Is Honesty Always the Best Policy? Illinois Appellate Court Holds Attorney’s Ethical Obligations Trump Professional Liability Policy Term

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In a case of first impression, the Illinois Appellate Court considered whether a professional liability insurer can deny a defense to its insured, an attorney who admits he erred in providing legal services. Ill. State Bar Assoc. Mut. Ins. Co. v. Greenfield & Assocs., P.C., No. 1-11-0337, 2012 Ill. App. LEXIS 921 (Ill. Ct. App. Nov. 9, 2012). The court held the insurer had a duty to defend its insured against a legal malpractice claim. The court rejected the insurer’s reliance on the prohibition against admitting liability in its Voluntary Payments condition.

The underlying suit arose out of attorney Greenfield’s representation of his clients, Leonard and Muriel Perry. Greenfield served as Mr. and Mrs. Perry’s estate planning attorney. Mr. Perry executed a Power of Appointment, which permitted Mrs. Perry to make changes to the distribution of her husband’s trust. After Mr. Perry’s death, Mrs. Perry exercised her Power of Appointment and directed Greenfield to draft a will permitting distribution of Mr. Perry’s trust in accordance with the terms of her trust. In 2008, Mrs. Perry amended her trust to change certain of the distributions. When Mrs. Perry died, Greenfield recognized he omitted a provision in the 2008 will that affected the distribution of funds. Greenfield sent a letter to the trust beneficiaries advising that his error caused them to receive less money than his client intended. Greenfield sent the letter before notifying his professional liability insurer of the situation.

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