Richard D. and Pamela Lindsay v. Attorneys Liability Protection Society ( 2013 )

STATE OF WEST VIRGINIA
SUPREME COURT OF APPEALS
Richard D. Lindsay and Pamela Lindsay FILED
d/b/a Tabor Lindsay & Associates, April 25, 2013
Defendants and Third-Party Plaintiffs Below, released at 3:00 p.m.
RORY L. PERRY II, CLERK
Petitioners SUPREME COURT OF APPEALS
OF WEST VIRGINIA
vs.) No. 11-1651 (Kanawha County 08-C-75)
Attorneys Liability Protection Society, Inc., et al.,
Third-Party Defendants Below, Respondents
MEMORANDUM DECISION
The petitioners, Richard D. Lindsay and Pamela Tabor Lindsay d/b/a Tabor
Lindsay & Associates, PLLC (collectively “Tabor Lindsay”), defendants/third-party plaintiffs
below, appeal an order of the Circuit Court of Kanawha County granting summary judgment
in favor of the respondent, Attorneys Liability Protection Society, Inc. (“ALPS”), third-party
defendant below, thereby concluding that Tabor Lindsay was not entitled to coverage under
claims-made-and-reported policies issued by ALPS for a lawsuit filed against Tabor Lindsay
in 2008.1
Upon our review of the parties’ arguments, the appendix record, and the
pertinent authorities, we affirm the circuit court’s grant of summary judgment in favor of
ALPS. Stated succinctly, based upon the particular facts presented in this case, we conclude
that the circuit court correctly determined that Tabor Lindsay failed to provide timely notice
of the claim to ALPS, which failure precluded coverage under the claims-made-and-reported
policies at issue. Furthermore, because this case presents no new or significant issues of law,
we find this matter to be proper for disposition in a memorandum decision in accordance
with Rule 21 of the West Virginia Revised Rules of Appellate Procedure.
The relevant facts are as follows. In March 2007, the law firm of Tabor
Lindsay & Associates, PLLC, purchased from ALPS a lawyers professional liability
1
We acknowledge and appreciate the participation in this appeal of Amicus
Curiae, the West Virginia Mutual Insurance Company.
1
insurance policy. Importantly, this policy was a claims-made-and-reported policy2 with a
policy period from March 24, 2007, through March 24, 2008 (“the 2007 policy period” or
“the 2007 policy”).3 The policy was renewed several consecutive times; each time for a new
one-year policy period.
On January 10, 2008, during the 2007 policy period, a pro se complaint was
filed against Tabor Lindsay by Ronnie Smith (“the Smith suit”).4 The lawsuit arose from a
medical malpractice case Tabor Lindsay had litigated in the early 1990s in association with
Rudolph DiTrapano.5 The suit settled in 1995, and a trust was established to receive the
2
Under a clams-made insurance policy, “coverage is provided based on when
a claim is made as opposed to when the circumstances giving rise to the claim came into
existence.” 1 Allan D. Windt, Insurance Claims & Disputes: Representation of Insurance
Companies & Insureds § 1:7, at 1-55 (5th ed. 2007) (footnote omitted). Explaining the
difference between a claims-made policy and an occurrence policy, this Court has stated
“‘[a]n “occurrence” policy protects a policyholder from liability for any act done while the
policy is in effect, whereas a “claims-made” policy protects the holder only against claims
made during the life of the policy.’ 7A J. Appleman, Insurance Law and Practice § 4503 at
90 (Berdal ed. 1979; Supp. 1995).” Auber v. Jellen, 196 W. Va. 168, 174, 469 S.E.2d 104,
110 (1996). A claims-made-and-reported policy, such as the policies at issue in the instant
case, includes the additional requirement that the insurer be notified of the claim within the
policy period. It has been explained that under a claims-made-and-reported policy, “a claim
is not made until notice of the claim is given to the insurance company.” 1 Allan D. Windt,
Insurance Claims & Disputes: Representation of Insurance Companies & Insureds § 1:7, 1­
56. In other words, “‘in a claims-made-and-reported policy, notice is the event that actually
triggers coverage.’” Id. at 1-58 n.4 (quoting Pension Trust Fund for Operating Engineers
v. Federal Ins. Co., 307 F.3d 944, 956-57 (9th Cir. 2002)).
3
The retroactive coverage date applicable to Richard Lindsay and Pamela
Lindsay under the ALPS policies was March 24, 1993. The retroactive coverage date is the
date from which a lawyer’s conduct might be covered by the policy so long as a claim arising
from such conduct is first made during the policy period.
4
Mr. Smith sued in his capacity as administrator of his wife’s estate, and on his
own behalf.
5
The plaintiffs, Mr. and Mrs. Smith, had retained Mr. DiTrapano to represent
them in their malpractice action. Mr. DiTrapano then enlisted Tabor Lindsay to litigate the
suit due to their expertise in handling medical malpractice cases.
2
proceeds of the settlement.6 The pro se complaint alleged that, in relation to the trust
account, “Pamela Tabor Lindsay, had illegally and wrongfully caused a check to be issued
in her name on August 9, 1996, in the amount of $290,000.00.” In response to the complaint,
Tabor Lindsay hired counsel and filed an answer. At this time, ALPS was not notified of the
complaint.
Mr. Smith subsequently hired counsel and filed an “Amended Complaint” on
May 27, 2008, after the expiration of the 2007 policy period, and during the policy that was
in effect from March 24, 2008, to March 24, 2009 (“the 2008 policy period”). The amended
complaint expanded the allegations of improper handling of the trust account funds made
against Tabor Lindsay. Specifically, the amended complaint alleged, inter alia, that Pamela
Tabor Lindsay had wrongfully endorsed Mr. Smith’s name on a check and failed to deposit
certain settlement proceeds into the trust, and that Tabor Lindsay had failed to provide an
accounting of allegedly missing funds.7 The amended complaint further alleged that these
wrongful actions violated the fiduciary duty owed by Tabor Lindsay to the beneficiary of the
trust account and to her husband.8 Tabor Lindsay again chose not to notify ALPS of the
lawsuit. In fact, no notice to ALPS regarding the Smith suit was provided during either the
2007 or 2008 policy periods.
Nearly two years later, under the ALPS claims-made-and-reported policy in
effect from March 24, 2010, to March 24, 2011 (“the 2010 policy period” or “2010 policy”),
6
Pamela Tabor Lindsay was one of three trust advisors to the bank.
7
The Appendix Record submitted to this Court is silent as to whether a
complaint has been filed with the Office of Disciplinary Counsel (ODC) in connection with
the conduct alleged in the Smith suit. Due to the nature of the allegations made against
Tabor Lindsay, we find a referral of this matter to the Office of Disciplinary Counsel to be
warranted. “[W]hen this Court believes a case before it presents the appearance of conduct
that does not comport with [the Rules of Professional Conduct (“RCP”)], we will comply
with Rule 8.3(a) of the RPC and Canon 3D(2) of the Code of Judicial Conduct, and refer the
matter to the Office of Disciplinary Counsel (ODC) for its review.” Gum v. Dudley, 202
W. Va. 477, 491, 505 S.E.2d 391, 405 (1997). Accordingly, we direct the Clerk of the
Supreme Court of Appeals to transmit a certified copy of this Opinion to the ODC. To be
clear, by making this referral we express no opinion as to whether disciplinary proceedings
ultimately should be initiated or how such proceedings should be resolved. It is for ODC to
determine whether, and/or how, to proceed after it has reviewed this matter.
8
The trust account beneficiary was deceased at the time of the filing of the
initial pro se complaint.
3
Richard Lindsay, for the first time, notified ALPS of the Smith suit by letter dated May 20,
2010. The letter explained that
[a] lawsuit was filed against Pamela Lindsay, Richard
Lindsay and Tabor Lindsay & Associates in 2008 from alleged
negligent conduct in 1995.
....
Because we looked upon this as a nuisance
case – nothing was done for almost a year – we did not notify
you, but I do not believe you are now prejudiced as we have
during the time period employed local counsel . . . to represent
us.
By letter dated May 25, 2010, ALPS informed Tabor Lindsay that it was
disputing the request for insurance coverage. ALPS stated that its dispute was “based upon
the failure to timely provide notice and based upon the allegations in the complaint which
amount to a claim for conversion and demand for punitive damages.” Thereafter, by letter
dated June 23, 2010, ALPS notified Tabor Lindsay that it denied their request for a defense
and indemnity. The correspondence stated in part:
Unfortunately, coverage is not available for Mr. Smith’s claims
because, among other things, they were not “first made . . . and
first reported” during the effective period of the Policy, as
required under the insuring clause. Apart from this, the relief
that Mr. Smith seeks, an accounting and repayment of amounts
allegedly misappropriated by you, do not constitute damages
within the meaning of the Policy. In addition, Mr. Smith’s
claims appear to fall within the scope of the Policy’s exclusions
for claims based upon improper handling of funds, billing
disputes, and intentional/dishonest conduct. Because no
coverage exists, ALPS will not provide you or your law firm,
Tabor Lindsay & Associates, . . . with a defense to Mr. Smith’s
claims, and you will need to continue to employ your own
counsel to protect your interests. . . .
Approximately four months later, on September 24, 2010, a second amended
complaint was filed in the Smith suit. The second amended complaint re-alleged and adopted
by reference the allegations in the amended complaint. In addition, the second amended
complaint included an express allegation of negligence that stated: “[e]ach allegation therein
setting forth actions, behaviors, omissions or violations of duty on the part of the defendants
4
were occasioned by their negligence.” Tabor Lindsay notified ALPS of the second amended
complaint on October 1, 2010. ALPS again denied Tabor Lindsay’s request for a defense
and indemnity, relying on several of the same grounds previously asserted for denying
coverage. Moreover, ALPS noted that Tabor Lindsay had alleged no new facts or case law
supporting coverage.
Tabor Lindsay then filed a third-party complaint that, in relevant part, sought
declaratory judgment on the issue of coverage under its ALPS policies. ALPS filed a motion
for summary judgment arguing that there was no coverage under the applicable policies
insofar as Tabor Lindsay failed to provide notice of the claim to ALPS during the same
policy period in which the claim was first made, the 2007 policy period. In addition, ALPS
asserted that coverage also was unavailable due to the nature of the claims against Tabor
Lindsay, i.e. claims seeking recovery of misappropriated funds. Tabor Lindsay filed a cross-
motion for summary judgment. By order entered October 26, 2010, the circuit court granted
ALPS’ motion for summary judgment based on its conclusion that the Smith suit
was not “first reported” within the policy period in which it was
“first made,” as required by the insuring clause. The undisputed
evidence demonstrates that Mr. Smith first asserted his claim
during the 2007 Policy period and that [Tabor Lindsay] did not
report it until nearly two years later, during the 2010 Policy
period.
We agree.
“A circuit court’s entry of summary judgment is reviewed de novo.” Syl. pt.
1, Painter v. Peavy, 192 W. Va. 189, 451 S.E.2d 755 (1994). In reviewing the lower court’s
summary judgment order de novo, we are mindful that “[a] motion for summary judgment
should be granted only when it is clear that there is no genuine issue of fact to be tried and
inquiry concerning the facts is not desirable to clarify the application of the law.” Syl. pt. 3,
Aetna Cas. & Sur. Co. v. Federal Ins. Co. of New York, 148 W. Va. 160, 133 S.E.2d 770(1963). That is to say, “[t]he circuit court’s function at the summary judgment stage is not
to weigh the evidence and determine the truth of the matter, but is to determine whether there
is a genuine issue for trial.” Syl. pt. 3, Painter, 192 W. Va. 189, 451 S.E.2d 755.
To resolve the question of whether the circuit court correctly determined that
there is no coverage for the Smith claim, we must examine the policy language. This Court
has held that, “[l]anguage in an insurance policy should be given its plain, ordinary
meaning.” Syl. pt 1, Soliva v. Shand, Morahan & Co., Inc., 176 W. Va. 430, 345 S.E.2d 33(1986), overruled in part on other grounds by National Mut. Ins. Co. v. McMahon & Sons,
177 W. Va. 734, 356 S.E.2d 488 (1987). “Where the provisions of an insurance policy
contract are clear and unambiguous they are not subject to judicial construction or
5
interpretation, but full effect will be given to the plain meaning intended.” Syl., Keffer v.
Prudential Ins. Co. of Am., 153 W. Va. 813, 172 S.E.2d 714 (1970). See also Syl., Tynes v.
Supreme Life Ins. Co. of Am., 158 W. Va. 188, 209 S.E.2d 567 (1974) (“Where provisions
in an insurance policy are plain and unambiguous and where such provisions are not contrary
to a statute, regulation, or public policy, the provisions will be applied and not construed.”).
The policies involved in the instant dispute are claims-made-and-reported
policies.9 The relevant language was the same in each policy, though we initially examine
only the policy in effect during the 2007 policy period. The first page of the policy contained
the following paragraph explaining the type of policy that had been purchased:
This policy is a “Claims Made and Reported” policy. Therefore,
the Insured must immediately report any claim to ALPS during
the policy period or during any applicable extended reporting
period. No coverage exists under this policy for a claim which
is first made against the Insured or first reported to ALPS after
the policy period or any applicable extended reporting period.
If the Insured receives notice of a claim, or becomes aware of
an act, error or omission or personal injury that could
reasonably be expected to be the basis of a claim, the Insured
must immediately deliver a written notice of the claim directly
to ALPS. . . .
In addition, the policy placed an affirmative duty upon the insured to provide
notice of any claim or potential claim of which the insured became aware. In a section titled
“Insured’s Obligations upon Notice of Claim or Potential Claim,” the policy specified:
When an Insured becomes aware of an act, error or
omission or personal injury that could reasonably be expected
to be the basis of a claim, but no claim arising therefrom has yet
been made, the Insured shall give written notice to the
Company as soon as practicable. Such notice shall include the
fullest information obtainable concerning the potential claim.
....
When a claim is made against an Insured, the Insured
shall immediately forward to the Company every demand,
notice, summons or other process received by him or his
9
For a definition of this type of policy, see supra note 2.
6
representative. The Company shall have no obligation
hereunder with respect to a claim unless and until so notified.
Furthermore, the first paragraph under the “Coverage” section of the policy
reiterated that coverage was dependent upon a claim being “first made” against Tabor
Lindsay and “first reported” to ALPS during the policy period:
Subject to the limit of liability, exclusions, conditions and other
terms of this policy, the Company agrees to pay on behalf of the
Insured all sums (in excess of the deductible amount) that the
Insured becomes legally obligated to pay as damages, arising
from or in connection with A CLAIM FIRST MADE
AGAINST THE INSURED AND FIRST REPORTED TO THE
COMPANY DURING THE POLICY PERIOD . . . .
The policy defines the term “claim” as “a demand for money or services, including but not
limited to the service of suit or institution of arbitration proceedings against the Insured.”
The foregoing language is not ambiguous as it relates to the facts of this case.
The ALPS policy plainly required Tabor Lindsay to provide notice to ALPS of the Smith suit
in 2007 when that claim was first made. Tabor Lindsay’s failure to provide notice as
required by the policy precludes coverage for that claim under the 2007 policy. Tabor
Lindsay seeks to overcome the plain policy language by arguing, in essence, that because the
allegations contained in the initial Smith suit would not have been covered under their policy,
there was no need to report the same.10 However, given the broad policy definition of the
term “claim,” and the fact that Tabor Lindsay was required by the policy to notify ALPS of
“an act, error or omission . . . that could reasonably be expected to be the basis of a claim”
as well as “every demand, notice, summons or other process received” in connection with a
claim, Tabor Lindsay’s argument is untenable.
Tabor Lindsay additionally seeks to obtain coverage under the 2010 policy
period, arguing that the second amended complaint filed in the Smith suit should be treated
as a new claim for purposes of notice to ALPS because the second amended complaint
10
We note that this justification was not relied upon by Tabor Lindsay to
explain to ALPS the reason for their untimely notice. Instead, Tabor Lindsay admitted that
they chose not to provide notice because they considered the Smith suit to be a nuisance case.
7
added, for the first time, a negligence claim. We reject this argument.11 As the circuit court
observed, the second amended complaint was founded on the same set of operational facts
as the earlier complaints. The only change was the addition of a new theory based upon that
same set of facts. Under these circumstances, there simply was no new “claim” under the
broad definition of that term set out in the policy.12 Furthermore, the 2010 policy precluded
Tabor Lindsay from providing notice during a policy term subsequent to the 2007 policy
period because Tabor Lindsay first knew about the Smith suit during the 2007 policy period.
Two provisions that appeared in each of the ALPS policies issued to Tabor Lindsay
precluded coverage of the Smith suit based upon Tabor Lindsay’s prior knowledge of the
same. Under the first provision, coverage for a claim would be available only if “at the
effective date of this policy, no Insured knew or reasonably should have known or foreseen
that the act, error, omission or personal injury might be the basis of a claim.” For each
policy period following the 2007 policy period, Tabor Lindsay knew of the Smith suit;
therefore, no coverage was available for the Smith suit under the plain terms of each of the
policies issued after the 2007 policy. Similarly, in a section of the policy titled “Insured’s
Obligations upon Notice of Claim or Potential Claim,” the policy stated, in relevant part:
In the event an Insured fails to give written notice to the
Company of a claim, prior to the end of the policy period in
which the claim is made, or in the event an Insured fails to give
written notice to the Company of a potential claim, as described
in Section 4.6.1,[13] prior to the end of the policy period in
11
The circumstances of this case differ from one where timely notice has been
given, coverage was denied, and the complaint was later amended. Thus, our resolution of
the instant matter, where notice was not timely given, provides no guidance for such a case.
12
This case does not present a factual scenario where a complaint was amended
to join an entirely separate claim against the defendant, such as where an original suit was
filed to allege malpractice against a lawyer in relation to the drafting of a will, and the
complaint subsequently amended to add a claim of malpractice involving the lawyer’s
representation of the same person in an unrelated civil lawsuit. In the instant case, we need
not decide whether such a scenario would render the new cause of action asserted in the
amended complaint a “new claim” for purposes of providing notice to the insurer.
13
Subsection 4.6.1 of the policy states:
When an Insured becomes aware of an act, error or
omission or personal injury that could reasonably be expected
to be the basis of a claim, but no claim arising therefrom has yet
been made, the Insured shall give written notice to the
(continued...)
8
which the Insured first becomes aware of the act, error,
omission, or personal injury, then no coverage for any such
claim shall be afforded to the Insured under any future policy
issued by the Company.
(Footnote added). Thus, Tabor Lindsay’s knowledge of the Smith suit during the 2007 policy
period, combined with its failure to provide ALPS with notice of the same, precludes Tabor
Lindsay from obtaining coverage for the claim under any subsequent policy, including the
2010 policy.14 In summary, because Tabor Lindsay ignored the plainly worded policy
requirements and chose not to provide ALPS with notice of the Smith suit during the 2007
policy period when the claim was first made, coverage for that claim was forfeited by Tabor
Lindsay.
Based upon the foregoing discussion, we affirm the October 26, 2010, order
of the Circuit Court of Kanawha County that granted summary judgment in favor of ALPS.
Affirmed.
ISSUED: April 25, 2013
CONCURRED IN BY:
Chief Justice Brent D. Benjamin
Justice Robin Jean Davis
Justice Margaret L. Workman
Justice Menis E. Ketchum
Judge Phillip M. Stowers, sitting by temporary assignment
DISQUALIFIED:
Justice Allen H. Loughry, II
13
(...continued)
Company as soon as practicable. Such notice shall include the
fullest information obtainable concerning the potential claim.
14
We note that each annual renewal application completed by Tabor Lindsay
following the 2007 policy period asked the following two questions: (1) “During the past five
years, have any Professional Liability claim(s) been made against the applicant firm, any of
its members or any former members while they were members of the firm?”; and (2) “Does
any firm member have knowledge or information of any incident or occurrence which might
give rise to a claim being made?” On each application, Tabor Lindsay answered these
questions in the negative.
9