On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. MER-L-3437-01.
The opinion of the court was delivered by: Baxter, J.S.C. (temporarily assigned).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Telephonically Argued: March 7, 2007
Before Judges Winkelstein, Fuentes and Baxter.
In this appeal, we decide whether a policy of insurance providing coverage for legal malpractice requires the insurer to provide indemnification to a former partner of a law firm for acts of malpractice allegedly committed subsequent to the dissolution of that firm. Under the facts presented, we conclude that the former partner was acting "solely in a professional capacity on behalf of such firm," as required by the policy of insurance and was entitled to a defense and indemnification. Accordingly, we affirm the trial court's grant of summary judgment in favor of defendant John J. Marquess, Esquire.
Marquess is a former partner and former employee of the Turnersville law firm of defendant Marquess, Morrison and Trimble, P.A. ("the firm" or "MMT"). The firm was insured under a policy of insurance issued by third-party defendant Zurich Specialties London Limited (Zurich), which provided professional liability coverage for the firm's associates and partners, and for former partners and associates, but only if specified conditions were satisfied.
While Marquess was still a partner, the firm was retained by American Independent Insurance Company (AIIC) in order to defend AIIC's insured Barbara Gorna in an automobile negligence action, Kimberly A. Jolley and Robin Jolley v. Barbara Gorna, Docket No. MER-L-1587-97 (the Jolley matter). During the pretrial stage of the Jolley matter, Marquess was a partner of the firm.
The automobile accident constituting the Jolley matter occurred on December 5, 1996, when a vehicle driven by Gorna failed to yield at a stop sign and collided with a vehicle driven by Molly Schaffer, which in turn collided with the postal truck being operated by Jolley, causing Jolley to sustain severe injuries. Jolley filed a complaint on April 22, 1997, against Gorna, Schaffer, and Jerzy Mankiewicz, the owner of the vehicle being operated by Gorna. Mankiewicz's insurer was AIIC, and AIIC assigned the defense of the Gorna/Mankiewicz matter to MMT. AIIC had been a long-standing client of the firm, but Marquess and Trimble both considered AIIC to be Morrison's client in particular. The answer to plaintiff's complaint was filed on April 20, 1998, and designated Morrison as trial counsel, in accordance with the requirements of Rule 4:5-1(c). A few months later, when Gorna was served with interrogatories, Morrison asked Marquess to answer the interrogatories and handle all of the pretrial discovery and motions, which he did.
Counsel for Jolley sent numerous Rova Farms*fn1 letters to both the firm and to AIIC between March 4, 1998 and November 18, 1998. All letters sent to the firm were addressed to Morrison. Receiving no response to any of these letters, plaintiff's counsel finally sent MMT a letter on December 16, 1998, notifying MMT that his client would no longer accept Gorna's policy limits in settlement of the matter. The first time anyone at MMT responded to the Rova Farms letters was on December 22, 1998, when Marquess notified Jolley's counsel that AIIC had authorized a settlement within the policy limits. On January 4, 1999, plaintiff's counsel responded that it was too late, and that his client intended to pursue all of her claims for damages without any limitations and would be looking to the carrier for payment of any damages in excess of the policy limits.
On November 2, 1999, while Marquess was handling the Gorna file, disputes between the three partners led Marquess and the two remaining partners, Morrison and Trimble, to enter into a stock purchase agreement whereby Morrison and Trimble agreed to acquire all of Marquess's interest in the firm, effective April 30, 2000, whereupon the firm was to be dissolved. Marquess left the firm as planned on April 30, and his former partners continued to practice together, under a new firm name of Morrison and Trimble. The dissolution agreement specified that Marquess would remain with the firm as a "senior trial attorney" after November 3, 1999, until his final termination date of April 30, 2000, but would no longer be a partner of the firm after November 3. In his capacity as a senior trial attorney, Marquess continued to represent Gorna until he left the firm on April 30. In early February 2000, three months before Marquess left the firm, MMT received a notice from the Mercer County Case Management Office that the Jolley matter was scheduled for trial on May 15, 2000.
After leaving MMT, Marquess began practicing as a sole practitioner on May 1, 2000, under the firm name Law Offices of John J. Marquess, P.A. The stock purchase agreement permitted Marquess to take with him 75 to 100 clients of the former firm, subject to those clients' consent, and the newly-formed firm of Morrison and Trimble retained the remaining clients. Neither AIIC nor Gorna was included in the list of clients that Marquess took with him when he established his new firm on May 1, 2000.
On May 8 or May 9, 2000, less than one week before trial of the Jolley matter was scheduled to begin, Morrison contacted Marquess requesting him to try the case. Marquess agreed to do so, but only if Morrison agreed to let him bill AIIC directly because, according to Marquess, his former firm already owed him $29,000, and he was not willing to run the risk of not being paid for his work trying the Jolley matter.
The May 15, 2000 trial date was adjourned, and ultimately jury selection began on August 8, 2000. At the conclusion of testimony on August 9, the jury rendered a verdict finding Gorna 100% responsible for the happening of the accident. That same day, Marquess entered into an agreement with counsel for Jolley, agreeing that Gorna would pay to Jolley stipulated damages in the amount of $750,000, to which prejudgment interest would be added. At the time the agreement was made, Gorna was no longer in the courthouse and had never been asked to consent to the stipulation of damages. Gorna's AIIC policy limits were $15,000/$30,000. An order was signed on September 5, 2000, entering judgment in favor of Jolley, and against Gorna, in the amount of $750,000, plus $128,475 in interest.
An August 9, 2000 letter from Marquess to Gorna assured her that Jolley's counsel had "agreed not to pursue any [portion] of the $750,000 figure against [her]" and opined "this is a very good outcome for you, since you will not have to pay that $750,000." Marquess's representation to Gorna that she would not be personally responsible for payment of any portion of the $750,000 judgment was not reflected in the Order for Judgment executed by the court on September 5, 2000.
As a result of learning that Marquess had stipulated to damages without her consent and had obligated her to pay a total of $878,475 to Jolley from her own funds, less the $15,000 policy limit, on October 26, 2000, Gorna executed an assignment to Jolley of her right to pursue a claim against Marquess. The assignment enabled Jolley to institute litigation against AIIC and Marquess. In return for receiving that assignment of rights, Jolley agreed to withhold action in executing the judgment against Gorna. Upon being advised that a cause of action for legal malpractice could not be assigned, Jolley and Gorna jointly filed suit against Marquess and AIIC with the complaint designating the plaintiffs as "Kimberly Jolley and Robin Jolley, Sr.,*fn2 as subrogees of Barbara Gorna, and Barbara Gorna individually."
Suit was instituted by Gorna and Jolley on October 31, 2001. The four-count complaint alleged a breach of the contractual duty of good faith and fair dealing by AIIC toward its insured, Gorna (count one); legal malpractice and breach of the duty of care owed to Gorna by MMT and/or Marquess in failing to adhere to reasonable standards of a qualified and competent attorney (count two); breach by Marquess and/or MMT of express or implied covenants that the attorneys representing Gorna would be knowledgeable and experienced (count three); and the making of false, deceitful and fraudulent misrepresentations of fact and/or law in the representation of Gorna by Marquess and/or MMT (count four).
Zurich was the malpractice carrier for Marquess, Morrison and Trimble before Marquess left the firm on May 1, 2000, and Zurich continued to provide professional liability insurance to Morrison and Trimble under a new policy after Marquess left. After Marquess was served with the malpractice complaint, he filed a third party complaint against Zurich asserting that Zurich was obligated to provide a defense and indemnification concerning the claims being asserted against him by Jolley and Gorna. In its answer, Zurich specifically denied having any duty to indemnify Marquess or provide a defense to the malpractice claims being asserted against him. Zurich denied coverage to Marquess, asserting that he was not a member of the firm of Morrison and Trimble, or a named insured on Morrison and Trimble's policy of insurance at the time any alleged malpractice by Marquess may have been committed. In particular, Zurich asserted that the $750,000 stipulation of damages by Marquess occurred after he left the firm.*fn3
In January 2006, both Zurich and Marquess filed cross-motions for summary judgment. During the motion hearing, each side described the circumstances surrounding the transfer of the Gorna file to Marquess in May 2000. The circumstances were to some degree in dispute, with Marquess asserting that Morrison asked him to try the Gorna matter, and Zurich insisting that AIIC made that request.*fn4 Both sides agreed, however, that no substitution of attorney was ever filed. At the time jury selection began on August 8, 2000, the firm of Morrison, Marquess and Trimble remained counsel of record for Gorna. Zurich argued before the Law Division, and now argues before us, that a substitution of attorney was forwarded to Marquess by his former partners, but that Marquess never filed it. Marquess, in turn, contends that his former partners have never produced a substitution, either in draft or otherwise, despite a demand for same having been made at depositions. Marquess further maintains that Zurich has never produced a copy of any substitution, or a letter forwarding same to Marquess. Additionally, both Marquess and Zurich agree that Marquess billed AIIC directly for his work on the ...