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Axis Insurance Company v. Farah & Farah

November 10, 2011



Plaintiff AXIS INSURANCE COMPANY ("Axis") brings this action against FARAH & FARAH, P.A., EDDIE FARAH ("Mr. Farah"), MICHAEL D. MARRESE ("Mr. Marrese"), F. CATFISH ABBOTT ("Mr. Abbott") (collectively "Defendants") and TRACEY B. TURNER & TRACY R. TURNER (collectively the "Turners") seeking declaratory relief from coverage on a claims-made-and-reported liability insurance policy issued to the law firm for the policy period beginning on June 19, 2009 (the "Policy"). Axis seeks a judicial determination that the Policy does not provide coverage for a legal malpractice action now pending against Defendants for which Axis is currently providing legal representation.

Before the Court are cross-motions for summary judgment filed by Axis (Doc. No. 89) and Defendants (Doc. No. 90) on August 24, 2011. Also before the Court are Defendants' joint response (Doc. No. 96), filed on September 14, 2011; Axis's response (Doc. No. 97), filed on September 26, 2011; and, Defendants' reply (Doc. No. 98), filed on October 12, 2011. Mr. Abbott waives his right to respond, and takes no position as to either motion for summary judgment (Doc. No. 95). Based on the parties' submissions and a review of the applicable law, the Court GRANTS in part Axis's motion for summary judgment, and DENIES Defendants' cross-motion.


I.The Relationship Between Defendants

Farah & Farah, P.A. is an active business entity authorized and governed by the Florida Business Corporation Act. Mr. Farah is one of the two shareholders in the law firm. (Farah Aff. ¶ 8, Doc. No. 55.) Mr. Marrese was employed by Farah & Farah, P.A. as an associate attorney from September 2001 until December 2008. (Marrese Aff. ¶¶ 5 and 23, Doc. No. 56.)

In April 2003, Mr. Farah, on behalf of Farah & Farah, P.A., and Mr. Abbott entered into an Agreement with the purpose to have Mr. Abbott "provide litigation, support, service, direction and decision making for plaintiff's bodily injury and wrongful death cases to [Mr. Farah] in-house at his Adams Street law office." (Farah Dep. Ex. 34, June 7, 2011, Doc. No. 93, Ex. C.) In pertinent part, they further agreed that:

3. SUPPORT PERSONNEL: [Mr. Abbott] will bring with him a support staff of attorneys and secretaries. [Mr. Abbott] will be responsible to pay the salaries and all benefits of the support staff personnel. . . . [Mr. Farah] will furnish other support staff such as receptionist, secretaries, paralegals and nurses as necessary and required to do first-class, top-of-the line litigation. If [Mr. Abbott] uses the services of [Mr. Farah]'s nurses, all time spent by the nurse(s) working on each [Mr. Abbott] case will be tracked as a cost to the client. . . . [Mr. Farah] will furnish [Mr. Abbott] with competent attorneys, such as [Mr.] Marrese and Brian Flaherty, who [Mr. Abbott] will direct in the litigation of cases generated by [Mr. Farah] . . . . In the event that any attorneys paid by [Mr. Farah] are to receive a bonus in the way of a percentage of a fee recovered on such a case, then [Mr. Farah] and [Mr. Abbott] will agree in writing in advance to pay an equal portion of such a bonus from their respective share of such a case/fee . . . .

4. LOGISTICAL SUPPORT: [Mr. Farah] will be responsible for furnishing all of the logistical support, such as offices, equipment, supplies, costs of litigation, etc., which are necessary for practicing law that [Mr. Abbott] or his personnel work on under the FARAH, FARAH & ABBOTT name.

5. LETTERHEAD: [Mr. Abbott]'s last name will appear on the top of the letterhead, in addition to "FARAH & FARAH." [Mr. Abbott] will have the right to be listed individually as Fred. M. Abbott, P.A. on the left side of the stationary where individual attorney names are placed.

6. AUTHORITY: [Mr. Abbott] will assume the sole responsibility for and will direct the course of all significant litigation in [Mr. Farah]'s office as to the cases on the list. [Mr. Abbott] will set the standards, guidelines and deadlines for all cases for which he is consulted and involved. [Mr. Abbott] agrees to keep [Mr. Farah] updated on the status of all cases [Mr. Abbott] is involved in by way of a monthly report. Anyone who cannot meet these written requirements will be reassigned or terminated by [Mr. Farah] at [Mr. Abbott]'s request. (Id.) (emphasis removed).

Pursuant to this Agreement, Farah & Farah, P.A. changed the name to Farah, Farah & Abbott, P.A. on or about May 2, 2003. (Farah Aff. ¶ 17, Doc. No. 55.) In April 2005, Mr. Abbott moved his practice away from the law firm's physical premises, at which time the name reverted back to Farah & Farah, P.A. (Id. at ¶¶ 27-28.)

II.Turner v. United States

On August 21, 2003, the Turners' medical negligence lawsuit against the United States of America commenced in the United States District Court for the Middle District of Florida, Case No. 3:03-cv-709-J-25TEM. Mr. Abbott, for Mr. Marrese and on behalf of the law firm Farah, Farah & Abbott, P.A., signed the initial complaint alleging hospital negligence in treating Mr. and Mrs. Turner's minor child who suffered serious and permanent injuries. Additionally, that complaint alleged that Mr. and Mrs. Turner, as parents, were entitled to loss of consortium damages. Following a bench trial, the United States District Judge Henry Lee Adams, Jr. found for the Turners and, most importantly to the instant action, awarded the parents loss of consortium damages in the amount of $809,059.00 each. The United States appealed Judge Adams's ruling.*fn1 See Turner v. United States, 514 F.3d 1194 (11th Cir. 2008).

III.Decisions of the Eleventh Circuit Court of Appeals

On January 28, 2008, the Eleventh Circuit issued its decision vacating Judge Adams's judgment and held, inter alia, that the trial court lacked jurisdiction over the Turners' consortium claims because they were filed prematurely, without allowing six months to pass from the date Mr. and Mrs. Turner's administrative claims (SF-95 forms) were filed with the United States Navy.*fn2

Consequently, the Eleventh Circuit concluded that the claims for loss of consortium were forever barred from refiling. Id. at 1202 n.5.

On remand, after applying the "reckless disregard" standard of care, Judge Adams reaffirmed the original judgment in favor of the minor son. See Turner ex rel Turner v. United States, 3:03-cv-709-J-25TEM, 2008 WL 2726508 (M.D. Fla. July 1, 2008). However, in light of the Eleventh Circuit's holding as to the loss of consortium damages, that judgment was lost. Challenging the basis for Judge Adams's reaffirmed judgment, the United States filed a second appeal. On February 18, 2009, Judge Adams's findings on remand were affirmed in Turner v. United States of America, 312 Fed. App'x. 300 (11th Cir. 2009).

IV.The Turners' Legal Malpractice Claim

On or about November 11, 2009, the Turners brought a lawsuit for legal malpractice in state court against the attorney Defendants. (See Doc. No. 23, Ex. D.) In that case, the Turners allege that the claim forms SF-95s were negligently prepared and/or that the medical negligence lawsuit was prematurely filed; that Mr. Abbott failed to take measures to prevent the same; and, that the opinion of the Eleventh Circuit Court of Appeals determined that judgment in their favor on the loss of consortium claims was forever lost as a result of Defendants' negligence. (Id.) It is this underlying legal malpractice action that is the basis of the instant declaratory judgment case.

V.Defendants' Insurance Policy with Axis

On May 4, 2009, Farah & Farah, P.A., through its executive director, Nathan Hendricks, completed and submitted the Markel Shand, Inc.*fn3 Application for Lawyers Professional Liability Insurance (hereinafter the "Initial Policy Application"). (Hendricks Aff. ΒΆ 9, Doc. No. 93, Ex. H; see Doc. No. 21, Ex. B.) Under Part II of the Initial Policy Application, titled FINANCIAL AND STAFFING INFORMATION, a question stated: "Provide the names of all lawyers who are presently officers, partners, employed lawyers, of counsels or retired partners of the Applicant and complete the information requested for each lawyer." (Doc. No. 21, Ex. B.) ...

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