Fraud Inducing Mass Mailings – One Event or Multiple Claims?

American Guar. & Liab. Ins. Co. v Chicago Ins. Co., 2013 N.Y. App. Div. LEXIS 2778 (N.Y. App. Div. 2013)

The New York state appeals court, first department reversed the trial court holding that an insurer is not obligated to cover defense costs for an attorney accused of selling estate planning services to senior citizens and then passing clients off to financial services representatives who swindled them because those claims arose outside policy period.

Attorney Roger A. Giuliani who is accused of engaging in a mass market mail campaign targeting senior citizens for estate planning legal services then funneling his clients to financial services representatives. Four of Giuliani’s clients were ultimately defrauded by the financial company.

The plaintiff insurer sought to hold defendant insurer liable for claims it covered on behalf of their mutual insured. The underlying suits against the insured involved allegations of legal malpractice based on the insured’s failure to oversee the financial representatives. Of the four suits filed, two occurred within the plaintiff’s policy period and two occurred within the defendants policy period. The plaintiff-insurer settled all the claims, then commenced this action claiming that under defendant’s “claims-made” policy, the latter claims were the “same and/or related” to the first two claims and that defendant should have provided coverage to Giuliani and therefore should reimburse the plaintiff. The trial court agreed, finding that because the victims’ relationship with Giuliani and the financial services professionals originated with the mass mailing campaign, the claims were related.

The appellate court, however, disagreed noting that a claims made policy provides “the distinct advantage for the insurer of providing certainty that, when the policy period ends without a claim having been made, the insurer will be exposed to no further liability.” Moreover, noting the substantial differences between the victims, including the amounts of their claims and the financial services professional who allegedly committed the fraud, the court found that “same or related” claims provisions in the context of lawyer’s professional liability policies have declined to find that the claims were the same or related where an attorney has provided separate services to multiple clients.