In an officially unpublished opinion, Illinois’ First District Court of Appeal held that an advance retainer which a law firm required for future costs and expenses was not covered malpractice under the firm’s E&O insurance policy: Illinois State Bar Ass’n Mut. Ins. Co. v. Coleman Law Firm, 2014 Ill. App. (1st) 133518-U, 2014 WL 7446203 (Ill. 1st DCA December 29, 2014)(stated “UNPUBLISHED OPINION”).
In that case, the Court reported, a bank’s “inside directors” signed an “’advanced payment retainer agreement’” with the insured law firm. The retainer agreement was stated to be “in connection with legal matters arising out of [the directors’] capacity as inside directors of the Bank.” The amount of the advance retainer was $150,000.00. That amount was, according to the agreement, to be paid by the Bank to the law firm “for reasonable costs and expenses incurred in connection with the matters for which the [Bank’s inside directors] had retained Coleman Law”. Illinois State Bar Ass’n Mut. Ins. Co. v. Coleman Law Firm, ¶ 4, 2014 Ill. App. (1st) 133518-U, ¶ 4, 2014 WL 7446203, at *1 (Ill. 1st DCA December 29, 2014)(stated “UNPUBLISHED OPINION”).
The bank went into receivership. The FDIC was appointed receiver and sent a letter to the law firm demanding the return of the $150,000.00 paid by the bank. The law firm refused. The FDIC filed suit for the return of the money and the law firm tendered defense of the FDIC case to the firm’s professional liability insurance carrier.
The carrier in turn filed an action for declaratory relief as to whether there was coverage under the malpractice insurance policy. The Circuit Court in and for Cook County granted the carrier’s motion for summary judgment. The First District affirmed on appeal, in the unpublished decision under discussion.
To be continued on Insurance Claims and Issues Weblog.
Reprinted with the permission of Thomson Reuters, and the author, from the manuscript of the author's 2015 Supplement chapters, and in particular Section 3:51, in “Litigation and Prevention of Insurer Bad Faith, 3d” ©2015 by Thomson Reuters.