A federal appeals court on Tuesday affirmed a lower court ruling in favor of a Crum & Forster Co. unit in litigation over its refusal to defend and indemnify an attorney under his professional liability insurance policy, based on a prior acts exclusion.
In November 2016 a lawsuit charged a defendant with illegal acts and misappropriation of corporate assets and he hired Max D. Leifer, of the Law Offices of Max D. Leifer P.C. in New York, as his defense attorney, according to the complaint in North River Insurance Co. v. Max D. Leifer and Law Offices of Max D. Leifer P.C.
Mr. Leifer allegedly failed to answer the lawsuit on time or to file a time extension, and a default judgment was entered against the client. Mr. Leifer was terminated.
In September 2019, Mr. Leifer submitted an application for professional liability insurance to C&F unit North River. In the application, he checked “no” to the question of whether there was a reasonable reason to believe his services might become the basis of a claim.
North River issued a legal malpractice policy for the year beginning October 2020 that included a prior acts exclusion. In November 2020, Mr. Leifer’s former client sued him for legal malpractice.
North River filed suit in U.S. District Court in New York in September 2021 seeking a declaratory judgment it had no duty to defend or indemnify Mr. Leifer.
The district court ruled in the insurer’s favor and was affirmed by a three-judge appeals court panel.
“Leifer’s own pleadings leave no doubt that, at the time of the Policy’s effective date, (1) Leifer had knowledge of the facts and circumstances giving rise to (the client’s) malpractice claim, and (2) a reasonable attorney would have understood that Leifer’s conduct could reasonably have been expected to give rise to a malpractice claim,” the panel said in affirming the lower court.