Beale v. American National Lawyers Insurance Reciprocal

BELL, C.J. This appeal from an order entering declaratory judgment presents the question whether, as a matter of law, in a legal malpractice action, the claims of each of five children allegedly injured as a result of the negligence of the same defendants, when consolidated for trial and, therefore, where all five of the claims are totally neglected, constitute a single claim under an insurance policy limiting the malpractice carrier’s liability for damages to those “arising out of the same, related or continuing Professional Services without regard to ⁶⁴⁶ the number of claims made, demands, suits proceedings, claimants, or Persons Insured involved.” 1 The Circuit Court for Baltimore City concluded that they do. We shall reverse. Between 1988 and 1990, Eric, Michael, Antoine, Dustin and Cynthia Beale (the Beale Children), the appellants, resided at premises, 1705 Holbrook Street in Baltimore City, in which, it was alleged, there was loose and flaking paint and which was cited for lead paint violations. During that time, and as a result of the alleged negligence of the landlord, each child was exposed to, and ingested, lead paint, sustaining an elevated blood lead level, as a result.

The Beale Children’s grandmother retained Mark E. Herman, Esq. and the firm with which he was associated, William G. Kolodner, P.A. (hereinafter, collectively, Kolodner, P.A.), to represent them in their attempt to recover for their injuries. Kolodner, P.A. filed suit against Northern Brokerage Co. and Brokerage I., Inc., the owners and operators of 1705 Holbrook, the landlords, on behalf of the Beale children and their parents. The complaint, consisting of eighteen (18) counts, alleged in separate counts applicable to the Beale children, their mother and their father, negligence, breach of warranty, negligent misrepresentation, nuisance, unfair and deceptive trade practices and breach of contract.

Thus, there were six counts relating to the Beale children, the claim of ⁶⁴⁷ each Beale child being consolidated with the claims of all of the other Beale children. The claims of each individual child, as alleged was identical to the claims of all of the other children. Subsequently, noting the lack of any evidence as to the landlord’s notice of the lead paint condition in the leased premises and on the issue of the causal connection between the alleged presence of lead-based paint in the dwelling and the alleged injury to the children, the trial court granted the landlords’ motion for summary judgment and entered judgment in their favor. 2 That judgment was affirmed by the Court of Special Appeals in an unreported opinion. Subsequently, now represented by new counsel, the Beale children, by their grandmother and next friend, brought a malpractice action against Kolodner P.A. Although consolidated in one complaint, having a total of ten (10) counts, the claim of each of the children against the law firm and Herman was set forth in separate counts.

In each count, the subject child alleged that, as a result of the total neglect of his or her attorney, as appropriate, Kolodner, P.A. and Herman, he or she was injured. More specifically, each count alleged that Kolodner, P.A. was negligent in: “a. Failing to properly investigate, prepare, handle, prosecute, pursue and litigate the claims of the Plaintiff; “b. Failing to adequately research the law as to lead paint poisoning actions; “c.

Agreeing to handle a legal matter which they knew or should have known they were not competent to handle; ⁶⁴⁸ “d. Failing to properly retain, hire and name expert witnesses, and to provide the opinions and reports of these expert witnesses pursuant to a Circuit Court Scheduling Order; “e. Failing to properly respond to motions for summary judgment filed by the landlord; “f. Failing to have Plaintiff evaluated psychometrically for the presence of brain damage resulting from his lead poisoning prior to recommending the said grossly inadequate settlement; “g.

Failing to conduct even the most rudimentary research in the medical literature to determine future consequences of the level of lead poisoning sustained by the Plaintiff.” Kolodner P.A. was insured, under a lawyers professional liability policy, by American National Lawyers Insurance Reciprocal (Risk Retention Group) (ANLIR), the appellee. That policy provided coverage of $ 1,000,000 per claim and $ 2,000,-000 aggregate per policy period and that ANLIR would pay on behalf of its insured “all sums [the insured] shall become legally obligated to pay as Damages because of any [timely made] Claim to which this policy applies.” With respect to the policy limits, it provided: “The Per claim Limit of Liability stated in the Declarations Page is the limit of the Company’s liability for all Damages arising out of the same, related or continuing Professional Services without regard to the number of claims made, demands, suits proceedings, claimants, or Persons Insured involved. If additional Claims are subsequently made and reported to the company and arise out of the same, related or continuing 3 Professional Services as a claim already made and reported to the Company, all such claims, whenever made, shall be considered first made and reported within the Policy Period or Extended Reporting Period in which the earliest claim arising out of such Professional ⁶⁴⁹ Services was first made and reported. All such Claims shall be subject to the Per Claim Limit of Liability applicable at the time the first Claim or act, error or omission was first reported to the Company. “The Aggregate Limit stated in the Declarations Page is the limit of the Company’s liability for all Damages arising out of Claims first made and reported to the Company during each Policy Period, or in the case of an Extended Reporting Period, the entire applicable Extended Reporting Period.

The Aggregate Limit of Liability does not increase the Per Claim Limit of Liability for Claims arising out of the same, related or continuing Professional Services.” “Professional Services” were defined as “Legal services which the Insured renders or fails to render, in his or her capacity as a lawyer, for or on behalf of one or more clients, arising from or within an attorney-client relationship.” A “claim,” the policy states, is “a demand received by the insured for money, other than fines, penal sums or any other amount or item not otherwise included within the definition of Damage in this policy, including the service of suit or the institution of other proceedings against the insured.” Maintaining that, under its policy, the five Beale claims constituted but “one claim,” ANLIR offered the appellants its per claim limit of $ 1,000,000.00. When the appellants rejected the offer, it filed this declaratory judgment action to resolve which limit of liability applied, the per claim or the aggregate. The legal malpractice action was stayed pending the result of the declaratory judgment action. The Circuit Court entered summary judgment in favor of ANLIR. 4 Agreeing with ANLIR that the claims of each ⁶⁵⁰ one of the Beale Children and, therefore, the damages each claimed due to their attorneys’ alleged malpractice, “arose out of the ‘same, related or continuing Professional Services, without regard to the number of Claims made, demands, suits, proceedings, claimants or Persons Insured involved,’ ” it declared, “[biased upon the undisputed material facts, and in accordance with caselaw cited by the parties, the Per Claim Limit of Liability of the Policy applies to all damages claimed by the Beales’ claims against the Attorneys.” The Petitioner timely noted an appeal to the Court of Special Appeals.

We granted certiorari, on the Court’s own motion, before any proceedings in the intermediate appellate court. Beale v. Am. Nat’l, 371 Md. 613 , 810 A.2d 961 (2002). We shall reverse the judgment of the Circuit Court for Baltimore City.

I. In granting summary judgment, the trial court, noting that “[t]he alleged negligence [is] identical in all ten counts of the [malpractice] Complaint,” and that the Beale children alleged their attorneys, “had[, and breached,] the same, identical duties as to the Beales,” concluded that “the damages claimed by the Beales due to the Attorneys’ alleged malpractice arose out of the ‘same, related or continuing Professional Services, without regard to the number of Claims made, demands, suits, proceedings, claimants or Persons Insured involved.’” It accordingly held that the per claim limit of liability applied to all damages claimed by the Beale children in the malpractice action. The court characterized as hypothetical and missing the point, the appellants’ argument that the aggregate limit applied because the attorneys need not have been negligent as to all of their clients; they could have been negligent as to one or more, but not all. More relevant to the court was ⁶⁵¹ “The Beales have not identified any professional service which the attorneys should have performed as to one or more of the Beales[, b]ut which they were not required to perform as to the others. In other words, the Beales have failed to show how the Attorneys’ duty to render professional service to them differed in any [respect] whatsoever.” The Circuit Court relied on cases from our sister states, there being neither Maryland nor Tennessee 5 cases on ⁶⁵² point.

Atlantic Permanent Federal Savings and Loan Association v. American Casualty Co. of Reading, Pa., 839 F.2d 212 (4th Cir.1988); Gregory v. Home Ins. Co., 876 F.2d 602 (7th Cir.1989); Chemstar, Inc. v. Liberty Mutual Ins. Co., 41 F.3d 429 (9th Cir.1994); Mead Reinsurance v. Granite State Insurance Co., 873 F.2d 1185 (9th Cir.1988); Continental Cas. Co. v. Wendt, 205 F.3d 1258 (11th Cir.2000) (adopting opinion in Continental Cas.

Co. v. Hall, 1999 U.S. Dist. LEXIS 21258 ; Continental Cas. Co. v. Brooks, 698 So.2d 763 (Ala.1997); Bay Cities Paving & Grading, Inc. v. Lawyers’ Mut. Ins.

Co., 5 Cal.4th 854, 21 Cal.Rptr.2d 691 , 855 P.2d 1263 (1993). Gregory, Wendt, Bay Cities and Brooks all involved legal malpractice actions. In Gregory , the attorney for the broker of a videotape series, in addition to providing services in connection with the videotape investment program, drafted the production service agreement and promissory note to be signed by the videotape purchasers and a tax and security opinion letter concerning the videotape sales. The tax and security opinion letter was reprinted in a sales brochure distributed to prospective buyers, in which investors were advised that the videotapes were not securities and that their purchase would have certain tax advantages. 876 F.2d at 602-603 .

When the Internal Revenue Service disallowed the deductions the attorney advised would be allowed, a class action lawsuit was filed, in which, inter alia, the attorney was joined via cross-claim for malpractice. Id. at 603 . The case was ⁶⁵³ settled when the court to which the action was assigned held, also contrary to the attorney’s advise, that the videotape sales were “investment contracts” and did not qualify for a private offering exemption. Id.

The settlement contemplated that a declaratory judgment action would be brought to determine whether, under the attorney’s professional liability policy, the “per claim” limit of liability or the “aggregate” limit applied to the class claims. Under that policy, “[t]wo or more claims arising out of a single act, error, omission or personal injury or a series of related acts, errors, omissions or personal injuries shall be treated as a single claim.” Id. at 604 . The court held that the claims flowing from both the attorney’s alleged error in the opinion letter with respect to the tax consequences of buying videotapes pursuant to the videotape offering and his error concerning the videotape promotion as a security were sufficiently related to be considered a single claim under the insurance policy. Id. at 605-606 .

This was so, the court reasoned, because “the acts giving rise to the claims could be considered causally connected, since they were performed by a single individual ... and involved legal advice and drafting of three documents all of which ‘flowed from his structuring the deal to try to achieve certain tax and security consequences.’ ” Id. at 605 . The limits of a lawyer’s Professional Liability Insurance Policy were also at issue in Wendt. That policy defined “the limit of liability stated for ‘each claim’ ” as “the maximum we will pay for all claims and claim expenses arising out of, or in connection with, the same or related wrongful acts.” Id. at 1260. The precise issue was whether the acts of an attorney forming the basis for a suit against him for making false and misleading statements were related, or logically connected, to those forming the basis for a later third party complaint asserting similar misrepresentations against him.

Id. at 1263. As in Gregory , the attorney in Wendt, in addition to performing legal services regarding various aspects of the transactions, promoted the sales of notes issued by his client. 205 F.3d at 1259. The activities in that regard, it was alleged, ⁶⁵⁴ consisted of appearing at seminars and holding himself out as knowledgeable in securities law; representing at these seminars the legality of his client’s loans; vouching for the legality of the loans with clients to whom he had a fiduciary duty; and “taking loans of money from his employees, drafting brochures for use by promoters, and various other illegal and unethical activities all performed with the aim of supporting investment in [his client’s] loans.” Id. at 1263. Holding that “[t]he plain meaning of the word ‘relate’ is to ‘show or establish a logical or causal connection between,’ ” the court concluded that the suits did “relate or have a ‘logical connection’ in any ‘meaningful sense of the word.’ ” Id.

It explained: “It is clear that Hall’s course of conduct encouraged investment in [the client’s] notes. Though clearly this course of conduct involved different types of acts, these acts were tied together because all were aimed at a single particular goal. The fact that these acts resulted in a number of different harms to different persons, who have different types of causes of action against Hall does not render the ‘wrongful acts’ themselves to be ‘unrelated’ for the purposes of the insurance contract. Rather, they comprised a single course of conduct designed to promote investment in [the client].

It is this same course of conduct which serves as the basis for [the later] litigation. The conduct at issue in both cases was arguably the ‘same’ and at the very least ‘related’ in any common sense understanding of the word.” In Bay Cities, the attorney representing a general contractor filed a mechanic’s lien, but failed both to serve a stop notice on the construction’s lenders and to file a complaint to foreclose the mechanic’s lien. 21 Cal.Rptr.2d 691 , 855 P.2d at 1264 . Consequently, being unable to collect the amount it was owed, the general contractor filed a malpractice action against the attorney, whose professional liability policy limited coverage to $ 250,000 “for each claim.” Under the policy, “Two or more claims, arising out of a single act, error or omission or a series of related acts, errors or omissions shall be treated as a single claim.” Id. The court rejected the plaintiffs argument that the two acts of negligence constituted two claims for ⁶⁵⁵ purposes of the policy’s “per claim” maximum coverage.

Id. at 1270. It held, in any event, that, if two claims, they were “related” within the contemplation of the policy, noting: “The two errors by the attorney are ‘related’ in multiple respects. They arose out of the same specific transaction, the collection of a single debt. They arose as to the same client.

They were committed by the same attorney. They resulted in the same injury, loss of the debt. No objectively reasonable insured under this policy could have expected that he would be entitled to coverage for two claims under this policy.” Id. at 1275. 6 Brooks is quite similar. There, an attorney prepared four quitclaim deeds and a durable power of attorney for the attorney’s client. 698 So.2d at 765 .

Her professional liability policy limited the carrier’s liability, as follows: “[T]he limit of liability stated for ‘each claim’ is the maximum we will pay for all claims and claim expenses arising out of, or in connection with, the same or related wrongful acts.” Id. at 764 . Holding that there was only one act of malpractice and, therefore, that the “per claim” limit of liability applied, the court commented: “Although the record shows that Egbert committed various acts of malpractice in connection with preparing deeds, wills, and a power of attorney, all of those acts, in our judgment, led to a single result that formed the basis of Brooks’s claim: the loss of title to property.” Id. at 765 . At issue in Chemstar were what constitutes an occurrence under a third party insurance contract and when the coverage under the policy is triggered among successive policy years. ⁶⁵⁶ Twenty eight homeowners, who purchased high-periclase lime plaster, manufactured by Chemstar and intended for exterior use only, sued Chemstar and a distributer when they used the lime plaster on the interior of their homes and the plaster pitted. Chemstar sought indemnity and defense from its insurer, whose policy required it to “pay on behalf of the insured all sums which the insured shall become obligated to pay by reason of the liability imposed on the insured ... for damages because of ... destruction of tangible property during the policy period ... caused by an occurrence.” 41 F.3d at 431.

The court determined that all of the plaster pitting claims arose from a single occurrence, and that the underlying cause of the plaster pitting was the failure of the distributer to warn the end users that it was not suitable for interior use. Id. at 431-32. Noting that there was no intervening, proximate cause after the failure to warn, the court concluded that “the fact that the 28 incidents of pitting involved different homes, claimants, sources of lime, and times does not prelude a finding that the incidents arose from the same underlying cause.” Id. at 433. To like effect is Mead, except that, instead of plaster pitting, in that case the court determined that 11 of 12 § 1983 lawsuits stemmed from one occurrence, the 11 complaints alleging “the same excessive force policy and being premised upon the City’s deliberate indifference to excessive force by its police department.” 873 F.2d at 1187-88 .

In Atlantic Permanent, one of the issues was the number of deductibles applicable to a directors and officers liability insurance policy where multiple plaintiffs brought multiple claims against the insured officers. 839 F.2d at 219 . The plaintiffs were loan customers who sued the Savings and Loan, its subsidiary and three of its officers, alleging that they “had engaged in various fraudulent and deceptive sales tactics in connection with Atlantic’s home improvement loan program.” Id. at 213 . The court affirmed the district court’s holding that “when the claims asserted against the insureds arise out of a series of interrelated acts — here, the planning and carrying out of Atlantic’s home improvement program — they should be ⁶⁵⁷ treated as a single ‘loss’ for the purposes of calculating the deductible.” Id. at 219 . This is the position espoused by the appellees.

The appellants, not surprisingly, see the resolution of the issues in this case quite differently. They point out that, under the professional liability policy at issue in this case, only damages and claims “arising out of the same, related or continuing Professional Services” fall within the insurance company’s liability. What constitutes the same or related professional service is, the appellants contend, ambiguous. Noting that the American Heritage Dictionary of the English Language 1539 (4th ed.2000), defines “same” as “the very one; identical,” the appellants argue that, as the claim of each of the Beale children is a separate and distinct case, requiring the rendering of professional services personal to the particular child, the professional services performed, or not performed, in that case are not the same professional services performed, or not performed, in the case of the other children.

The professional services rendered in the case of one of the children, to be sure, may be the same services for purposes of the claims of persons other than another client, i.e. those, like the claim of the child’s mother perhaps, dependent on the claim of that child. Thus, the appellants submit that there are two reasonable and logical interpretations of the term, “same.” They also reject the appellee’s argument that, since the five cases were consolidated and then all of them were neglected, with nothing being done in any of them, with the result that they were all dismissed at the same time, the same professional service was rendered to each — “each child received the same legal service of total neglect.” The appellants also deny that the claims are related. First, they maintain that the term, “related” is ambiguous. Referring again to the dictionary definition, the appellants note that “related” is defined as “connected, associated,” American Heritage Dictionary of the English Language 1473 (4th ed.2000), and “standing in relation: connected; allied; akin.” Black’s Law Dictionary, 1288, (6th ed.1990).

From these definitions, ⁶⁵⁸ they point out, two lines of cases have evolved, one exemplified by Scott v. American National Fire Ins. Co., 216 F.Supp.2d 689 (N.D.Ohio 2002), in which the relatedness is causal, and the other, in which the relatedness may be either solely “logical” or both logical and causal. Under either approach, the appellants submit, the applicable limit of liability is the aggregate one. This is so, they assert, because that result is dictated by the rules of construction applicable to the interpretation of contracts of insurance: “Where terms are ambiguous, extrinsic and parol evidence may be considered to ascertain the intentions of the parties.

Cheney, supra, 315 Md. at 766-67, 556 A.2d [at 1138]. ‘Maryland does not follow the rule, adopted in many jurisdictions, that an insurance policy is to be construed most strongly against the insurer.’ Id. Nevertheless, ‘if no extrinsic or parol evidence is introduced, or if the ambiguity remains after consideration of the extrinsic or parol evidence that is introduced, it will be construed against the insurer as the drafter of the instrument.’ Id.; see also, e.g., Collier [v. MD-Individual Practice Ass’n, 327 Md. 1, 5-6 , 607 A.2d 537, 539 (1992)]; Mut[ual] Fire, Marine & Inland Ins. [Co.] v. Vollmer, 306 Md. 243, 251 , 508 A.2d 130 [, 134] (1986); St. Paul Fire & Marine Ins. [Co.] v. Pryseski, 292 Md. 187, 193-96 , 438 A.2d 282 [, 285-87] (1981); Truck Ins. Exch. v. Marks Rentals, 288 Md. 428, 435 , 418 A.2d 1187 [, 1191] (1980); Aragona v. St. Paul Fire & Marine Ins. [Co.], 281 Md. 371, 375 , 378 A.2d 1346 [, 1349] (1977).” Bushey v. Northern Assur. Co. of America, 362 Md. 626, 632 , 766 A.2d 598, 601 (2001), quoting Sullins v. Allstate Ins.

Co., 340 Md. 503, 508-09 , 667 A.2d 617, 619 (1995). As in this case, they point out, no parol evidence of proof of industry standards as relates to the language under review was offered and nothing was offered as to any “technical meanings or meanings deviating from common usage.” The first approach, which the appellants urge the Court to adopt, they state is “an objective viewing of whether the services provided were related by one’s being caused by the ⁶⁵⁹ other.” In this case, they submit that “[n]ot only were the attorney’s