Opinion ID: 172861
Heading Depth: 2
Heading Rank: 2

Heading: Do the Tester Letter and the Malpractice Lawsuit involve a single claim?

Text: We must first determine whether the Tester Letter and the Malpractice Lawsuit allege related wrongful acts which would be considered as one claim under the policy. Here, the insurance policy required that, as a condition precedent to triggering rights under the policy, an Insured must give the Insurer written notice of the claim as soon as practicable. App. at 43. [4] And, a claim is deemed to have been first made at the time notice of the claim is first received by  any Insured. Id. at 40 (emphasis added). Further, all claims based upon or arising out of the same Wrongful Acts or any Related Wrongful Acts, or one or more series of any similar, repeated or continuous Wrongful Act or Related Wrongful Acts, shall be considered a single Claim. Id. at 43. And, a claim is first made when the earliest Claim arising out of such Wrongful Act or Related Wrongful Acts is first made. Id. Therefore, the first step in untangling the factual scenario in this case is to analyze the insurance policy's definition of related wrongful act. If the Tester Letter makes a claim that is a related wrongful act to the Malpractice Lawsuit, then the Tester Letter was the first notice of the claim. As stated above, a related wrongful act is defined as Wrongful Acts which are logically or causally connected by reason of any common fact, circumstance, situation, transaction, casualty, event or decision. Id. at 41. Therefore, we must determine whether the acts alleged in the Tester Letter and the Malpractice Lawsuit are logically or causally connected. Plaintiffs cite the federal district court case [5] of Professional Solutions Ins. Co. v. Mohrlang, No. 07-cv-02481-PAB-KLM, 2009 WL 321706 (D.Colo. Feb.10, 2009), in support of their position that the claim asserted in the Tester Letter and the claims asserted in the Malpractice Lawsuit are not logically or causally connected. In Mohrlang, an insurer filed suit seeking a declaration that the relevant insurance policy did not require payment to the defendants, Harry and Lenora Mohrlang, and Bruce Mohrlang, who became trustee of their various trusts. 2009 WL 321706, at  1. The insurer provided professional malpractice insurance to an attorney and the defendants were clients of that attorney. Id. The attorney was sent a letter and draft complaint from Bruce Mohrlang which indicated a professional negligence action would be brought against the attorney for the attorney's allegedly deficient advice in negotiating and structuring the sale of the defendants' business. Id. at . The attorney was then sent a letter and draft complaint from Harry Mohrlang alleging professional negligence for advice concerning the sale of stock in the defendants' business and breach of fiduciary duties of loyalty, disclosure, candor regarding release of promissory notes. Id. The insurance policy at issue was limited to $500,000 per claim with a $1,000,000 aggregate term limit; all related claims were considered to be a single claim by the policy. Id. at . The insurance policy defined claim as a demand you receive for money or services, including suit or institution of arbitration proceedings against you. Id. at  (internal quotations, alterations, and emphasis omitted). The insurance policy then defined related claim as claims arising out of a single act or omission or arising out of related acts or omissions in the rendering of professional services. Id. (internal quotations and emphasis omitted). And finally, the insurance policy defined related acts or omissions as all acts or omissions in the rendering of professional services that are temporally, logically or causally connected by any common fact, circumstance, situation, transaction, event, advice or decision. Id. (internal quotations and emphasis omitted). The district court in Mohrlang first found that the language of the insurance policy was not ambiguous and that the policy's terms should be given their plain and ordinary meaning. Id. at . The district court then went on to define the temporally, logically or causally connected phrase used in the related acts or omissions definition of the insurance policy. The district court found no temporal connection between the sale of the business and the breach of fiduciary duties because there was a temporal break between the two events. Id. at . The district court then defined logically connected as connected by an inevitable or predictable interrelation or sequence of events, noting that for two things to be logically connected, one must attend or flow from the other in an inevitable or predictable way. Id. The district court found no logical connection between the two alleged acts of malpractice because the sale agreement did not account for the promissory note and deed of trust that were the subject of the alleged breaches of fiduciary duties; they were independent obligations. Id. Finally, the district court defined causally connected. Id. The district court defined causally connected as where one person or thing brings about the other. Id. The district court also noted that the common understanding of causation requires a showing of but-for causation and a situation where the first thing leads to the second in a direct and traceable way, and where no independent, significant thing interrupts the causal chain between the two. Id. The district court found that the two alleged acts of malpractice were not causally connected because the sale of the business did not directly or traceablyand certainly did not foreseeably lead to the [attorney's] violation of his fiduciary duties. Id. at . Because the district court in Mohrlang found that the alleged acts of malpractice were not temporally, logically, or causally connected by any common fact, circumstance, situation, transaction, event, advice, or decision, the district court concluded that the two claims were not related claims under the insurance policy. Id. at . Plaintiffs ask us to adopt the result reached in Mohrlang to the facts of this case. While we agree that, like the insurance policy in Mohrlang, the terms of this insurance policy are not ambiguous and should be defined by their plain and ordinary meaning, we conclude that the acts of malpractice alleged in the Tester Letter and the Malpractice Lawsuit are logically or causally connected. Here, using the common definition of logically connected expressed in Mohrlang, the alleged acts of malpractice in the Tester Letter and the Malpractice Lawsuit are connected by an inevitable or predictable interrelation or sequence of events. Id. at The Tester Letter faults Murphy for not submitting Rule 16.1's required witness disclosures. The Malpractice Lawsuit flows from Murphy's decision to proceed under Rule 16.1. Surely these two acts attend or flow from the other in an inevitable or predictable way. See id. A required disclosure under Rule 16.1 and the decision to proceed under Rule 16.1 are predictably interrelated because the decision not to opt out of Rule 16.1 resulted in a timeline for witness disclosures under that rule. Both parties then also discuss the case of Bay Cities Paving & Grading, Inc. v. Lawyers' Mut. Ins. Co., 5 Cal.4th 854, 21 Cal.Rptr.2d 691, 855 P.2d 1263 (1993), which determined the meaning of claim and related under a claims-based legal liability insurance policy. In Bay Cities, the alleged malpractice was an attorney's failure to serve a stop notice on a construction project's lenders and a failure to timely foreclose on a mechanic's lien. 21 Cal.Rptr.2d 691, 855 P.2d at 1264. The insurance policy provided coverage for each claim and further provided that [t]wo or more claims arising out of a single act, error or omission or a series of related acts, errors or omissions shall be treated as a single claim. Id. Bay Cities argued that it was entitled to the policy limits for two claims because the attorney's two omissions resulted in separate injuries to Bay Cities. Id. at 1265. The insurer argued that Bay Cities had a single cause of action and a single injury stemming from the attorney's conduct. Id. The California Supreme Court in Bay Cities determined that the insurance policy's definition of claim limited Bay Cities to only one claim under the policy. Id. at 1266. The court stated: [W]hen, as in this case, a single client seeks to recover from a single attorney alleged damages based on a single debt collection matter for which the attorney was retainedthere is a single claim under the attorney's professional liability insurance policy. ... [I]f an attorney's single error harmed two clients and gave each of them a separate claim, those two claims would be treated as a single claim under the policy's limitation of liability. It would be anomalous to limit liability in that circumstance but to disregard the limitation when, as in this case, a single client suffers a single injury as a result of multiple errors. Id. The Bay Cities court then went on to determine, in the alternative, whether the insurance policy's related acts, errors or omissions language would limit Bay Cities to the policy's per claim limit. Id. at 1270. The court found that the term related was not ambiguous and that it was broad enough to encompass both logical as well as causal relationships.... Id. at 1271. The court found that the alleged acts of malpractice were related. Id. at 1275. The court noted that the acts arose out of the same specific transaction, the collection of a single debt, that the acts arose as to the same client, that the acts were committed by the same attorney, and that the acts resulted in the same injury. Id. Carolina Casualty argues that Bay Cities ' reasoning should be applied here, and urges us to conclude that plaintiffs have one malpractice claim and that the alleged acts of malpractice in the Tester Letter and the Malpractice Lawsuit should be deemed related. Carolina Casualty analogizes Bay Cities because here: (1) there is a single clientthe Burkhardts; (2) there is a single attorneyMr. Murphy; and (3) there is a single tort claim for which Mr. Murphy was retained. Appellee Br. at 23. Carolina Casualty also contends that the Burkhardts suffered a single harm from Murphy's alleged acts of malpracticethe lost opportunity to recover some or all of their damages in the Ciri Lawsuit. Id. We agree with Carolina Casualty that the Burkhardts suffered one injury in the facts underlying this case. Where there is one injury flowing from multiple acts of malpractice, it seems logical to connect those multiple acts of malpractice as related. See, e.g., Gregory v. Home Ins. Co., 876 F.2d 602, 606 (7th Cir.1989) ([T]he common understanding of the word `related' covers a very broad range of connections, both causal and logical.). Because the insurance policy here treats as one claim all related wrongful acts, we therefore conclude the Burkhardts state one claim. And finally, a case cited by Carolina Casualty discusses the determination of whether a single claim or multiple claims have been made under a claims-made legal liability insurance policy. See Eagle Am. Ins. Co. v. Nichols, 814 So.2d 1083 (Fla. Dist.Ct.App.2002). In Nichols, the insurance policy limited coverage per claim for related wrongful acts. 814 So.2d at 1086. The alleged acts of malpractice were the attorney's failure to name a hospital and each individual physician from that hospital as defendants in a medical malpractice lawsuit. Id. at 1084. Nichols asserted that he had multiple claims because his attorney committed multiple wrongful acts by failing to join several defendants, depriving him of a claim against each defendant for that defendant's maximum liability coverage. Id. at 1085. The insurer alleged that Nichols had only one malpractice claim and one injurythe loss of a complete recovery. Id. The court concluded that the negligent acts alleged by Nichols were logically related. The court stated: [I]n this case, the claim was for the entire amount of Nichols' uncollected damages as a result of the failure to join several defendants in the suit, and all of the acts of negligence caused or contributed to the inability of Nichols to collect the entire amount of his damages. Id. at 1086. Similar to our discussion regarding the Bay Cities case above, we conclude that the Burkhardts' one malpractice cause of action resulting in the one claim for injury encompasses all alleged acts of malpractice related to that malpractice cause of action. Here, an alleged failure to comply with Colorado's rules for disclosure of witnesses is related to an alleged failure to opt out of those same rules. We conclude that the Tester Letter and the Malpractice Lawsuit allege related wrongful acts under the insurance policy. Therefore, they should be considered one claim under that policy.