Legal representation, without more, does not constitute an “act or omission in the rendering of legal services” for purposes of determining a professional liability insurer’s duty to defend an attorney accused of unjust enrichment when his client made an allegedly false claim, according to the U.S. Fifth Circuit Court of Appeals. Edwards v. Cont'l Cas. Co., 2016 WL 6500668 (5th Cir. Nov. 2, 2016).
A lawyer represented a client in a personal injury suit against his employer for a work-related injury. The parties entered into a settlement as a part of which the employer paid attorneys’ fees to the lawyer through an annuity contract. The employer later sued the lawyer and his client, alleging that they had exaggerated or fabricated the extent of the client’s injuries and claimed that it was fraudulently induced to settle. It sought reimbursement of its settlement payment and the cost of funding the annuity contract. The lawyer notified his professional liability insurer, but the insurer denied defense and indemnity. The lawyer filed a declaratory judgment against his insurer, and the district court granted partial summary judgment in his favor, holding that the insurer had a duty to defend. The insurer appealed.
The policy provided that the insurer owed a duty to defend against a “claim,” defined as “one arising out of an act or omission, including personal injury, in the rendering or failure to render legal services.” The Fifth Circuit held that because the employer did not allege a professional act or omission that gave rise to the claim, the lawsuit did not satisfy the requirement that the claim arise out of an act or omission. It rejected the argument that “arising out of” required nothing more than a “but-for” causation and should be interpreted broadly and held that the representation, without more, could not be an act or omission in the rendering of legal services. The Fifth Circuit reversed the summary judgment.