Attorney Not Entitled to Defense Against Claim for Reimbursement of Fees
Case: Thomas Edwards v. Continental Casualty Co.
U.S. Court of Appeals for the Fifth Circuit
Attorney Edwards represented his client, a diver formerly in the employ of Cal-Dive, in a personal injury claim alleging a brain injury. The underlying case was settled for several million dollars, out of which Edwards received his fee. Some time later, Cal-Dive sued the diver, alleging he fraudulently exaggerated or fabricated his injuries to increase the value of his claim. The suit advised Edwards was not believed to have had knowledge of the fraud, but did seek reimbursement of the portion of the settlement funds he kept as his fee on the basis of unjust enrichment or restitution. This suit was ultimately dismissed for failure to state a claim.
Edwards sought a defense against the suit from his professional liability insurer, which the trial court granted, finding the allegation that Edwards represented the diver was sufficient to potentially implicate coverage under the policy at issue. On appeal, the United States Fifth Circuit reversed, holding an allegation of representation of the diver, without mention of any “act or omission” complained of during the performance of that work was insufficient to implicate potential coverage, as otherwise those terms would effectively be given no effect. It was further argued that recovery of fees paid as part of a settlement would not qualify as “damages” under the policy, but the Fifth Circuit did not address this argument. Edwards was allowed to keep his fee, but had to fund his own defense against the restitution claims.