After Burkhart, Wexler & Hirschberg, LLP (BW&H) was named a defendant in a federal suit, it sued its insurer, Liberty Insurance Underwriters, because that company refused to defend and indemnify the law firm.
When the Nassau County Supreme Court agreed with the insurer's position, BW&H appealed to the Appellate Division, Second Department.
In the federal litigation, the lawyers were reportedly sued for "'wanton, willful and malicious' breach of fiduciary duty for misappropriating [a client's] confidential information and trade secrets; tortious interference with contract for using this information to attempt to convert [the client's] members and prospective members to a newly-formed competing business entity; and for 'wanton, willful and malicious' misappropriation of trade secrets."
While an insurance carrier has a duty to defend when a complaint falls "within the scope of risk covered by the policy," in this case, the parties' contract limited coverage to "negligence or malpractice" arising out of the firm's performance (or non-performance) of legal services. Since the claims brought against BW&H weren't encompassed events, the AD2 agreed the insurer didn't have an obligation to defend.
In other words, Liberty was freed by the AD2.
To download a copy of the Appellate Division's decision, please use this link: Burkhart, Wexler & Hirschberg, LLP v. Liberty Ins. Underwriters, Inc.