coverage under a lawyers professional liability policy for an arbitration award that was based on the joist firm's failure to provide their clients with certain it vice and certain disclosures that are imposed and require and that the illinois rules of professional conduct and related case law in situations where that lawyer is negotiating a new fee agreement with an existing client the district court determined that there was no coverage not because this type of claim is not typically covered under a lawyers professional liability policy rather the district court held th coverage was excluded under a policy provision that states the policy does not apply to claims for fines sanctions penalties and punitive damages  but the second issue assuming you agree with the court's decision on the applicability of the claim for sanction exclusion the next issue is whether the insurance company p t i see in this case should have been a stop from relying on or asserting that policy exclusion by reason of its breach of the insurance contract by failing to pay for the joyce firm's defense or whether as the district court determined the stop was not sufficiently developed and waived in the proceedings below on the sanctions issue as i said the policy provides that does not apply to claims for fine sanctions penalties punitive damages for there's no claim that any of this type of relief was made in this arbitration process there's no if you look at the claim that was made they didn't seek that what they did s there's a laundry list and in the prayer for release relief in that complaint the claim that that the underlying claimant succeeded on in the proceeding below was a claim for breach of fiduciary duty again based on the joyce firm failure to comply with certain professional obligations when it negotiated its new fee agreement with its clients the relief they sought in that claim was a forfeiture or just fortune of a portion of their fees actually district court found the underlying claim when you think about it a claim for attorney's fees in a case isn't a claim you make against a lawyer for example for failure to make a disclosure of a conflict which is a common problem awarded was a discouragement of attorneys fees well so it seems to me that this is squarely at least that of the larger share of the award hundred fifty thousand that they were required to pay as damages for hundred some odd thousand dollars part of the award is the disgorgement attorney's fees right i agree with you there is no it clearly it seems to me falls within the attorney's fees exclusion well he exclusion in the policy is for claims for attorneys fees paid to the insured that the claim in this case what we do with the claim in this case as in many malpractise cases is that the joyce f conflict right it was it was the right over the amount of the attorney's fees that repay that claimants didn't think they should have to pay extra know it well at the case was a little bit confusing there was two there was a court there was clearly a claim fees in this case and that was the claim that the that the breach of contract claim that was made where the where the underlying claim and said this case and the fees that we owed the joyce firm should be determined under  similar claim where the claim in that case was this that that the but too cheap plaintiff's lawyer had calculated their fee based on a contingent fee agreement rather than  illinois statute that limits their fees in medical malpractise cases so the court next case said well once once the attorney client representation is over and you're talking about calculating fees that's the type of feed dispute that's the type of  but there's nothing in that case that stands for the proposition that that's the only kind of fee dispute there is and certainly not for purposes of the exclusion and that's yeah i'm not practice insurance policy there are many different kinds of the disputes some sound in breach of contract some sound in breach of fiduciary duty etc and this one all bases of liability for discouragement were alleged one was proven and the firm was required to can't put a number on what what was your damage and what was your monetary out of pocket losses a result of that conflict courts in those situations typically award a fee right and there's a different kind of a conflict of interest alleged as the foundation for the breach if you do share a duty claim in this case in this arbitration which is that the law firm didn't fully educate the client about its own conflict because it was a co claimant essentially get the benefit of the bargain from your lawyer your lawyer didn't give you the proper advice he didn't disclose his conflict and you know we can't put a number on how that harmed you but we're going to say that a portion of what that lawyer earned should be returned to you then every here is because of this failure to disclose there was no agreement no meeting of minds or no contract made and therefore we're going to have the joyce firm reimburse the client for a portion of its fees it wasn't a dispute over a fee it wasn't the joyce firm you know saying you charges too much it wasn't that at all your honor it wasn't your charge just too much the decision wasn't based on a claim that you charges too much the decision was based on a claim that you breached a disclosure requirements and that the remedy for that since we can't put a number on how that you know that happened before the engagement really began we can't put a number on how you were harmed at that point by that breach what they do is they  say we're going to we're going to cause the attorney to reimburse a portion of that fee that they aren't because in a sense the client didn't get the benefit of the full advice and proper advice of the attorney so they didn't get what they paid for going to be subject to a claim that i didn't disclose something i should have disclosed as required by the rules of professional conduct that i would expect that i'm going to be covered for that claim illinois is clear on that that any claim for breach of a duty to disclose a conflict is a malpractise claim it is a breach of fiduciary claim and it implicates the professional liability of the attorney if contingent fee contract with client providing for one third the recovery recovery is made of a lawyer takes half of it and there are an arbitration follows in which the client says the lawyer took too much and violated his professional duties by doing it the arbitrator says that's right it is a violation of professional duties and a conflict of interest to take more than the contract provides you have to give it back as i understand your argument the difference between one third and one ha now be collected from the insurer because the arbitrator said you had to give it back because it was violation of your duty to have taken it all no not at all greiner in fact and tell me why that's not the implication of your argument in this very case  because because the argument you're saying is is a classic a dispute you know i thought we had an agreement that says every case looks like a classic the dispute for the same reason there was an argument that the lawyer violated his professional duties in some way and as a result of that violation the fee exceeded the amount he could legally claim an arbitrator says the amount you can legally claim is x well you know i think what the arbitrator said is that because you violated your duty in this has violated his duties to his calls no i don't think that's the case at all judge for example had the arbitrator in this case said you're correct plaintiffs that the fee in this case should have been calculated in accordance with the fee agreement the contingent fee agreement you signed back in two thousand and two then we wouldn't have a claim under the insurance contract to recover the difference between the amount we charged and the amount the arbitrator said we would have had to pay him bertucci the court said you don't the to recover the different between the amount you charged and the amount you were obligated to receive on the illinois statute you don't get the collect that from the insurance company those are free to speak that's a classic fee dispute but when i breach a fiduciary duty to my client by not disclosing something i am required to do and the courts say well ok well what's the damage remedy here you really can't put a number on it so what we do is we say in effect you didn't get the benefit of the bargain with your lawyer your lawyer didn't  provide the advice and should have provided you we're going to reimburse cause you to reimburse a portion of your feet i don't think that's the same thing and i don't think that's what the the situation you describe your honor i think i think it's an entirely different thing and if that's the case if if that's the case then i think the policy should say that and in this case in bertucci the policy specifically says that damages do not include any recovery of legal fees whether by forfeiture think it's quite as clear as you say that just because the the arbitrator awards legal fees you're outta luck and you don't get coverage i see my time is  family and that clearly if this isn't a malpractise claims case there there aren't any allegations that he performed any errors or omissions in his performance of legal services and this is a fee dispute in fact they are saying you you charged us too much by saying you entered into a contingent agreement and then you later tried to charge us hourly fee and as a result we like of you know we're demanding a fee for  i think there are i think the issue that your honor considered to be distinct was the second component of the sanctions awarded by the arbitrator which was the award that  percentage of local council fees with respect to this i would say this is still awarded as a component of a claim for fees the policy exclusion phrase the lack of coverage as a claim for legal fees or a claim for sanctions a claim is defined in the policy as a demand so by we'll put attorneys fees exclusion applies to any claim for legal fees cost disbursements paid or to you and that twenty five percent of the coverage firms fees that aspect one hundred fifty thousand dollars of the a war that aspect of the award had nothing to do with fees paid to the choice firm and what to do with joyce firms breach of fiduciary duty with respect to its status for lawyer misconduct only the state supreme court has the authority to issue what we would customarily understand as a sanction for violation of the rules of professional conduct everything else is a remedy of some sort damages restitution discouragement such a yes and in the way the exclusions are phrased in the p d i see policy is they are not tied to the nature of the damages they're tied to the nature of the claim so claim is defined as the demand and at the time the arbitrator entered this award the only claim that was left was the claim for a fee for the chair he disallowed the conversion claim and found there was no breach of contract because there was no existing fee contract so the only relief awarded was based soley on the claim for fees for a fee for future and that's the four hundred thousand dollars component of the war the hundred fifty is damages the firm was required to pay in addition to forfeiture of its fees yes but as a component of relieve in the claim for fees because the policy doesn't exclude damages in the form of legal fees it doesn't it doesn't limit the explosion we are saying we only exclude damages for sanctions we only exclude damages for fees it eliminates coverage for claims for fees so the entire claim itself is not covered under the that's how we analyze duty to defend cases that once there's been an award and on and on a duty to indemnify claim and insurance coverage disputes we look at what was awarded and why to see if there's indemnification coverage your focus on what the claim is for is certainly important on a duty to defend but that's not where we're at here well and focused on what the claim is for because that's the way that the exclusion is worded it in some policies the policy will stay we don't ever damages as a result damages do not include return of fees or damages do not include sanctions but this policy states the policy does not apply to claims for legal fees  owed to you so the only claim that was asserted against joyce was the claim for legal fees paid or owed to you so the nature of the damages were still awarded as a component of that claim so when i focus on  the nature of the claim i'm i'm doing that because that's the policy language but but i would also i would also say that this disgorgement that they refer to it as an equitable discords meant and i recognize your honor  doesn't agree that the court had authority to enter an award of sanctions and certainly mr joyce doesn't believe that he deserved to have an award of sanctions and turned against him by that you know there was an award of sanctions entered again ten it isn't something that we're at litigating here only mitigating whether an award of sanctions is covered under the policy but also just within the scope of coverage illinois courts are clear that restitution in disgorgement twenty five percent of the local council fees what the court held was that that these that these fees were really encouraged for the purpose of collecting joyce's fee and that the efforts made by local council were reflecting something they were doing for the benefit of joyce not the benefit of his client as much to the ready for the statement you just made about illinois courts not recognizing restitution as a measure of the damages i'm sorry cover damages under an insurance policy that claims for discords men arrested to show and do not constitute damages that would be this court's opinions and level three and ryerson there's a northern district opinion you're stating it is a categorical rule and i don't think those cases support that proposition well they may be specific applications of the idea that you can't insure insurable interest in this domain well i mean the way we read it i mean it was it sort of wasn't addressed in the underlying case but that restitution even if it's you know when you look at the writer's indecision even if it's an innocent mistake restitution it states that restitution is not insurable and it's not intended to be a punitive measure it's just an avoidance of some type of windfall so it's this arbitrator here held that joyce should have paid the twenty five percent fees incurred by counsel because they were acting on his behalf those are fees that he should have paid not his insurance carrier he wasn't suffering a loss but the real problem in the right person case was  is based on fraud or in some other deliberate torturous or criminal act or at the other extreme of the restitution spectrum merely an innocent mistake or the rendition of a service for which compensation is expected but contracting is doesn't but rather that regardless of what the level of culpability is a claim for damages in the proper sense of the word is different that it's he's he's not being ordered to pay damages to someone for the harmon committed the court has concluded that this is something he owes something he would be unjustly enriched by that if he like for instance if he were to keep if he were to keep the fees that the court found were not deserved if the insurance carrier pays them that's a windfall to the insured then it's not a reflection of damages so the claim it and similarly what twenty five percent the court held that he should have paid those local counsel fees because they were solely for his benefit in napa benefit of his client so by ordering his insurance carrier to pay those fees that's a windfall to him it's not it's not the same as paying damages incurred because of an act there are mission on his part which is what the policy is intended to cover  payment certainly there was no denial or refusal to pay the defense costs incurred up until the award was entered so without this breach there can't be in a stop all that they did agre