Legal Malpractice and Coverage Issues Arising Out of Referral to a Financial Services Professional

/ 01.May, 2013

Attorney Roger A. Giuliani has a history of problems.  In 2004, a Nassau County, New York,  judge awarded $2 million in punitive damages to a man who responded to Mr. Giuliani’s advertisement for a living trust and lost $2,000, when Mr. Giuliani allegedly sent a non-attorney to the home of Gerald Campbell to execute a living trust.  It was alleged that Mr. Giuliani and other defendants pocketed the money without providing the service.  More recently, Mr. Giuliani has been accused of engaging in a mass market mail campaign targeting senior citizens for estate planning legal services.  Once the offer for legal services was accepted, Mr. Giuliani referred his clients to financial services representatives.  Following the referrals, four clients became the victim of theft and fraud by the financial services representatives.

The lawsuits by the four clients of Mr. Giuliani led to a lawsuit by American Guarantee and Liability Insurance Company against Chicago Insurance Company to determine coverage.  Two of the victims filed their claims while Mr. Giuliani was insured by Chicago Insurance.  The other two victims filed their claims while Mr. Giuliani was insured by a subsequent insurer, American Guarantee.  Both policies for Mr. Giuliani were “claims made” policies.  American Guarantee sought to hold Chicago Insurance responsible to cover the claims made by the two later claimants because the latter claims were “same and/or related” to the first two claims.  The New York Supreme Court, New York County, published an opinion on April 25, 2013, holding the claims were not the same or related.  The court noted “a claims-made policy is designed to protect the policyholder during the life of the policy upon ‘notice to the carrier within the policy period.'”  The court noted that claims made policies permit an insurer to be certain “that, when the policy period ends without a claim having been made, the insurer will be exposed to no further liability.”  The court found there were “substantial differences between the victims, including the amounts of the claims and the fact the financial services professional who allegedly committed the fraud was not the same in each circumstance.”

While the coverage dispute in this matter is interesting, the legal malpractice avoidance take away is the idea that an attorney may be sued for referring their client to a financial services professional.  This is not an isolated case.  Attorneys are frequently sued because the financial service professional they referred their client to turned out to be incompetent, or worse still, criminal.

-Josh J.T. Byrne, Esquire