United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 10, 2015 Decided April 21, 2015

No. 14-7063

CHICAGO INSURANCE COMPANY,

APPELLEE

v.

PAULSON & NACE, PLLC AND BARRY JOHN NACE,

APPELLANTS

GABRIEL ASSAAD AND SARAH GILBERT,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 1:12-cv-02068)

Stephen A. Horvath argued the cause and filed the briefs 

for appellants.

Paulette S. Sarp argued the cause for appellee Chicago 

Insurance Company. With her on the brief was David 

Hudgins.

Carla D. Brown was on the brief for appellee Sarah 

Gilbert. 
2

Before: HENDERSON, SRINIVASAN and WILKINS, Circuit 

Judges.

Opinion for the Court filed by Circuit Judge WILKINS.

WILKINS, Circuit Judge: A law firm was engaged to 

bring a medical malpractice action on behalf of a young 

woman who had become paralyzed after surgery. Roughly a 

year and a half after the engagement, the firm filed two 

complaints in Virginia state court, each of which was

dismissed: the first without prejudice for failure to correctly 

caption a pleading; the second with prejudice for filing outside 

the statute of limitations. Shortly thereafter, the law firm 

applied for and obtained a new professional liability insurance 

policy. A few years later, the aggrieved client sued the law 

firm for legal malpractice, and the firm in turn sought coverage 

from its insurer. 

The insurance coverage dispute at the heart of this appeal 

turns on whether, at the time the law firm applied for its new 

policy, the firm was on notice that it had committed a breach of 

professional conduct, or otherwise should have foreseen that 

the dismissals could give rise to a legal malpractice claim. If 

so, then the insurer was relieved of any obligation to cover the 

malpractice claim under the policy’s “known risk” exclusion. 

The District Court found, as a matter of law and without 

expert testimony, that the law firm was on notice of the

potential malpractice claim. The District Court also rejected 

arguments that the insurer had forfeited or waived its right to 

deny coverage. We agree with the District Court’s resolution 

of each of these issues, and therefore affirm its decision 

granting summary judgment in favor of the insurer.
3

I.

On July 28, 2004, Sarah Gilbert, a fourteen-year-old girl 

residing in Virginia, underwent a spinal surgery that left her

paralyzed. Five months later, Ms. Gilbert’s parents retained 

the law firm of Paulson & Nace, PLLC, to pursue a claim of 

medical malpractice on her behalf. J.A. 842. The firm filed a 

medical malpractice complaint in Virginia on July 24, 2006, 

four days before the statute of limitations expired on Gilbert’s 

claims. See July 24, 2006 Compl., J.A. 98.

The caption on this complaint read: “Richard Gilbert and 

Rosie Lee Gilbert, Individually and on behalf of their daughter, 

Sarah Gilbert, a minor.” Id. Under Virginia Code § 8.01-8 

and Virginia case law, however, the caption should have read: 

“Sarah Gilbert, by her parents and next friends Richard Gilbert 

and Rosie Lee Gilbert, and Richard Gilbert and Rosie Lee 

Gilbert, Individually.” See Herndon v. St. Mary’s Hosp. Inc.,

266 Va. 472, 476 (2003). After the medical practice moved to 

dismiss based on this error, Paulson & Nace filed a properly 

captioned complaint in a separate civil action. See October 

25, 2006 Compl., J.A. 104. 

The Virginia court dismissed the claims in the first case 

without prejudice on February 27, 2007, based on the caption 

error. First Dismissal Order, J.A. 143. During a hearing on 

June 18, 2007, the same court stated that it would dismiss the 

second complaint with prejudice on statute of limitations 

grounds. Transcript of Motions Hearing at 31-32, J.A. 

176-77. Paulson & Nace appealed the trial court’s decision 

but was unsuccessful.

On July 18, 2007, while the state court appeal was still 

pending, the firm’s sole member, Barry J. Nace, applied for a 

new insurance policy with Chicago Insurance Company. 
4

Claims-Made Application, J.A. 200-09. Nace was asked 

whether there were “any circumstances which may result in a 

claim being made against [his] firm.” Id., J.A. 204. Despite 

the recent dismissal of Gilbert’s claims, Nace responded “no.”

Id.

Chicago Insurance subsequently issued Paulson & Nace a 

“claims-made” liability insurance policy – that is, coverage for 

all claims made within the policy period, regardless of when

the events giving rise to the claim occurred. But the policy 

also contained a standard known risk exclusion, meaning 

pre-policy conduct would not be covered if the firm had a 

reasonable basis “to believe that the [firm] had breached a 

professional duty” prior to the policy’s issuance or to otherwise

foresee that pre-policy conduct might result in a claim against 

the firm. Insurance Policy, J.A. 523, 527-28.1

Paulson & Nace eventually informed Chicago Insurance 

in May 2009 of the Gilbert incident, though it represented that 

the potential malpractice had occurred in 2008, not 2006. 

Incident Information Form, J.A. 254. Shortly thereafter, 

Chicago Insurance provided Paulson & Nace with an attorney, 

who submitted relevant case files and other materials to 

Chicago Insurance throughout 2010 and 2011. In November 

2011, the insurance company noticed that Paulson & Nace had 

made the caption error in 2006 – prior to the policy period. 

On January 13, 2012, Chicago Insurance notified Paulson & 

Nace that it reserved its rights to deny coverage under the 

known risk exclusion if a malpractice suit arose. J.A. 847-48. 

 1 This type of provision is routinely referred to as a “prior 

knowledge,” “known risk,” or “known loss” exclusion. See 7 

Couch on Ins. §§ 102:9, 102:11 (3d ed. 2013). 
5

Ms. Gilbert eventually filed a legal malpractice action 

against the law firm in March 2012, and she was awarded 

$1,750,000 by a Virginia court in 2013. Chicago Insurance 

brought this declaratory judgment action premised on diversity 

jurisdiction, contending that Paulson & Nace should have 

known of the potential claim when it applied for the insurance 

policy and that the known risk exclusion therefore applied. 

The District Court granted summary judgment in favor of 

Chicago Insurance. Chicago Ins. Co. v. Paulson & Nace, 

PLLC, 37 F. Supp. 3d 281 (D.D.C. 2014). Paulson & Nace

appeals.

2

II.

We review de novo the District Court’s grant of summary 

judgment. See Hidalgo v. FBI, 344 F.3d 1256, 1258 (D.C. 

Cir. 2003). Summary judgment is appropriate only if the 

evidence in the record shows that, first, “there is no genuine

dispute as to any material fact,” and, second, “the movant is 

entitled to judgment as a matter of law.” FED.R. CIV. P. 56(a); 

see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). 

In making this determination, we “view the facts and draw 

reasonable inferences in the light most favorable to the party 

opposing the summary judgment motion.” Scott v. Harris, 

550 U.S. 372, 378 (2007) (internal quotation marks and 

brackets omitted). Choice of law questions are also subject to 

de novo review. City of Harper Woods Emps.’ Ret. Sys. v. 

Olver, 589 F.3d 1292, 1298 (D.C. Cir. 2009). 

 2 Chicago Insurance brought this action against the following 

defendants: Paulson & Nace; Barry Nace; one of the firm’s

associates, Gabriel Assaad; and Sarah Gilbert. Only Paulson & 

Nace and Barry Nace appeal the District Court’s decision. For 

convenience, the term Paulson & Nace is used to refer collectively to 

the firm and Barry Nace.
6

III.

A.

The principal question in this case is whether a reasonable 

attorney in Paulson & Nace’s position would have been on 

notice by July 2007 of a possible breach of professional duty or 

a potential malpractice claim, such that there was an obligation

to disclose the underlying incident to the insurer. See Ross v. 

Cont’l Cas. Co., 420 B.R. 43, 48 (D.D.C. 2009), aff’d, 393 F. 

App’x 726 (D.C. Cir. 2010) (interpreting known risk clause as 

“incorporating a subjective look at the insured’s actual 

knowledge and an objective consideration of ‘whether a 

reasonable professional in the insured’s position might expect 

a claim or suit to result’”) (quoting Colliers Lanard & 

Axilbund v. Lloyds of London, 458 F.3d 231, 237 (3d Cir. 

2006)). This question is appropriate for summary judgment 

only if a reasonable jury “can draw but one inference and that 

inference points unerringly to the conclusion that the insured 

has not acted reasonably under the circumstances.” Starks v. 

N. E. Ins. Co., 408 A.2d 980, 982 (D.C. 1979) (internal 

quotation marks omitted); accord Travelers Indem. Co. of Ill.

v. United Food & Commercial Workers Int’l Union, 770 A.2d 

978, 991 (D.C. 2001).

We agree with the District Court that no reasonable jury 

could have found against Chicago Insurance on this question. 

It is undisputed that Paulson & Nace was aware that the first 

complaint was improperly captioned, as evidenced by its 

attempt to correct the error in October 2006 and by the 

dismissal of the complaint on the basis of the captioning error 

in February 2007. It also is undisputed that Paulson & Nace

knew that its attempt to correct the error had failed at the trial 

level, and that Ms. Gilbert’s claims were going to be dismissed 

with prejudice. 
7

Under such circumstances – that is, where an attorney is 

aware that he committed a procedural error that resulted in an 

unfavorable outcome – there is no triable question with respect 

to a lawyer’s duty to inform his insurer of the potential claim. 

See Koransky, Bouwer & Poracky, P.C. v. Bar Plan Mut. Ins. 

Co., 712 F.3d 336, 343-44 (7th Cir. 2013) (concluding as a 

matter of law that a law firm whose associate had failed to 

deliver an executed sales contract to the seller, jeopardizing the 

sale, was on notice of a potential malpractice claim); Capitol 

Specialty Ins. Corp. v. Sanford Wittels & Heisler, LLP, 793 F. 

Supp. 2d 399, 411 (D.D.C. 2011) (“[T]he dismissal of a lawsuit 

because of attorney error would clearly put a lawyer on notice 

of the possibility of a malpractice claim.”); Ross, 420 B.R. at 

46, 49-50 (holding on summary judgment that an attorney who 

failed to timely file an answer, leading to a default judgment, 

was on notice that a malpractice claim might be filed against 

him). 

Paulson & Nace points out that Virginia’s caption rule is 

unevenly enforced, see Appellants’ Br. 24-25, and that it 

believed the captioning error would be forgiven on appeal, see 

id. at 7. But these assertions do not create a genuine question 

as to whether a reasonable attorney would have been on notice 

of the existence of the error or a potential claim. See

Koransky, Bouwer & Poracky, 712 F.3d at 343 (noting that law 

firm was on notice of potential claim even though there was a 

chance the mistake could be fixed); Coregis Ins. Co. v. Baratta 

& Fenerty, Ltd., 264 F.3d 302, 307 (3d Cir. 2001) (affirming 

grant of summary judgment for insurer where attorneys knew 

that client’s complaint was dismissed for lack of activity, even 

though attorneys believed legal malpractice suit was 

time-barred). 

Relatedly, Paulson & Nace tells us that expert testimony 

should have been required to determine what a reasonable 
8

attorney might have foreseen. But this misses the point. It is 

true that expert testimony is routinely required in legal 

malpractice actions where lay jurors are ill-equipped to 

evaluate the merits of an attorney’s strategic decisions. See

O’Neil v. Bergan, 452 A.2d 337, 341 (D.C. 1982); Applegate v. 

Dobrovir, Oakes & Gebhardt, 628 F. Supp. 378, 382 (D.D.C.

1985) (ruling that the complexity of client’s claim, the 

extensive attorney preparations and pretrial rulings, and the 

difficulty of evaluating last-minute settlements rendered 

malpractice issue “not cognizable by layman judging on the 

basis of common knowledge and common sense, unaided by 

expert testimony”), aff’d, 809 F.2d 930 (D.C. Cir. 1987). But 

no expert testimony is required if an “attorney’s lack of care 

and skill is so obvious that the trier of fact can find negligence 

as a matter of common knowledge.” Forti v. Ashcraft & 

Gerel, 864 A.2d 133, 138 (D.C. 2004) (quoting O’Neil v. 

Bergan, 452 A.2d at 341) (internal quotation mark omitted). 

The Virginia state court did all the expert legal work 

needed here in dismissing the cases based on Paulson & Nace’s

procedural error prior to decision on the merits. Nothing more 

than this dismissal with prejudice – which can be explained to a 

jury through lay testimony and court records – was needed to 

establish that Gilbert’s legal malpractice claim was reasonably 

foreseeable.

3

 3 Appellants do not cite any cases holding that expert testimony is 

necessary to determine when a law firm should have known to notify 

its professional liability insurer of a possible claim, and we have not 

found any such cases. To the contrary, there are many cases in 

which no such testimony has been required. See, e.g., Koransky, 

Bouwer & Poracky, 712 F.3d 336; Capitol Specialty, 793 F. Supp. 

2d 399; Ross, 420 B.R. 43; City of Brentwood, Mo. v. Northland Ins. 

Co., 397 F. Supp. 2d 1143 (E.D. Mo. 2005).
9

B.

We next turn to Paulson & Nace’s contention that Chicago 

Insurance forfeited its right to a known risk denial of coverage

by failing to comply with Virginia Code § 38.2-2226, which 

requires a liability insurer that discovers a breach of the terms 

or conditions of an insurance contract by the insured to notify a 

claimant “within forty-five days after discovery by the insurer 

of the breach or of the claim, whichever is later.” The District 

Court correctly rejected this argument, concluding that District 

of Columbia law governed this contract between the

D.C.-based law firm and its Illinois-based insurer. See 

Chicago Ins. Co., 37 F. Supp. 3d at 290-92 (concluding that the 

“government interest” test heavily favored application of D.C. 

law, in light of appellants’ residence and professional activities 

in the District of Columbia, among other factors) (citing 

Adolph Coors Co. v. Truck Ins. Exch., 960 A.2d 617, 620-21 

(D.C. 2008)). The parties agree that there is no 

notice-to-claimant requirement under D.C. law. 

Perhaps recognizing that the government interest test 

clearly favors the application of D.C. law, Paulson & Nace

does not argue that the contract is always governed by Virginia 

law, but rather that Virginia’s notice-to-claimant provision 

somehow alters the parties’ obligations in this particular case

because the underlying lawsuits were filed in Virginia. See 

Appellants’ Br. 10-11, 16. The firm cites no on-point case 

law to support this argument. We do not strain to find such 

authority, because even if Virginia law could be invoked, 

Virginia courts have made clear that Section 38.2-2226 may 

not be enforced by the insured – here, Paulson & Nace –

against its insurer. See Dan River, Inc. v. Commercial Union 

Ins. Co., 227 Va. 485, 488-91 (1984) (holding that the 

predecessor statute of VA Code § 38.2-2226 could not be used 

by insured party against insurer); Great Am. Ins. Co. v. Gross, 
10

Civil Action No. 3:05-0159, 2008 WL 376263, at *11 (E.D. 

Va. Feb. 11, 2008) (“[Section] 38.2-2226 serves to protect 

claimants, who are strangers to the contract, and not the 

insured”); see also Morrel v. Nationwide Mut. Fire Ins. Co., 

188 F.3d 218, 226 (4th Cir. 1999) (explaining that § 38.2-2226 

applies when a claimant unable to collect a judgment from an 

insured party sues an insurer directly under Va. Code 

§ 38.2-2200).

4

C.

Finally, Paulson & Nace argues that a reasonable jury 

could have found that Chicago Insurance waived its right to 

deny coverage by failing to timely inform the firm of its 

intention. “Waiver is an act or course of conduct by the 

insurer which reasonably leads the insured to believe that the 

breach will not be enforced.” Williams v. First Gov’t Mortg.

& Investors Corp., 225 F.3d 738, 750 (D.C. Cir. 2000)

(quoting Diamond Serv. Co. v. Utica Mut. Ins. Co., 476 A.2d 

648, 654 (D.C. 1984)) (internal quotation mark omitted). 

Waiver of one’s rights generally requires actual knowledge of 

those rights. Travelers Indem. Co., 770 A.2d at 992 

(“Ordinarily, a waiver requires an intentional relinquishment 

of a known right.”) (internal quotation marks omitted); see also 

Zuckerman Spaeder, LLP v. Auffenberg, 646 F.3d 919, 922 

(D.C. Cir. 2011) (“Waiver refers to a party’s intentional 

 4 It is not clear whether Sarah Gilbert could have brought a claim on 

her own behalf against Chicago Insurance, as the insurance policy 

was issued in Illinois and delivered in Washington, D.C. Cf. Va. 

Code § 38.2-2200 (requiring only that policies “issued or delivered” 

in Virginia allow direct suits by claimants). In any event, Ms. 

Gilbert’s right to a direct suit against Chicago Insurance was neither 

litigated below nor raised in this appeal, which relates solely to 

Paulson & Nace’s rights under the insurance contract. 
11

relinquishment or abandonment of a known right.”) (internal 

quotation marks omitted). 

Paulson & Nace does not contend that Chicago Insurance

had actual knowledge of its known risk defense prior to 

November 2011, but rather argues that this is irrelevant. 

Appellants’ Br. 28-29. The law firm asserts that the relevant 

date is March 2010, when Chicago Insurance received 

documents that contained the correct dates of the medical 

malpractice proceedings. Thus, according to Paulson & Nace,

Chicago Insurance had constructive knowledge of its defense

nearly two years before invoking it.

There may be instances under D.C. law in which 

constructive knowledge suffices to result in waiver. See, e.g.,

Gov’t Emps. Ins. Co. v. Govan, 451 A.2d 884, 886 (D.C. 1982) 

(holding that an insurer had constructive knowledge of 

insured’s driving history, where the insurer possessed actual 

knowledge that the insured had misrepresented her driving 

record on her insurance application, and where a reasonable 

inquiry would have revealed the insured’s true driving record).

But this is not such a case. Paulson & Nace initially informed

Chicago Insurance that the alleged malpractice occurred within 

the policy period, see Incident Information Form, J.A. 254, and 

it never expressly alerted the insurer to its error. Chicago 

Insurance was under no duty during the preliminary stages of 

the claim process to sift and verify the information provided by 

Paulson & Nace. See Burlington Ins. Co. v. Okie Dokie, Inc., 

368 F. Supp. 2d 83, 90 (D.D.C. 2005) (noting that under D.C. 

law, an insurer “generally has the right to rely on statements 

made in an insurance application; the insurer need not conduct 

an independent investigation unless it has reason to doubt the 

statements”). Because there is no genuine question as to 

Chicago Insurance’s actual knowledge, and because Paulson & 

Nace has not cited any reason why knowledge should be 
12

imputed here, its waiver argument can be rejected as a matter 

of law.5

IV.

For the foregoing reasons, Chicago Insurance was entitled 

to summary judgment in this case and the District Court’s 

decision awarding summary judgment in its favor is:

Affirmed.

 5 Furthermore, as the District Court observed, Chicago Insurance

had not undertaken any meaningful defense of Paulson & Nace 

before it reserved its rights. Chicago Ins. Co., 37 F. Supp. 3d at 

295-96. It therefore is highly doubtful that the insurance company 

can be said to have engaged in “an act or course of conduct . . . which 

reasonably [led] the insured to believe that the breach will not be 

enforced.” Williams, 225 F.3d at 750 (quoting Diamond Serv., 476 

A.2d at 654).