Lawson v. Federal Insurance Company et al

Robert E. Lawson, a South Carolina attorney, was sanctioned $230,000 for misconduct during a class action lawsuit. He sought coverage from his professional liability insurer, Federal Insurance Company, which denied the claim. The insurer argued that Lawson failed to provide timely notice of the claim as required by the policy and that the sanctions did not fall within the definition of covered "damages" or "loss." Lawson then sued for breach of contract and bad faith. On November 26, 2018, the U.S. District Court for the District of South Carolina granted summary judgment in favor of Federal Insurance Company, finding no duty to indemnify due to late notice and because court-imposed sanctions were not insurable losses. The Fourth Circuit later affirmed this decision.

The district court granted summary judgment for Federal Insurance Company, ruling there was no coverage as a matter of law. The judgment was affirmed on appeal by the U.S. Court of Appeals for the Fourth Circuit.

Whether a court-ordered monetary sanction against an attorney for litigation misconduct constitutes a covered "loss" under a professional liability insurance policy, and whether the insured provided timely notice of the claim in accordance with the policy's reporting requirements.

The case reinforced the strict enforcement of notice provisions in claims-made professional liability policies and clarified that sanctions imposed for an attorney's own misconduct are generally not insurable as damages. It served as a significant warning to legal professionals regarding the immediate reporting of potential claims and the limited scope of malpractice coverage.