No Coverage for Attorney’s Fee Award Found to be Sanction

    The court rejected the attorneys’ claim that an award of attorney’s fees awarded for pursuing a frivolous claim under the Individuals with Disabilities Education Act (IDEA) was not a “sanction” and was covered under the policy Wesco Ins. Co. v. Roderick Linton Belfance, LLP, 2022 U.S. App. LEXIS 18263 (6th Cir. July 1, 2022).

    The lawyers brought claims against schools under the IDEA. They alleged that their clients were not afforded an appropriate education. The district court ruled for the schools. After the claims failed, the schools sought their attorney’s fees from the lawyers under IDEA’s fee-shifting provision. The schools alleged that the lawyers presented sloppy pleadings, asserted factually inaccurate or legally irrelevant allegations, and needlessly prolonged the proceedings. 

    The lawyers asked Wesco to pay the fees under their professional liability policy. Wesco declined because the fees fell within the policy’s exclusion for “sanctions.” Wesco then filed a suit for a declaratory judgment that its policy did not apply. The district court granted summary judgment to Wesco.

    The attorneys appealed. The Sixth Circuit noted that “sanctions” were not defined in the policy. Here, however, the award of attorneys’ fees was a coercive measure because a court compelled a party or attorney to pay it. IDEA provided for an award of fees to a prevailing party who filed a complaint found to be frivolous, unreasonable, or without foundation. The schools successfully proved this misconduct, and their complaints unambiguously requested “sanctions.”  Therefore, the schools’ suit thus fell within the “sanctions” exclusion in Wesco’s policy. 

    Thanks to blogging colleague, Robert Thomas, for forwarding this case.