Attorneys James F. Kavanaugh, Jr., Kurt B. Fliegauf, and Katherine A. Kelter recently scored a significant victory for their clients in an insurance coverage matter implicating novel issues of professional “legal” services. In Governo v. Allied World Insurance Co., No. 17-CV-11672-MLW, the Massachusetts federal district court (Wolf, J.) eschewed oral argument and issued a lengthy opinion on the papers that denied the motion to dismiss filed by defendant Allied World Insurance Company (“Allied World”). Attorneys Kavanaugh, Fliegauf, and Kelter represented plaintiffs David M. Governo and Governo Law Firm (“GLF”) in a declaratory judgment action against Allied World, which had denied coverage to GLF for counterclaims asserted against GLF in an underlying matter by attorneys who had departed GLF to form a new, competing firm. In the underlying matter, GLF sued the departing attorneys, alleging that they unlawfully took certain GLF proprietary databases and other data and property for use in establishing their new firm. The departing attorneys asserted several counterclaims against GLF, including a counterclaim that GLF intentionally interfered with the departing attorneys’ client relationships by refusing to cooperate in notifying clients of the attorneys’ departure and by refusing to transfer client files to the new firm.
GLF tendered the counterclaims to Allied World and sought a defense against the departing attorneys’ allegations, but Allied World disclaimed coverage, arguing that the wrongful acts alleged by the departing attorneys were mere business disputes of a ministerial nature, and therefore did not constitute “legal services wrongful acts” as defined in its policy. The Court rejected this argument, favoring GLF’s reasoning and holding that Allied World was obligated to provide a defense to GLF for those counterclaims. The Court noted that an attorney’s duty to properly notify clients about the departure of an attorney to a new firm and to transfer client files does “implicate the specialized knowledge and skill of lawyers.” The Court further noted that the Massachusetts Rules of Professional Conduct provide guidance about an attorney’s ethical obligations that are associated with these tasks, and explained that the Rules “attest to how these activities involve understandings and intellectual proficiencies unique to the legal profession.” The Court concluded that Allied World not only had a duty to defend GLF against this counterclaim but also was obligated to defend GLF against the remaining counterclaims asserted by the departing attorneys under the Massachusetts “complete defense” insurance coverage rule.
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