Eastern District of Va. finds insurer has no duty to defend in Blackberry malpractice case

In Minnesota Lawyers Mutual Ins. Co. v. Antonelli, Terry, Stout & Kraus, LLP, No. 1:08-CV-1020 (E.D. Va. Nov. 18, 2010), the Court granted the insurer's motion for summary judgment concerning insurance coverage for the "Blackberry malpractice case."

 

In the "Blackberry malpractice case", which is pending in Florida, the plaintiffs claim that alleged breaches of duty by the defendant law firm and attorneys prevented them from receiving any share of the settlement of NTP's patent infringement claims against RIM concerning Blackberry wireless messaging technology. NTP's suit against RIM resulted in a $612.5 million settlement, and one of the defendant attorneys is alleged to have received $177 million of the NTP settlement proceeds.

 

In the coverage action, the Eastern District of Virginia based its ruling on the business enterprise exclusions in the policy, which relieved the insurer from its duty to defend the insureds in the underlying malpractice case.

 

Essentially, the Court found that the malpractice claims arose out of legal advice rendered by the insured attorneys; that the insured attorneys rendered these services in connection with the Telefind, Flatt Morris, and NTP enterprises; and that Flatt Morris and NTP were both owned, controlled, or managed by the Insureds. The damages alleged in the malpractice action resulted from a conflict of interest between the insureds and the plaintiffs, who claimed an interest in NTP, Telefind, and Flatt Morris. Therefore, the business enterprise exclusions applied.

 

There was also a Specific Entity Endorsement in the policy, excluding:

Any CLAIM resulting from any act, error or omission arising out of rendering or failing to render PROFESSIONAL SERVICES to or on behalf of the following individual(s), business enterprise(s) or organization(s): "NTP Incorporated"

However, and somewhat curiously, due to the ruling based on the business enterprise exclusions, the Court did not reach the issue whether the Specific Entity Endorsement barred coverage.

 

This coverage decision has been appealed to the 4th Circuit, which will be the second time the case has reached the 4th Circuit.

 

More background concerning this decision, and judicial interpretatioin of business enterprise exclusions in LPL policies, is available here.