‘It’s not my fault’ no apology for attorney’s failure to disclose malpractice claim

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(Reuters) – A professional liability insurer had no obligation to defend a North Dakota lawyer who renewed his policy in 2017 without disclosing that months earlier confusion over the scope of his representation had led to a $1 million judgment against his clients in state court, a federal appeals court ruled Friday.

The 8th United States Circuit Court of Appeals has upheld the victory of ALPS Property and Casualty Insurance, represented by Kutak Rock attorneys, in an action to determine whether Jeff Bredahl’s police covered a malpractice suit in 2019 by its former clients, Legacy Steel Building Inc and its leaders. .

Bredahl should have disclosed the resulting confusion and judgment as a potential claim when he renewed his policy in 2017, even though he felt he was not at fault and Legacy would never sue him, wrote Circuit Judge Duane Benton for the panel.

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“A lawyer should reasonably know that a client could bring an action against the lawyer if he believed the lawyer was representing him, failed to appear at trial on the lawyer’s advice, and then lost a judgment of a million dollars,” Benton wrote, joined by Circuit Judges James Loken and Roger Wollman.

Legacy then settled with Bredahl and agreed to an assignment of its rights against ALPS, making Legacy the appellant in the 8th Circuit.

Legacy attorney Paul Sortland of Sortland Law said they were “disappointed” and were considering options. The court “omitted important facts”, such as evidence that Bredahl had withdrawn from the case, he said.

“If a lawyer has withdrawn, must he still report the subsequent unfortunate results to his insurer?” Sortland asked.

Lawyers for ALPS did not respond to requests for comment on Friday. Bredahl didn’t get an answer either.

According to the 8th Circuit, Legacy retained Bredahl in 2015 to defend against a breach of contract lawsuit by Elite Inspection Services. Bredahl said he backed out of the case, by letter, in March 2016.

Days before the March 2017 trial, Bredahl called Legacy president Wane Engkjer “to wish him well” and learned that Engkjer had never seen his letter. (Engkjer said he later found it in an office manager’s filing cabinet.)

Bredahl quickly arranged for another attorney to file a motion for an extension and assured Engkjer that the trial would be postponed. However, the state court judge denied the extension and entered judgment for Elite. Legacy then settled with Elite for $570,000.

The appeal decided on Friday is ALPS Property & Casualty Ins. vs. Legacy Steel Building Inc., 8th U.S. Circuit Court of Appeals No. 20-3432.

For ALPS: Brooke McCarthy and Kevin Hartzell of Kutak Rock, J. Crisman Palmer of Gunderson, Palmer, Nelson and Ashmore

For Legacy Steel: Paul Sortland of Sortland Law Firm

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