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Continental Casualty Co. v. Parnoff

United States District Court, D. Connecticut

September 12, 2018

CONTINENTAL CASUALTY CO., Plaintiff,
v.
LAURENCE V. PARNOFF, LAURENCE V. PARNOFF, P.C., DARCY YUILLE, Defendants.

          RULING ON MOTION FOR JUDGMENT ON THE PLEADINGS

          MICHAEL P. SHEA, U.S.D.J.

         Plaintiff and counterclaim defendant Continental Casualty Co. (“Continental”) issued a professional liability coverage policy to attorney defendant Laurence V. Parnoff (“Parnoff”) and his law firm, defendant Laurence V. Parnoff, P.C. (the “Parnoff Firm” and collectively, the “Parnoff defendants”). Continental's suit seeks a declaration that the policy did not obligate it to defend Parnoff in a state court action brought by Parnoff's former client, defendant Darcy Yuille (“Yuille”), concerning Parnoff's legal fees (the “Yuille Action”).[1] Both Yuille and the Parnoff defendants assert affirmative defenses to Continental's action, and the Parnoff defendants also brought counterclaims for breach of contract and breach of the duty of good faith and fair dealing for Continental's refusal to defend Parnoff. (ECF Nos. 22, 28; see ECF No. 28 at 9-13.) Continental now moves for judgment on the pleadings under Fed.R.Civ.P. 12(c), arguing that its policy does not cover the Yuille Action because that action does not seek any “Damages” under the policy, does not involve “legal services” as the policy defines them, and even if these two requirements were met, the policy's “claims-made-and-reported” and “prior knowledge” requirements have not been satisfied. (ECF No. 31 at 1-2.) Continental further argues that the Parnoff defendants' counterclaims for breach of contract and the implied covenant of good faith should also be decided in Continental's favor as a matter of law. (Id. at 2.) For the reasons discussed below, I GRANT Continental's motion for judgment on the pleadings.

         I. Factual Background

         A. The Policy

         Continental issued to the Parnoff Firm a professional liability insurance policy for the period of September 3, 2012 to September 3, 2013 (the “Policy”). (ECF No. 1-1.)[2] The Policy provides in relevant part:

The Company agrees to pay on behalf of the Insured all sums in excess of the deductible that the Insured shall become legally obligated to pay as damages and claim expenses because of a claim that is both first made against the Insured and reported in writing to the Company during the policy period by reason of an act or omission in the performance of legal services by the Insured or by any person for whom the Insured is legally liable[.]

(ECF No. 1-1 at 13, § I.A.)[3] Under the Policy, Continental had “the right and the duty to defend in the Insured's name and on the Insured's behalf a claim covered by this Policy even if any of the allegations of the claim are groundless, false or fraudulent.” (Id.) The Policy defines a “claim” in relevant part to mean “a demand, including the service of suit or the institution of any alternative dispute resolution proceeding, received by the Insured for money or services arising out of an act or omission, including personal injury, in the rendering of or failure to render legal services.” (Id. at 16, § III.) “Legal services” are defined in relevant part as:

A. those services, including eleemosynary (pro bono) services, performed by an Insured for others as a lawyer, arbitrator, mediator, title agent or other neutral fact finder or as a notary public . . .
B. those services performed by an Insured as an administrator, conservator, receiver, executor, guardian, trustee or in any other fiduciary capacity and any investment advice given in connection with such services;
[. . . .]

(Id. at 18, § III.) The Policy defines “damages” as “judgments, awards and settlements (including pre-judgment interest), provided any settlements negotiated with the assistance and approval of the Company.” The Policy specifically excludes from “damages, ” however, the following:

A. legal fees, costs and expenses paid or incurred or charged by any Insured, no matter whether claimed as restitution of specific funds, forfeiture, financial loss, set-off or otherwise, and injuries that are a consequence of any of the foregoing;
[. . .]
C. punitive or exemplary ...

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