A federal appeals court on Thursday ruled against AmTrust Financial Services Inc. in a lawyer’s professional liability coverage dispute. Affirmed a ruling in favor of the entity, holding that an underlying lawsuit involving an attorney’s position with an unrelated business was not covered by the policy.
AmTrust unit Associated Industries Insurance Co. Inc. issued a lawyer’s professional liability policy to New York law firm Wachtel Misery LLP, providing limits of $5 million per claim and $5 million in aggregate, according to court papers. Associated Industries Insurance Company, Inc. v. Howard Kleinhendler, Wachtel Misery LLP.
Associated sued the law firm and former partner Howard Kleinhendler in U.S. District Court in New York and sought a declaratory judgment that its policy does not provide coverage to the firm or Mr. Kleinhendler in the underlying lawsuit involving a real estate company because it Professionals were not involved. Services provided by either.
According to the complaint in the case, Mr. Kleinhendler created a company in which he was both a shareholder and executive vice president to acquire the property.
The district court ruled in favor of the insurer and a three-judge panel of other judges affirmed the decision. US Circuit Court of Appeals in New York. “As is relevant here, the insurance policy contained an express exclusion for activities undertaken in the capacity of an officer of another business enterprise,” the decision said.
“Kleinhendler argues that AIIC has a duty to defend him in the lawsuit” because he “alleges certain acts that could give rise to claims covered by the insurance policy,” it says.
However, “in short, all of Mr. Kleinhendler’s potential liability in the underlying litigation” arises “at least in part from his position” with the other company, the ruling said.
“Therefore, the district court appropriately concluded that AIIC’s policy exclusion applies” and that it does not have a duty to defend Mr. Kleinhendler in the underlying litigation.
Mr. Kleinhendler, who represented himself, and lawyers for the insurer did not respond to requests for comment.
