Lawyers Claim for Indemnification Under Retainer Agreement Must be Arbitrated

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AT&T Services, Inc. (“AT&T”) moved the USDC to compel arbitration, pursuant to the Federal Arbitration Act. In Lonstein Law Office, P.C., Julie Lonstein, Wayne D. Lonstein v. Evanston Insurance Company, Markel Service Incorporated, AT&T Services, Inc., No. 20-cv-9712 (LJL), United States District Court, S.D. New York (January 6, 2022) the USDC resolved the dispute.

BACKGROUND

During the term of the Retainer Agreement, Plaintiffs were named, sometimes alongside DIRECTV, in four lawsuits relating to the actions by Plaintiffs and DIRECTV in asserting its rights against the plaintiffs in the four lawsuits.

THE PROBLEM CAUSED BY INSUFFICIENT LIMITS ON E&O POLICY

Plaintiffs are parties to Insurance Policy No. LA806580 with Evanston Insurance Company (“EIC”) providing professional malpractice 

Plaintiffs seek indemnification from DIRECTV in the Actions since the insurance is exhausted. They allege that have demanded that DIRECTV indemnify and defend Plaintiffs, but that DIRECTV has nonetheless refused to do so.

Plaintiffs bring claims for breach of contract and breach of good faith and fair dealing and seek a judgment declaring that DIRECTV is obligated to defend and indemnify Plaintiffs against the claims that are asserted in the Actions as well as an order of specific performance against DIRECTV.

DISCUSSION

The arbitration clause in the Wind Down Agreement vests in the arbitration panel in the first instance the decision whether any particular dispute falls within that clause and should be subject to arbitration.

First, since there is a valid and enforceable arbitration agreement between the parties and since the parties agreed that the arbitrator-and not a court-would decide the scope of that provision, Plaintiffs are making their argument in the wrong tribunal. Having made that bargain, Plaintiffs must convince the arbitrators, and not this Court, that the dispute should not be arbitrated.

ZALMA OPINION

Lawyers errors and omissions insurance invariably contain a burning limits clause that requires the limit of liability to be reduced as investigation and defense costs are incurred. LLO only acquired a $1 million limit which was exhausted by its defense counsel without resolution. 

(c) 2022 Barry Zalma & ClaimSchool, Inc.

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