No Professional Liability Coverage Available For Dispute
April 07, 2010
The 1st District Appellate Court recently held that no coverage was available to an attorney under a lawyer's professional liability policy, for claims against the attorney in either a civil suit or a disciplinary proceeding, based on allegations that the attorney charged a contingent legal fee in excess of that allowed by statute. Continental Casualty Co. v. Donald T. Bertucci, Ltd., 2010 WL 1033448 (1st Dist. 2010).
The attorney, Donald T. Bertucci, was represented by Connelly, Roberts & McGivney LLC, of Chicago. Clausen, Miller P.C. of Chicago, and Wiley, Rein LLP of Washington D.C., represented the insurer, Continental.
Bertucci, a sole practitioner, represented Lourdes Rodriguez in an underlying medical malpractice action and recovered for her a settlement of $2.25 million in 2002. According to Rodriguez, Bertucci subsequently retained $750,000 from the settlement proceeds as his fee, or 33 percent of the recovery.
By statute, 735 ILCS 5/2-1114(a), the maximum fee for an attorney in a medical malpractice action is 33 percent of the first $150,000 of recovery, 25 percent of the next $850,000, and 20 percent of any amount over $1 million. The statute allows additional compensation in extraordinary circumstances, but requires that the attorney obtain court approval.
Rodriguez alleged that the fee statute and her written agreement with Bertucci limited his compensation to no more than $512,500, and that he had taken an additional $237,500 without getting her consent and the court's approval. She further alleged that Bertucci misrepresented to her that he had obtained court approval for the extra fee. In addition, she claimed that he had told her that certain medical fees had been satisfied out of the settlement, which never were.
Rodriguez retained new attorneys, who notified the ARDC of the alleged attorney misconduct, and the ARDC commenced an investigation. She subsequently filed a state court action in which she sought restitution for legal fees improperly charged by Bertucci, and the recovery of consequential expenses for his impropriety, including statutory interest, her new attorneys fees, and punitive damages.
Bertucci sought coverage from Continental for both the civil suit and the ARDC proceeding. Continental's professional liability policy issued to Bertucci was subject to a $2 million limit and a $5,000 deductible, on a claims made basis. Continental denied coverage for both proceedings and brought the instant action for a declaration of the parties rights and obligations. Bertucci counterclaimed, and on cross summary judgment motions, the circuit court ruled in Continental's favor on the civil suit and for Bertucci on the administrative proceeding. Both sides appealed.
In an opinion by Justice Margaret Stanton McBride, the appellate court affirmed in part and reversed in part, both holdings in favor of Continental. With respect to the civil action, Bertucci argued principally that Continental had prevailed by mischaracterizing Rodriguez's lawsuit as a mere fee dispute, which was outside the scope of coverage. He contended, instead, that Rodriguez alleged that he committed an error or omission while representing her when, despite her authorization, he failed to comply with the statutory requirement for obtaining court approval for an enhanced fee.
McBride responded by looking at the terms of the policy. She noted that under the insuring agreement, Continental was to provide coverage for all sums in excess of the deductible that Bertucci became obligated to pay as "damages," the "claim" for which was first made during the policy period.
The policy defined "damages" as judgments and settlements not including "legal fees ... charged by the Insured ... and injuries that are a consequence of any of the foregoing." It also defined a "claim" as "a demand received by the Insured for money or services arising out of an act or omission ... in the rendering of or failure to render legal services." "Legal services" in turn were defined as "those services performed by an Insured for others as a lawyer."
In McBride's view, Rodriguez's civil complaint did not trigger coverage under these provisions because it alleged neither "damages" – rather it sought the recovery of legal fees charged by Bertucci – nor an act or omission in the performance of legal services for Rodriguez.
To the extent the civil complaint alleged Bertucci's failure to comply with the Illinois fee limitation statute, moreover, McBride found that the allegations dealt exclusively with legal fees, or injuries that were a consequence of such fees. His retention of money, in other words, could not be construed as the provision of any type of service for another and was a business practice independent of the lawyer-client relationship. She cited several cases that supported her view of the billing/professional services dichotomy.
Bertucci also relied on an exception to the policy's dishonesty exclusion in support of coverage. The provision excluded coverage for claims arising out of dishonest or fraudulent acts, but further provided that the insurer would provide a defense to such claim until the dishonest or fraudulent act has been determined by a court.
McBride, however, construed the arguable coverage under the provision as not creating coverage at all but only preserving whatever coverage was granted in the insuring agreement. Because no coverage existed under the insuring agreement, no coverage was provided under the exclusion.
Continental's cross appeal turned on language in the supplementary payments provision of the policy which provided up to $10,000 for attorney fees resulting from a disciplinary proceeding arising out of an act or omission in the rendering of "legal services," and further providing that if the insured is found not liable, the company would reimburse the insured up to $100,000.
Although the circuit court found that the provision applied to the ARDC proceeding against Bertucci, McBride determined otherwise based on the fact that coverage was limited to "legal services." Because the ARDC proceeding rested on Bertucci's retention of fees, and not the providing of improper legal services, the provision had no application.
The court therefore affirmed the finding of no possibility of coverage for the Rodriguez civil action, and reversed the circuit's finding of coverage under the supplementary payments provision.
