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In determining whether a lawyer must report a potential malpractice claim on a professional liability “errors and omissions” renewal or application form, must the insured attorney foresee how Missouri appellate courts would interpret a legal issue never before addressed? Based on a recent Missouri Court of Appeals opinion, the answer seems to be perhaps yes.

In Ruiz v. Bar Plan Mutual Insurance Co., 2019 WL 4145480 (E.D. Mo. 2019)(Sept. 3, 2019), the Missouri Court of Appeals found that an attorney’s failure to notify his legal malpractice carrier of a potential malpractice claim (arising out of the attorney’s representation of a deceased client) precluded coverage under the policy, even though at the time the attorney filed the insurance application no Missouri court had ever held that a legal malpractice action survives the death of a client. The malpractice claim in Ruiz stemmed from the lawyer’s representation of the decedent, Marcia Paul, in a medical malpractice action. The decedent had obtained a $750,000 judgment against the medical doctor, Dr. Enrique Pastrana. At the time, Ms. Paul had entered into a “537.065” settlement agreement which stipulated that the decedent could collect only from Dr. Pastrana’s liability insurance carrier. Dr. Pastrana’s liability insurance carrier then filed a declaratory judgment action seeking a ruling that the policy did not cover the Paul claim. After the insurance carrier filed a motion for summary judgment, Ms. Paul’s lawyer failed to properly respond, and the facts set forth in the carrier’s motion were deemed admitted. The trial court entered summary judgment in favor of the doctor’s insurance carrier, and Ms. Paul appealed. Shortly after, Ms. Paul died, and Elizabeth Ruiz was appointed the personal representative of Ms. Paul’s estate.

Approximately six months after Ms. Paul’s death, in December of 2008, her attorney submitted a renewal application with his professional liability insurance carrier and did not disclose the potential malpractice claim involving the Paul matter. On November 3, 2009, Ms. Ruiz filed a legal malpractice lawsuit against Ms. Paul’s attorney on behalf of the estate. Shortly thereafter, the attorney notified his malpractice carrier of the claim for the first time. The attorney’s malpractice carrier, the Bar Plan, denied coverage. In November 2011, the decedent’s lawyer entered into a “537.065” consent judgment that limited recovery to the Bar Plan policy. Ruiz filed an equitable garnishment seeking to recover against the Bar Plan policy, and the trial court granted summary judgment in favor of the Bar Plan on the basis that the attorney had not properly disclosed the legal malpractice claim arising out of his representation of Ms. Paul. Ruiz appealed.

In affirming summary judgment in favor of the Bar Plan, the Missouri Court of Appeals analyzed the reporting requirement of the claim-made policy under the “objectively reasonable attorney” standard. That is, the court looked to whether an “objectively reasonable attorney” would have had reason to know that his actions might give rise to a claim.

The decedent’s attorney argued that he could not have reasonably expected a legal malpractice claim at the time he submitted his renewal application in December 2008 because: (1) legal malpractice actions are not assignable in Missouri; and (2) prior to 2012, no Missouri appellate court had ever held that a legal malpractice claim survives the death of a client. The Missouri Court of Appeals rejected both arguments, noting that the 2012 Missouri appellate case Roedder v. Callis, which found that legal malpractice claims do in fact survive a client’s death, was not a “change” in the law. Rather, Roedder simply applied existing principles of the survivability of personal injury actions to legal malpractice claims, according to the Court.

The Court of Appeals also rejected as a red herring the lawyer’s argument regarding Missouri’s bar against assignment of legal malpractice actions. According to the Court, whether a legal malpractice action is assignable has no bearing on whether the action survives the death of the client.

As of the date of this blog article, an application for transfer to the Missouri Supreme Court remains pending. In his application for transfer to the Missouri Supreme Court, the decedent’s lawyer argued that the Missouri Court of Appeals’ holding, if it were to stand, would place an “insurmountable burden” on attorneys to predict future changes in Missouri law. For the time being, prudent attorneys in Missouri should carefully review the opinion in Ruiz and its potential impact on their claims-made professional liability policy reporting requirements.