DEFENSE ARRANGEMENTS BY INSURED REQUIRED NOTICE TO INSURER

Professional Liability	Consent
Notification

A lawyers professional liability policy protected a law firm's associates and the firm against claims for alleged professional errors and omissions, the insuring agreement providing for payment of damages and the defense of suits alleging errors and omissions. It was also specified that the insurer would "pay all claims expenses in addition to the applicable limit of liability."

Among its definitions, "claims expenses" were defined to include "fees, costs and expenses resulting from the investigation, adjustment, defense and appeal of a claim, suit or proceeding arising in connection therewith, if incurred by the Company, or by the Insured with written consent of the Company…"

A lawyer employed by the firm was involved in a situation that might (but did not) result in a claim. He informed the insurer and was requested to notify it if and when a suit was filed. The senior member of the firm eventually, on his own initiative, hired attorneys to investigate and prepare for a defense of the associate; he was concerned about protecting the firm.

A malpractice suit was never filed. The insured law firm brought action against the insurer to recover the sums expended in the investigation and related legal matters. It appealed a grant of summary judgment in favor of the insurer.

The insurer contended that it was not obligated to investigate or defend anything other than a "suit against the insured..." The insured argued that the policy was ambiguous because "claim" was not specifically defined. It said that the insurer had an obligation to defend and investigate "claims" which are not "suits."

The appeal court concluded, from the policy insuring agreement and related provisions, that the insurer, apart from the defense of a claim, had no obligation to reimburse the insured for defense expenses incurred without the written consent of the insurer.

The summary judgment in favor of the insurance company was affirmed.

Stein et al., Plaintiffs, Appellants v. International Ins. Co., Defendant, Respondent. California District Court of Appeal, Fourth District, Division One. No. D008700. January 26, 1990. 217 Cal. App. 3d 609. CCH 1990 Fire and Casualty Cases, Paragraph 2389.)