No Coverage for Malpractice Suit Where Insured Misrepresented Prior Knowledge of Potential Claim

A Connecticut state court has held that an insurer owes no coverage to an insured law firm that misrepresented its prior knowledge of a potential malpractice claim to be filed by a former client. Evans & Lewis, LLC v. Nat’l Liab. & Fire Ins. Co., 2024 WL 3579684 (Conn. Super. Ct. July 22, 2024).

The claims-made professional liability policy included a prior knowledge condition, whereby coverage was potentially available only if “[a]s of the continuous insurance start date no Insured knew or reasonably should have known of any same or related wrongful act, legal service, fact, circumstance or adverse outcome that might result in a claim.” In a premium indication form and in a supplemental warranty letter completed prior to the coverage period, the insured law firm checked boxes indicating “no” to questions asking whether the firm or its attorneys had been involved in the past five years in “a claim, potential claim, suit, disciplinary matter or grievance arising out of the rendering or failing to render legal services.” That answer in the supplemental warranty letter, as later conceded by the insured in the coverage action, was untrue: The previous year, a former client had filed a complaint before a state grievance committee regarding the legal services of an attorney at the firm. During the policy period, the former client sued the insured law firm for professional malpractice, and the insurer denied coverage.

Granting summary judgment to the insurer in the coverage action, the court deemed the supplemental warranty letter part of the insurance agreement and determined that the prior knowledge condition precluded coverage for the malpractice suit. The court highlighted that the premium indication form explicitly incorporated into the policy “any and all information, Applications, supplements, addendums and statements” provided by the insured and that the supplemental warranty letter specified that “any misrepresentations or false statements made may be the basis for the termination or revocation of coverage.” Having determined that those materials were part of the policy, the court turned to the question of whether the prior knowledge condition had been satisfied. The court found both that the insured subjectively knew about the former client’s grievance and that, objectively, a reasonable person in the insured’s position “might expect” that grievance to form the basis of a claim. To argue that it did not anticipate a meritorious claim, the insured pointed out that the state grievance committee had dismissed the former client’s complaint, but the court held that it was the fact that the previous complaint existed at all that was material to the coverage determination.