Illinois Appellate Court

In Continental Cas. Co. v. Howard Hoffman and Associates, __ N.E.2d __, 2011 WL 3612291 (Ill. App. Ct. Aug. 15, 2011), the Illinois Appellate Court for the First District held that coverage under a professional liability policy for multiple claims arising from the insured's employee's embezzlement of client funds were related and thus limited to a single $100,000 per claim policy limit, rather than the $300,000 aggregate policy limit for unrelated claims.  

Continental Casualty Company issued a lawyer's liability policy to Howard Hoffman & Associates containing limits of liability of $100,000 for "each claim" and $300,000 in the "aggregate."  During the policy period, Hoffman informed Continental that one of its nonlawyer employees, Judith Stachura, had "embezzled significant funds" from at least 16 probate estates represented by the firm.  Subsequently, 12 of these estates asserted claims against Hoffman resulting from the embezzlement and Hoffman's alleged failure to properly manage the estate litigation and supervise Stachura. 

Continental took the position that a single $100,000 limit applied to all claims arising out of Stachura's embezzlement scheme, while Hoffman argued that it faced multiple, unrelated claims and that the $300,000 aggregate policy limit therefore applied.   In a declaratory judgment action, the trial court granted summary judgment in favor of Continental, and Hoffman appealed.

The Appellate Court reviewed the pertinent policy provisions regarding "related claims" and "related acts or omissions" and found both provisions to be clear and unambiguous.  When combined together, the court explained, the plain language of the provisions specified that "all claims" arising out of "all acts or omissions in the rendering of legal services that are temporally, logically, or causally connected by common fact, circumstance, situation, transaction, event, advice, or decision" shall be considered a single related claim.  Accordingly, the court reasoned that all of the claims constiuted a single related claim subject to the $100,000 "each claim" limit of liability.  The court further held that Stachura's scheme to embezzle estate funds was a common fact, circumstance, situation or decision, and that all of the allegations asserted against Hoffman were logically and causally connected by Stachura's scheme to embezzle.  Therefore, the court concluded that all of the claims were related and that the $100,000 "each claim" policy limit applied, and thus it affirmed the summary judgment for Continental.