Hollywood producer turned convicted felon Harvey Weinstein has brought a legal malpractice suit against his counsel, claiming they failed to inform him that the dismissal of a charge in his 2020 trial would result in the forfeiture of insurance coverage.1 The suit alleges that Abelson Herron Halpern LLP ("AHH") was contractually required to provide Weinstein “with legal counsel regarding certain insurance coverage in connection with a criminal proceeding ….”2 In the complaint, Mr. Weinstein alleges that AHH and its partner Michael Bruce Abelson, who were aware of an impending dismissal of a count in an underlying criminal suit, failed to “inform Weinstein that insurance coverage may be terminated as a result of the aforementioned dismissal.”3
Weinstein’s lawsuit prompts the question: Does counsel’s failure to inform clients of the potential for —or ability to lose— insurance coverage constitute legal malpractice? Indeed, several courts have held that attorneys may have a duty to inform clients about and pursue insurance coverage.4
The New York Appellate Division, Second Department, considered an attorney’s duty to advise and pursue a client’s insurance coverage in Shaya B. Pacific, LLC v. Wilson, Elser, Moskowitz, Edelman & Dicker, LLP.5 The court was asked to determine whether counsel retained by a primary carrier to defend its insured in an underlying action had any obligation to investigate whether the insured had excess coverage available and, if so, to file a timely notice of claim with the carrier on the insured's behalf. In Shaya, Wilson, Elser tendered the underlying suit to the excess carrier, National Union, after the underlying claimant had won summary judgment against the plaintiff but before the trial on damages commenced. Upon tender, National Union disclaimed coverage on the ground that it had not received timely notice and had no information to confirm that the plaintiff was an insured under the excess policy. Plaintiff sued Wilson, Elser, claiming that the “defendant had been negligent in failing to advise National Union of the underlying action or, alternatively, that its failure to do so constituted a breach of contract.”6 Defendant subsequently moved to dismiss the case. The Court concluded that a dismissal would be appropriate if the defendant could demonstrate either that the plaintiff’s engagement letter conclusively proved that the scope of representation never encompassed any responsibility with respect to possible excess coverage or, alternatively, that National Union’s disclaimer letter conclusively established that the plaintiff was not an insured under the excess policy. Denying the defendant’s motion to dismiss, the Court held that: (1) whether an attorney is negligent for failing to investigate and pursue insurance coverage depends on the scope of the agreed representation, and if the attorney fails to exercise the reasonable skill and knowledge commonly possessed by members of the legal profession;7 and (2) the same rule applies to an attorney who is retained by the insurer, instead of the insured itself.8
With engagement letters and retainer agreements being the basis of attorney-client relationships, the terms of these contracts will generally govern an attorney’s duty to inform clients about insurance coverage. Attorneys who use broad, sweeping language in their retainer agreements should be mindful of their presumed obligations to investigate and advise clients of their insurance coverage. For example, the United States District Court for the Southern District of Florida has held that when an attorney is retained to “defend [a client’s] interests” in litigation, there is arguably an obligation to review the client’s insurance avenues, including pursuing claims against the client’s insurer if the insurer fails to defend or indemnify the client.9
Based on broad interpretations of retainer agreements, attorneys like Weinstein’s are likely to open themselves up to legal malpractice claims if they knowingly allow allegations that trigger an insurer’s duty to defend or indemnify to be dismissed. For example, allegations of negligence in a complaint can trigger an insurer’s duty to defend an entire suit, even if all other allegations in the complaint are excluded from coverage.10 If an attorney allows the negligence allegations to be dismissed, the client will forfeit a defense and indemnification under certain insurance policies. Moreover, unless the client was informed of the implications of the dismissal and consented beforehand, the client could seek legal recourse against their attorney for the termination of coverage.
How Should Attorneys Protect Themselves?
Attorneys can take several steps to protect themselves from legal malpractice claims arising out of failures to advise on insurance coverage. First, attorneys should be mindful of how they draft their retainer agreements. Attorneys can proactively add provisions in their retainers, requiring clients to disclose any insurance policies and/or confirm whether their policies may be implicated in their claims.
Second, if clients have any applicable insurance coverage, attorneys should carefully review the policies’ terms to determine if any of the policies trigger an insurer’s duty to defend or indemnify. Additionally, to be extra cautious, attorneys should tender all potential notices of claims or suits to pertinent insurers to avoid an insurer raising a late notice defense.
Lastly, if attorneys are unsure of or inexperienced with insurance issues, they should advise their clients of the benefits of retaining counsel that practice insurance coverage law. Adding insurance coverage counsel to a litigation team will ensure that clients obtain the maximum recovery under their policies and that legal strategies in the underlying litigation do not jeopardize said coverage.
For more information and guidance, please contact Jasjeet K. Sahani at JSahani@sdvlaw.com.
1Weinstein v. Abelson Herron Halpern LLP et al., Index No. 150086/22 (N.Y. Super. Ct. Jan. 2, 2022); subsequently transferred, Weinstein v. Abelson Herron Halpern LLP et al., No.1:22-cv-00970 (S.D.N.Y. Feb. 3, 2022).
2Id. at ¶ 8.
3Id. at ¶ 9.
4See Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison, 958 P.2d 1062 (Cal. 1998) (holding that manufacturer suffered “actual injury” when law firm failed to investigate insurance coverage or advise manufacturer to notify insurer of underlying suit); Soni v. Pryor, 32 N.Y.S.3d 236, 238 (N.Y. App. Div. 2nd Dep’t 2016) (finding attorneys failed to establish they did not commit legal malpractice by failing to advise clients that they had coverage for an action under their “Directors and Officers” policy).
5827 N.Y.S.2d 231 (N.Y. App. Div. 2nd Dep’t 2006).
6Id. at 233.
7Id. at 236.
8Id. at 237-38.
9Pharma Supply, Inc. v. Stein, No. 14-80374-CIV, 2014 WL 4055781, at *5 (S.D. Fla. Aug. 14, 2014), on reconsideration in part, No. 14-80374-CIV, 2015 WL 328228 (S.D. Fla. Jan. 26, 2015); see also Little v. Middleton, 198 Ga. App. 393, 395, 401 S.E.2d 751, 754 (Ga. Ct. App. 1991) (holding that attorney in auto accident may have had a duty to advise client regarding possible right of action against the client's own insurance carrier).
10See CGS Indus., Inc. v. Charter Oak Fire Ins. Co., 720 F.3d 71, 83 (2d Cir. 2013) (applying New York law) (stating that if any of the claims in a complaint are covered by the policy, the insurer “has a duty to defend the entire action ….”).