NY Underlying Real Estate Transaction
Facts: The attorney, who was employed full time by the Lawrence Group, Inc. as its general counsel, represented the plaintiff when it purchased some real estate property for $2,600,000. The Lawrence Group was a holding company for various insurance underwriting and agency components, which included the plaintiff. The Lawrence Group and the seller of the land later filed for bankruptcy. The plaintiff argued that because of the lien on the property it was out $2,600,000. The attorney then left the Lawrence Group and affiliated with a firm on an “of counsel” basis.
The plaintiff brought this legal malpractice action against the attorney. The attorney provided notice of the action to the defendant insurance company, which had issued a “claims made” policy to the firm. The defendant insurance company denied the coverage because it was provided “only to the extent such lawyer performs services on behalf of the named insurance,” and since the attorney rendered services as an employee of a corporation separate from the named insured, his acts fell within an exclusion contained in the policy. The defendant moved for summary judgment and the lower court granted the motion based on the policy language with respect to an attorney acting “of counsel.” The plaintiff appealed.
Issue: Does a policy issued to the law firm provide coverage for legal malpractice of an attorney who is affiliated with the law firm on an “of counsel” basis?
Ruling: Not when the policy at issue defined an “insured” to include, among others, “each lawyer acting as ‘of counsel,’ but only to the extent such lawyer performs services on behalf of the firm.” Id. at 923.
Lesson: New York’s Code of Professional Responsibility provides that the term “of counsel” nay be used “if there is a continuing relationship with a lawyer or law firm, other than as a partner or associate.”