.Attorney’s Lien Dispute Neither a “Suit” nor “Damages” under Professional Liability Policy

The Illinois First District Appellate Court, applying Illinois law, in an opinion by Justice Harris, reversed a lower court’s decision and found that Illinois State Bar Association Mutual Insurance Company (“ISBA Mutual”) had no duty to defend its insured, attorney Mark McNabola, against a motion to adjudicate an attorney’s lien. The Appellate Court reasoned that the motion was not directed at damages covered under McNabola’s Lawyers Professional Liability Insurance Claims Made and Reported Policy because the motion was not seeking monetary damages. Instead, it only disputed McNabola’s right to the lien.

The underlying suit arose from an incident that left Scot Vandenberg severely injured after he fell from the top deck of a yacht manufactured by Brunswick Corporation. McNabola represented Vandenberg in his personal injury lawsuit against Brunswick. After a three-week trial, the parties agreed to a $25 million settlement.  Brunswick later sought to vacate the settlement after learning that a court clerk had read McNabola a jury question prior to the settlement. The trial court granted Brunswick’s motion and vacated the settlement. As a result, Vandenberg replaced McNabola with new counsel and filed a motion to reconsider.  The motion was argued in front of a new judge.  Vandenberg’s motion was granted, and the settlement was reinstated.

Vandenberg subsequently filed a motion to adjudicate any claimed attorney’s liens or fees/expenses against McNabola.  The motion was separate from a legal malpractice action Vandenberg filed against McNabola, which ISBA Mutual agreed to defend.  In the motion, Vandenberg argued it would be “wholly unfair and contrary to public policy” to award McNabola fees out of the settlement, because his misconduct resulted in the initial loss of Vandenberg’s $25 million settlement.  Vandenberg further argued, if fees were ordered, the fees should be reduced by the amount Vandenberg had to pay new counsel he was required to retain after McNabola’s misconduct. 

ISBA Mutual refused to defend McNabola against the motion and filed a complaint for declaratory judgment.  ISBA argued, in part, it had no duty to defend McNabola because the policy provided a duty to defend against “suits” and Vandenberg’s motion was not a suit.  ISBA Mutual further argued the motion did not seek “damages” as defined by the policy.  McNabola answered the complaint and filed a motion for judgment on the pleadings, which the trial court granted reasoning that Vandenberg’s motion to adjudicate an attorney’s lien constituted a “suit” under the policy and that the damages sought were covered by the policy.

On appeal, the Appellate Court found that, although the term “suit” most often refers to a formal complaint, this is not always true based on the facts of each case.  The court explained that “suit” may also apply to petitions and other court filings.  However, because courts must construe insurance policies as a whole, the court reasoned that, although the policy did not define “suit,” the policy did state that the duty to defend attaches to suits “against the insured that seeks damages arising out of a wrongful act.”  Ultimately, the court found Vandenberg’s motion did not seek recovery for a monetary loss directly resulting from McNabola’s misconduct.  Instead, Vandenberg sought only to dispute McNabola’s claimed right to the lien.  As a result, the Appellate Court reversed the trial court’s ruling and found ISBA Mutual did not have a duty to defend McNabola against the motion to adjudicate an attorney’s lien. Illinois State Bar Ass’n. Mut. Ins. Co. v. McNabola Law Group, P.C., 2019 IL App (1st) 182386 (June 21, 2019).