I’m thrilled to sit down with Simon Glairy, a renowned expert in insurance and Insurtech, whose deep knowledge of risk management and AI-driven risk assessment has made him a trusted voice in the industry. Today, we’re diving into a significant recent ruling by the Eleventh Circuit in the Medmarc Casualty Insurance Company v. Fellows LaBriola LLP case, exploring its implications for professional liability coverage and the duties of insurers. Our conversation touches on the nuances of the case, the court’s interpretation of policy exclusions, the broader impact on duty-to-defend obligations under Georgia law, and what this means for insurers and policyholders alike.
Can you walk us through the core issue in the Medmarc Casualty Insurance case involving Fellows LaBriola LLP?
Certainly, Abigail. This case revolves around a malpractice lawsuit filed by former clients, Zankhana Patel and PNP Amusement Games, against the Atlanta-based law firm Fellows LaBriola LLP and one of its attorneys. The clients claimed the firm mishandled funds by transferring assets, including money, a BMW, and jewelry, to other parties without their consent after a settlement in a RICO and civil forfeiture action. On top of that, they alleged the firm failed to address conflicts of interest during their representation. Medmarc, the firm’s professional liability insurer, sought a declaratory judgment to avoid defending or indemnifying the law firm, arguing that the claims fell under a policy exclusion.
What was the Eleventh Circuit’s key decision in this dispute?
The Eleventh Circuit ruled that Medmarc must defend the law firm. The court found that not all the claims in the malpractice lawsuit were tied to the misappropriation of funds, which was the basis of Medmarc’s exclusion argument. Some claims, particularly those related to conflicts of interest, fell outside that exclusion and could potentially be covered under the policy. Therefore, the court upheld the broader duty to defend, aligning with the principle that if any part of a lawsuit might be covered, the insurer has to step in.
Could you explain the main features of Medmarc’s insurance policy that played a role in this case?
Sure. The policy, which covered the law firm from February 2021 to February 2022, included a commitment from Medmarc to defend any lawsuit or arbitration seeking damages against the insured, as long as the policy applied. However, there was a specific exclusion for claims involving the conversion, improper commingling, or misappropriation of client funds or trust account funds. Medmarc leaned heavily on this clause to argue they had no obligation to defend or indemnify, claiming all the allegations fell under this exclusion.
How did the court interpret that misappropriation exclusion in Medmarc’s policy?
The court took a nuanced view. They determined that while some claims did relate to the alleged mishandling of funds, others—specifically the accusations around conflicts of interest, like failing to disclose potential conflicts or obtain waivers—were separate and not covered by the exclusion. This meant that not every claim in the lawsuit was excluded, and under Georgia law, that’s enough to trigger Medmarc’s duty to defend the law firm on the entire case.
What does this ruling tell us about the scope of the duty to defend under Georgia law?
This decision reinforces that the duty to defend is very broad in Georgia. If even one claim in a lawsuit could potentially fall within the policy’s coverage, the insurer is obligated to provide a defense, regardless of whether other claims are excluded. It’s a policyholder-friendly stance that prioritizes protection for the insured over the insurer’s ability to cherry-pick claims to avoid defense costs. This case is a clear signal that insurers can’t easily walk away if there’s any ambiguity or partial coverage.
Medmarc also sought clarity on whether they’d have to pay damages if the law firm loses the malpractice suit. How did the court handle that request?
The court essentially said, “Not yet.” They ruled that it was premature to decide on the issue of indemnification—whether Medmarc would have to cover damages—because the underlying malpractice case hasn’t been resolved. That question will only be addressed once the outcome of the lawsuit against the law firm is clear, ensuring the focus right now remains on the duty to defend.
What broader implications does this case have for insurance companies and professional liability coverage?
This ruling is a wake-up call for insurers in the professional liability space. It highlights that the duty to defend isn’t something they can sidestep lightly—courts will hold them to it if there’s even a sliver of potential coverage. It also underscores the critical need for crystal-clear policy language. Ambiguities in exclusions or coverage terms often tip in favor of the insured, as we saw here. Insurers need to draft policies with precision and anticipate how courts might interpret claims that don’t neatly fit into exclusion categories.
Looking ahead, what is your forecast for how this decision might shape the landscape of professional liability insurance?
I think we’re going to see insurers become much more cautious and deliberate in how they structure professional liability policies, especially around exclusions. There might be a push to tighten language or create more specific carve-outs to limit exposure to broad duty-to-defend obligations. At the same time, this ruling could embolden policyholders to demand robust defense coverage, knowing courts are likely to interpret ambiguities in their favor. It may also drive more litigation over coverage disputes as both sides test the boundaries of these principles in future cases. Overall, it’s a pivot point that could reshape expectations and negotiations in this space.
