An attorney applying for a claims-made malpractice policy “need not inform the prospective insurer about every client who has expressed dissatisfaction with the attorney’s services,” an Illinois appellate court decided, awarding coverage to the insured when a claim was later made against the attorney.

Arthur Gold received a 2004 letter from his client, William Messner, expressing great displeasure with his representation. Recapping Gold’s work to date, Messner wrote that he was “extremely angered by the way you have handled this case,” calling it “the laziest lawyering I have witnessed.”

Messner then laid out three options for the relationship going forward: appealing a trial court’s dismissal of his suit, keeping Gold as his lawyer; settling the case, again with Gold maintaining his representation; or “go[ing] to war against you, for full reimbursement of all fees.”

The client chose the first option and Gold continued to represent him in the appeal of his lawsuit. Later that same year, Gold purchased professional liability insurance from Illinois State Bar Association Mutual Insurance Company. He did not disclose the letter from Messner in his application.

Three years after Messner sent the letter (with an appellate court affirming dismissal of the lawsuit in the interim) he filed a malpractice suit against Gold. The lawyer tendered defense to ISBA Mutual, which filed suit seeking a declaration that it had no duty to defend or indemnify.

Because Gold failed to notify the insurer of the potential liability before he purchased the policy, as it required, ISBA Mutual argued it was off the hook.

The Illinois Court of Appeals disagreed.

“The letter Messner sent in 2004 informed Gold that Messner had considered ‘go[ing] to war’ against Gold, but the letter did not state a clear and unmistakable intent to bring a claim for professional malpractice,” the panel wrote. Messner continued to seek and use Gold’s professional services, both in the letter he sent in 2004 and thereafter, in negotiations and the appeal of his lawsuit.

“The entire course of the attorney-client relationship showed that the threat of a claim had apparently dissipated before Gold applied for the policy,” the court concluded. “We find that the policy did not require Gold to inform ISBA Mutual of every client who had expressed some dissatisfaction with Gold’s services.”

To read the decision in Illinois State Bar Association Mutual Ins. Co. v. Gold, click here.

Why it matters: Despite efforts by insurers to deny coverage based upon claims that insureds failed to notify them of potential liability during the application process, the court here recognized that insureds will not lose their coverage for a failure to disclose information about every client that has expressed dissatisfaction with services performed without more. Instead, a court will look at the entire course of the relationship to determine whether notice was required to the prospective insurer.