, the Court ruled that the answer is “yes.”

In Templo Fuente, a real estate closing went bad when the financing to fund the loan fell through. A directors and officers lawsuit was filed against Templo Fuente. Templo Fuente thereafter presented the claim to National Union for coverage under a claims made policy – some six months after being served with the complaint. National Union disclaimed coverage on the grounds that a condition precedent to coverage – timely notice – had not been met. The trial court and the appellate court agreed with National Union, but Templo Fuente appealed to the New Jersey Supreme Court, Templo Fuente argued (among other things) that allowing a late notice disclaimer (in the absence of “appreciable prejudice”) was contrary to the growing national trend.

The New Jersey Supreme Court disagreed and ruled for National Union. In reaching its decision, the Court noted that:
the requirement of notice in an occurrence policy is subsidiary to the event that invokes coverage, and the conditions related to giving notice should be liberally and practically construed.
By contrast, the event that invokes coverage under a “claims made” policy is transmittal of notice of the claim to the insurance carrier. In exchange for limiting coverage only to claims made during the policy period, the carrier provides the insured with retroactive coverage for errors and omissions that took place prior to the policy period.

This decision is obviously good news for insurers since the pricing for claims made policies is largely predicated on timely notice. But, what may be even better news is that in reaching its decision (in dicta) the Court noted that one of the reasons that claims made policies should be treated differently than occurrence based policies is that the insureds in claims made policies are “knowledgeable insureds, purchasing their insurance requirements through sophisticated brokers” who effectively know (or should know) what they are buying. One wonders whether this argument could be successfully used as a defense in respect of disclaimers on other types of policies or on other types of legal issues where there are “knowledgeable insureds” with “sophisticated brokers.”

For more information about this post please e-mail Bob Cosgrove .

Who are “You” in an Application for Professional Liability Coverage? (NJ)

In 2008, the sole proprietor (Povich) of a New Jersey law firm completed an application for professional liability insurance.  He responded to the question “[a]re you aware of any incident, circumstances, acts, errors, omissions, or personal injuries that could result in a professional liability claim against any attorney of the firm?” based on his own personal knowledge. The sole proprietor admitted that he employed what the court described as a “don’t ask” policy, whereby he neither had a system in place to monitor other attorneys nor asked the other attorneys about potential liability issues prior to completing the application. Prior to the issuing of the policy, an attorney at the firm was involved in an issue that would lead to a professional liability claim but, failed to disclose this information to the sole proprietor.

After the policy was issued, a former client filed suit against the firm alleging professional malpractice stemming from a cause of action that had been unresolved since 2007. The insurer filed a declaratory judgment action, seeking a declaration that it had no obligation to defend or indemnify because of the firm’s supposedly material misrepresentation in the application for insurance. The trial court found that since the firm was a sole proprietorship, the term “you” referred only to the sole proprietor. Following the New Jersey Supreme Court ruling in Liberty Surplus Ins. v. Nowell Amoroso P.A., 189 N.J. 436 (2007), the trial court used the subjective standard in determining whether the proprietor knew about the potential liability.

On appeal, the Superior Court reversed the court’s ruling finding that based on the plain language of the policy “you” included any firm attorney.  Accordingly, the offending attorney’s knowledge of the potential professional liability claim was critical to the issue of coverage, and the fact that the firm was a sole proprietorship was of no moment.   Thanks to Tiffany Davis for her contribution, and please email Brian Gibbons with any questions.

Court Refuses to Extend NY Ins. Law. §3420 Direct Actions to Professional Liability Polices

Many of the strict laws imposed against insurers in New York are found in NY Insurance Law § 3420 including, for example, the timeliness of the issuance of the disclaimers of coverage and the duty to notify a claimant of a disclaimer.

However, a recent decision by a federal district court in XL Specialty v Lakian, made clear that § 3420 is limited in its scope and does not apply to many types of insurance, including professional liability policies.

In Lakian, the insurer issued a professional liability insurance policy to Capital L Group, LLC.  Several allegations of mishandling of funds were asserted against individuals associated with Capital L.

The insurer filed an interpleader action after receiving multiple claims for the policy’s proceeds.  Several other parties filed motions to intervene.  Two such parties were default judgment creditors of Capital L who claimed that they were entitled to bring a direct action against the insurer under New York Insurance Law § 3420.  Indeed, under § 3420(a)(2), if a person or entity obtains judgment against an insured after 30 days “an action may … be maintained against the insurer under the terms of the policy or contract.”

But the Court refused to grant § 3420 an “expansive reading,” finding that no other court had “recognized a direct action Under Section 3420 in connection with the type of economic injury and financial services insurance policy at issue here.”  Quoting from § 3420, the Court determined that the statute only applied to policies “insuring against liability for injury to person … or against liability for injury to, or destruction of, property.”

Thanks to Steve Kaye for his contribution to this post.  Please write to Mike Bono for more information.

Lack of Payment Dooms Suit Against Lawyers (PA)

The relationship between CD Realty and Colliers, Lanard, & Axilbund, soured when CD Realty failed to pay Colliers commission that was due pursuant to an agreement to sell commercial property.  Colliers sued CD Realty, and CD hired the firm Riley Riper Hollin & Colagreco to represent them in this underlying suit.

The firm was unsuccessful in trying to argue that the agency agreement between the parties was unenforceable, and after a bench trial Colliers was awarded $421,933.  Unhappy with the award, CD decided to bring a malpractice action against its lawyers.  Among other claims, CD alleged that its lawyers didn’t adequately discuss its settlement options.

The Court granted summary judgment to the lawyers basing its decision, in part, on the fact that testimony showed Colliers was unwilling to settle the case for lower than the amount of the award.  Instead, the lowest amount it would have taken during settlement was $700,000, which was considerably higher than the award.

In addition, despite its apparent unhappiness with the award, a third party, Silver Lake Office Holdings, paid the judgment without requiring any repayment by CD Realty.  As a result, CD Realty did not actually suffer a loss as a result of their claims, and could not sustain an action against its attorneys.

Thanks to Thalia Staikos for her contribution to this post.


Thrid Circuit Upholds Inter-Related Wrongful Acts Provision in PL Policy (NJ)

Joining their colleagues in the medical profession, attorneys are increasingly becoming the targets of claims of professional malpractice. Given the mobility of individual lawyers, it can become a tricky endeavor to ensure that an attorney is covered in the event a claim is made based on alleged wrongful conduct committed at a prior firm.

In Gladstone v. Westport, an attorney found himself bare for earlier acts of alleged wrongful conduct committed while working as a solo practitioner after his firm was absorbed by a larger firm in New Jersey. The new firm added the attorney to its malpractice policy by attachment of a “Prior Firm Endorsement” that amended the policy’s definition of “Who is an Insured” covering him for legal services performed at his prior firm.

While operating as a solo, the attorney performed legal services from 2004 through 2006 for various individual and corporate clients who unsuccessfully sought to overturn some local zoning ordinances. After filing a collections action in 2006 against several of those former clients for non-payment of his legal fees, two responded by seeking damages for allegedly incompetent legal work. Of significance, the attorney did not file a claim with his own malpractice insurer in 2006. The collections action was eventually settled with almost all defendants, leaving the counterclaim of one defendant intact. Nevertheless, the collections action was dismissed without the knowledge or consent of the defendant with the counterclaim.

Fast forward to 2009. The former client realized that his counterclaim was mysteriously dismissed so he filed a new complaint asserting malpractice in 2009 when the attorney’s new firm had its professional liability coverage with Westport. In that suit, it was alleged that the zoning matter was not handled in accordance good practice. Notice was given to Westport who denied coverage on the basis that the malpractice claim was excluded by the “inter-related wrongful acts” provision.  That provision explains that “Two or more CLAIMS arising out of a single WRONGFUL ACT…or series of related or continuing WRONGFUL ACTS, shall be a single claim. All such CLAIMS whenever made shall be considered first made on the date on which the earliest CLAIM was first made arising out of such WRONGFUL ACT…”  The new firm filed an action for declaratory judgment challenging Westport’s denial of coverage.

The Third Circuit affirmed the district court’s ruling that the “inter-related wrongful acts” provision in Westport’s policy was not ambiguous or in conflict with the “Prior Firm Endorsement.” In short, the court found that the 2009 malpractice complaint related back to the earlier counterclaim and was “considered first made on the date on which the earliest claim was first made,” that is, in 2006. Since the claim was not “made and reported” during Westport’s policy year, it had no obligation to defend or indemnify the attorney in the newly filed malpractice case. Further, the “Prior Firm Endorsement” did not conflict with the “inter-related wrongful acts” provision. It merely added the  attorney to the roster of attorneys who qualified as an insured under the Westport policy and enlarged his coverage for wrongful acts committed while at an earlier firm.

If you have any questions or comments about this post, please email Paul at .

Legal Malpractice Claims Barred Business Enterprise/Pursuits Exclusions

Professional liability policies are designed to cover errors and omissions committed by professional while providing or failing to provide services on behalf of their firms.  Sounds simple enough.  Problems arise when attorneys -or other professionals – act in different capacities, sometimes providing legal advice while at others  offering business judgments or acting as “deal makers” for fledgling businesses.

In Abrams, Fensterman, et al. v. Underwriters At Lloyd’s, London, a partner and his law firm found themselves in a real pickle over some business transactions that went bad. The underlying complaint alleged that the partner committed legal malpractice and engaged in fraudulent conduct when he induced the underlying plaintiffs to invest in a business formed to underwrite and sell insurance products. According to the disgruntled investors,  when their seed money went missing, the law firm defendants falsely claimed that it was  stolen by members of a royal family in the United Arab Emirates.

Given the allegations of legal malpractice, the law firm defendants sought a defense and indemnification from their malpractice insurer. After some initial fact gathering, the insurer denied coverage citing two key policy exclusions commonly called the “business pursuits” and “business enterprise” exclusions. Closely aligned, these exclusions bar coverage for any claims arising out of or in connection with (1) a business “controlled, operated or managed by any insured” or (2) an  insured’s activities as “a trustee, partner, officer, director or employee of a business ” other than his law firm.  Given the attorneys’ alleged involvement in the formation, capitalization and management of the business venture, the court upheld the insurer’s denial of coverage.

Abrams, Fensterman reinforces that most professional liability policies seek to avoid assuming additional risk where an attorney “so intermingles his business relationships with his law practice” that the line between the two is blurred.  When timely invoked, the courts will uphold those exclusions.

If you have any questions or comments about this post, please email Paul at

Disclaimer:  This post is not intended to express any opinion on the merits of the allegations in the underlying lawsuit, which may or may not have any merit.