Insurance Law

Top N.H. Court Says 'Innocent Insured' Includes Duped Law Firm Partner, Nixes Policy Recission

In the latest twist in an attorney misappropriation matter that has created trouble for a longtime law partner to the alleged wrongdoer, the New Hampshire Supreme Court says an insurance company that provided professional liability coverage to the duo’s law firm can’t rescind its policy based on incorrect information supplied by the innocent partner.

Reversing a declaratory judgment granted to Great American Insurance Co. by the trial court on the recission issue, the supreme court held Friday, as a matter of law, that partner Robert Christy, who was not involved in the misappropriation, fell within the category of an “innocent insured” under the plain language of the policy. Hence, although there may be other coverage arguments for the trial court to consider on remand, GAIC could not declare the policy null and void due to incorrect information Christy supplied.

Christy said he relayed information to GAIC after simply asking his law partner, Thomas Tessier, whether he knew of anything that should be disclosed on the insurance application, and Tessier told him he knew of nothing, recounts the court’s opinion (PDF).

In fact, as far as the policy at issue in the coverage case is concerned, Tessier had settled, not long before that conversation, with an attorney representing an individual who was supposed to get assets from an estate that Tessier has misappropriated, the court said. As detailed in a previous post, Tessier was convicted and disbarred as a result of allegedly misappropriating some $2.3 million.

Under the language of the policy, “[t]he innocent insured provision shows that the parties intended to distinguish actual from imputed knowledge and not to penalize insureds who did not have actual knowledge of wrongful acts,” the supreme court writes.

And “[t]hus, an insured who does not have actual knowledge of the wrongful acts and, therefore, does not have the ability to report them and the foreseeable claims that may arise from them, is entitled to coverage provided the insurer is notified promptly after the insured obtains knowledge of the wrongful acts.”

Hat tip: Legal Profession Blog

Related coverage: “Lawyer’s Wife Can Sue Nixon Peabody Attorney re Claimed Injuries Due to Her Own Husband’s Fraud”

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