Vague Allegations Support Possible Wrongdoing After Policy in Place
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Vague Allegations Support Possible Wrongdoing After Policy in Place

A law firm and its named partner were faced with a legal malpractice lawsuit brought by one of the firm’s clients after the attorney failed to timely accept a demand to settle a personal injury case as instructed, causing the case to go to trial with a verdict against the client in excess of $5.5 million. The firm’s professional liability insurer sought declaratory judgment arguing it had no duty to defend based on the Prior Knowledge Condition in the policy. The Fifth Circuit affirmed the insurer’s duty to defend finding Prior Knowledge Condition did not relieve it of the duty to defend where the underlying complaint made allegations of wrongdoing at an unspecified time. The court found that the firm’s alleged failure to accept the settlement demand occurred prior to the policy period but noted the complaint made additional, general allegations of wrongdoing by the firm at an unspecified time that could have been after the policy inception. 

Allied World Specialty Insurance Company v McCathern