Law firm Napoli Shkolnik, PLLC sought coverage under professional liability insurance policies issued by Greenwich Insurance Company and Hudson Excess Insurance Company for a lawsuit filed against it in federal court in Maryland, alleging that it had breached fee-sharing agreements with another law firm. Greenwich and Hudson disclaimed coverage on the ground that the plaintiff in the federal court action did not allege wrongful acts by Napoli Shkolnik in its professional capacity as attorneys as required by the insuring agreement of the professional liability policies. Napoli Shkolnik sued Greenwich and Hudson in New York State Supreme Court, and the insurers filed a motion to dismiss, which the trial court granted.
On appeal, Napoli Shkolnik argued that the trial court ignored allegations in the amended pleadings in the underlying action that Napoli Shkolnik charged its clients excessive fees and could not handle the cases it said it could handle. According to Napoli Shkolnik, these allegations brought the federal court action within the insuring agreement of the Greenwich and Hudson policies. Greenwich and Hudson argued that they had no duty to defend or indemnify Napoli Shkolnik because the plaintiff did not seek to assert liability against Napoli Shkolnik for that conduct.
The Appellate Division for the First Department agreed with Greenwich and Hudson, and held that the two insurers had no duty to defend or indemnify Napoli Shkolnik with respect to the underlying federal court action. The court held that the underlying action “was premised on actions taken by [Napoli Shkolnik] as a business, not in its professional capacity as a law firm. To the extent that the first and second amended complaints alleged that [Napoli Shkolnik] committed malpractice or fraud in its handling of clients’ cases, those ‘shotgun’ allegations were insufficient as no cause of action was premised on those facts.”