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Hullverson Law Firm, P.C. v. Liberty Insurance Underwriters, Inc.

United States District Court, E.D. Missouri, Eastern Division

October 22, 2014

THE HULLVERSON LAW FIRM, P.C., et al., Plaintiffs,
v.
LIBERTY INSURANCE UNDERWRITERS, INC., Defendant.

MEMORANDUM AND ORDER

CHARLES A. SHAW, District Judge.

This matter is before the Court on the plaintiffs Mark Becker, Thomas Burke, John E. Hullverson, Thomas C. Hullverson, Stephen H. Ringkamp, and The Hullverson Law Firm, P.C.'s ("plaintiffs") motion for summary judgment as to Count V of the amended complaint. Liberty Insurance Underwriters, Inc. ("Liberty") has filed a cross motion for summary judgment as to Count V. The matter is fully briefed and ready for decision. For the following reasons, the Court will deny plaintiffs' motion and grant Liberty's motion.

I. Background

This action arises out of a policy of lawyers professional liability insurance issued by Liberty to The Hullverson Law Firm, P.C. ("the Hullverson Law Firm"). Initially plaintiffs brought a four-count complaint against Liberty. Count I sought declaratory relief; Count II asserted a claim for breach of the insurance contract; Count III asserted a claim for vexatious refusal to pay; and Count IV asserted a claim for bad faith failure to defend and indemnify.[1] Plaintiffs filed their amended complaint on January 16, 2014, adding Count V, which seeks coverage for plaintiffs' costs in defending themselves in disciplinary proceedings.

Underlying this professional liability insurance coverage action is an action filed by James E. Hullverson, Jr. ("James Hullverson") against plaintiffs in this Court, captioned Hullverson v. Hullverson, 4:12-CV-144 JAR (the "underlying suit"). In the underlying suit, James Hullverson alleged plaintiffs violated the Lanham Act and various Missouri Supreme Court Rules of Professional Conduct by presenting false and misleading advertising in phone directories, on the Internet, and on office signage. In addition to filing suit, James Hullverson also delivered a copy of the complaint to Mr. Alan D. Pratzel of the Missouri Office of Chief Disciplinary Counsel ("OCDC"). The OCDC initiated disciplinary proceedings against the insureds under the Missouri Rules of Professional Conduct.

Returning to the instant case, on June 11, 2014, the Court granted plaintiffs' motion for summary judgment on Count I for declaratory relief, declaring Liberty has a duty under the lawyers professional liability policy to defend and indemnify plaintiffs in the underlying suit. Now the parties have filed cross motions for summary judgment on Count V, which seeks coverage for disciplinary proceeding defense costs under the provision of the policy relating to Disciplinary Proceeding Defense Cost Reimbursement. Liberty has already reimbursed plaintiffs the $25, 000 policy limit for defense costs for "any one disciplinary proceeding, " but plaintiffs seek the $100, 000 aggregate limit for defense costs for multiple disciplinary proceedings.

II. Summary Judgment Standard

The standards applicable to summary judgment motions are well settled. Pursuant to Federal Rule of Civil Procedure 56(c), a court may grant a motion for summary judgment if all of the information before the court shows "there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law." See Celotex Corp. v. Catrett , 477 U.S. 317, 322 (1986); Board of Educ., Island Trees v. Pico , 457 U.S. 853, 863 (1982). "Where the unresolved issues are primarily legal rather than factual, summary judgment is particularly appropriate." Cearley v. General Am. Transp. Corp. , 186 F.3d 887, 889 (8th Cir. 1999) (citing Crain v. Board of Police Comm'rs , 920 F.2d 1402, 1405-06 (8th Cir. 1990)).

Where parties file cross motions for summary judgment, each summary judgment motion must be evaluated independently to determine whether a genuine dispute of material fact exists and whether the movant is entitled to judgment as a matter of law. Husinga v. Federal-Mogul Ignition Co. , 519 F.Supp.2d 929, 942 (S.D. Iowa 2007). "[T]he filing of cross motions for summary judgment does not necessarily indicate that there is no dispute as to a material fact, or have the effect of submitting the cause to a plenary determination on the merits." Wermager v. Cormorant Twp. Bd. , 716 F.2d 1211, 1214 (8th Cir.1983).

With this standard in mind, the Court accepts the following facts as true for purposes of resolving the cross motions for summary judgment.

III. Facts

Liberty issued a policy of lawyers professional liability insurance, policy number LPA300976-0111, with a policy period from October 26, 2011 through October 26, 2012 (the "policy"). The Hullverson Law Firm was the named insured under the policy. Additional insureds under the terms of the policy include all of the plaintiffs herein.

On January 27, 2012, James Hullverson filed a complaint alleging, among other things, a claim for damages against the firm and several of its individual attorneys based upon the allegedly false advertising of the Hullverson Law Firm in phone books, on the Internet, and on office signage. The complaint included separate counts against each plaintiff for violations of the Missouri Rules of Professional Conduct. The complaint invoked Eastern District Local Rule 83-12.02 and Rule IV, Section B of the Code of Professional Responsibility adopted by the U.S. District Court for the Eastern District of Missouri, and sought discipline of each insured by this Court under those Rules up to and including disbarment.

On February 2, 2012, James Hullverson delivered a copy of the complaint to the OCDC, thereby initiating disciplinary proceedings against each insured under the Missouri Rules of Professional Conduct. The OCDC assigned each insured a separate file number, docketed as follows: John E. Hullverson, File No. 12-267; Thomas C. Hullverson, File No. 12-268; Thomas M. Burke, File No. 12-266; Mark J. Becker, File No. 12-265; and Stephen H. Ringkamp, File No. 12-269.

Plaintiffs hired the law firm Husch Blackwell to defend them in the underlying action and to defend them before the OCDC. In the underlying suit, pursuant to the insureds' motion to dismiss or strike, Judge John A. Ross dismissed the ethical allegations concerning the purported violations fo the Missouri Rules of Professional Conduct. He held the Missouri Rules of Professional Conduct were insufficient to form the basis of a civil cause of action, and noted that the OCDC was investigating the allegations. Less than two weeks later, the underlying complaint was voluntarily dismissed without prejudice by James Hullverson.

The matter proceeded before the OCDC, and on December 28, 2012, the OCDC found no ethical violations by any of the insureds. After appeal by James Hullverson to the Advisory Committee of the Supreme Court of Missouri, the Advisory Committee determined that the OCDC findings were appropriate and declined further investigation. The Advisory Committee closed its investigation file on May 20, 2013.

On July 11, 2013, plaintiffs made demand upon Liberty under the Special Benefits provisions relating to Disciplinary Defense Cost Reimbursement. The defense of the ethical allegations in the underlying suit and in the OCDC proceedings exceeded the policy's aggregate limit of liability of $100, 000 "for all disciplinary proceedings." On January 10, 2014, Liberty issued its check to plaintiffs in the amount of $25, 000 for the amount it conceded it owed pursuant to the policy's Special Benefits Provision. Liberty denies payment beyond the $25, 000 limit.

On January 16, 2014, plaintiffs file a first amended complaint, alleging Count V for reimbursement of defense costs up to the $100, 000 aggregate limit for multiple disciplinary proceedings under the policy.

The Policy Language

The policy contains a "Special Benefits" provision relating to "Disciplinary Proceeding Defense Cost Reimbursement":

Special ...

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