Insurance Denied in Legal Malpractice Verdict

     WASHINGTON (CN) - An insurer need not defend an attorney sued for legal malpractice after his misfiling cost a paralyzed client her medical malpractice case.
     The case involves spinal surgery that minor Sarah Gilbert underwent in 2004 to fix her scoliosis.
     That surgery rendered Gilbert a paraplegic, however, and her parents hired Barry Nace with Paulson & Nace to file a medical malpractice claim.
     Another Paulson & Nace attorney, Gabriel Assaad, assisted with the case, which they filed in Richmond, Va., days before the statute of limitations on Gilbert's claim expire in 2006.
     That action failed to identify Gilbert's parents as her "next friends" on the complaint, however, leading the court to dismiss. Though the lawyers had filed a second complaint to address this error, the court dismissed this case as untimely in early 2007.
     With the firm's insurance policy set to expire that July, Nace applied for a professional liability insurance policy from Chicago Insurance Co.
     Though Gilbert's legal malpractice suit against his firm was imminent, the lawyers did not alert the new insurer about it that potential claim until May 2009.
     They also said the "alleged error" with respect to Gilbert had occurred in 2008, and they never informed their prior insurer about Gilbert's potential claim.
     Chicago then retained counsel to defend the lawyers against Gilbert and finally discovered the true timing about the Gilbert medical malpractice case in 2011.
     Gilbert filed a March 2012 legal malpractice action against the lawyers in Richmond, Va., and Chicago Insurance sued Gilbert and the lawyers that December in Washington, D.C., to disclaim coverage.
     A jury in Richmond ultimately awarded Gilbert $4 million on the legal malpractice claim, but the court reduced that judgment to $1.75 million last year.
     U.S. District Judge Amy Jackson granted the insurer summary judgment Thursday.
     "The attorney defendants reasonably should have known about defendant Gilbert's potential claim prior to the July 24, 2007 inception of the CIC policy, and therefore, they did not satisfy an essential prerequisite to coverage of her claim," she wrote.
     Nace failed to show that Chicago waived its defense by working the case, including paying for the firm's defense, for two years before claiming it was not obligated to provide coverage, according to the ruling.
     "None of CIC's actions impeded the attorney defendants from obtaining their own counsel, or prevented defendants from negotiating settlement and avoiding a trial," Jackson wrote.