Admiralty Law Firm’s Insurance Rescinded

In an unpublished decision, the U.S. Court of Appeals for the Sixth Circuit ruled that an insurance company could rescind the professional liability insurance of an admiralty law firm for material misrepresentation in the application. The law firm (noted for filing asbestos claims against ship owners, among other things) indicated in its application that none of its lawyers knew of any circumstances that could result in a professional liability claim. Following the death of the senior partner, it was found that he had misappropriated more than $15 million of settlement funds owed to clients. The insurance company filed suit to rescind the policy. The law firm contended that the partner who signed the application was unaware of the misappropriation. The court held that, in the absence of a severability clause, all the partners are bound by the misrepresentation of the misappropriating partner. American Guarantee & Liability Insurance Company v. The Jaques Admiralty Law Firm, PC, No. 03-2170 (6th Cir.) (HK Law)