Insured's Participation in Investment Scheme Triggers Business Enterprise Exclusion

Post by Logan Wells

Fourth Circuit Finds Insured’s Participation in Investment Scheme Triggers Business Enterprise Exclusion Under Professional Liability Policy

On March 29, 2012, in an unpublished opinion, the United States Court of Appeals for the Fourth Circuit affirmed the judgment of the Eastern District of Virginia, holding that an insured’s activities as investor in companies for which the insured acted as legal counsel triggered the Business Enterprise Exclusion ("BEE") contained in the professional liability policy issued to the insured, thereby precluding coverage.  

In Minnesota Lawyers Mutual Insurance Company v. Antonelli, Terry, Stout & Kraus, LLP, the Antonelli firm and attorney Stout sought coverage for Ferguson v. Stout, a malpractice suit arising out of the alleged activities of the firm and attorney with respect to certain business entities they represented. According to the Ferguson complaint, inventor Andrew A. Andros formed Telefind Corporation in 1986 to develop and market wireless email technology (“WET”). In 1987, Andros and Telefind retained the Antonelli firm and Stout to perform patent prosecutions on its behalf; however, over time their role evolved from that of pure attorneys to equity investors to increasingly immersing themselves in counseling and managing Telefind’s strategy and operations.

Telefind received substantial financial backing from a group of outside investors (“Richards Investors”). The Richards Investors lent Telefind $6 million via a loan through Flatt Morris, S.A. The loan agreement stated Stout would serve as trustee for Flatt Morris and hold Telefind’s intellectual property in trust for Flatt Morris’s benefit. Over time, Stout and the Antonelli Firm acquired a majority equity share of Flatt Morris, including its Telefind assets.

Later, when it became necessary to protect the WET from Telefind’s creditors, Stout devised a legal strategy that he told the Richards Investors and Andros would legally protect Telefind’s interest in the WET, recommending placing the patents in a separate legal entity and stressing that their entire interest in the WET would be lost if they did not follow his advice. To implement the strategy, three employees of ESA Telecommunications (“ESA”), a company Telefind worked with previously, filed the WET patents in their names. Stout emphasized that for the strategy to be successful Andros and the Richards Investors could not have any documented direct ownership interest in the WET, assuring them they would continue to participate in any benefits associated with the WET. Andros and the Richards Investors disavowed their legal interest in the patents and the ESA employees assigned the patents to Stout. In 1992, Stout created NTP, Inc. to hold the WET patents.

Andros passed away in January 2001. Later that year, NTP filed a patent infringement action against Research in Motion Limited. RIM settled the suit in March 2006 for $612.5 million. The Ferguson complaint alleged the money was divided between Stout, his partners at the Antonelli firm, and others associated with NTP. When the Richards Investors and Andros’s surviving family contacted Stout regarding their interest in the proceeds of the RIM settlement, Stout denied the existence of any agreement conferring such an interest. Neither Andros’s estate nor the Richards Investors received any portion of the settlement. The Ferguson action ensued, asserting, on the bases of the above facts, claims of breach of fiduciary duty, breach of contract, unjust enrichment, and promissory estoppel. The Ferguson plaintiffs did not challenge NTP’s ownership of the WET patents, arguing only that the implicit understanding was that the Ferguson plaintiffs would receive a share of any WET profits.

The Antonelli firm and Stout notified their professional liability carrier, Minnesota Lawyers Mutual Insurance Company (“MLM”), of the Ferguson action. MLM filed a declaratory judgment action seeking a declaratory judgment that MLM was not obligated to defend the Ferguson action. Thereafter, the parties filed cross-motions for summary judgment. The district court granted MLM’s motion, finding that coverage for the Ferguson action was excluded by the policy’s BEE, which provided:

[This policy does not provide coverage for] any claim arising out of professional services rendered by any insured in connection with any business enterprise:

(a) owned in whole or in part;

(b) controlled directly or indirectly; or

(c) managed, by any insured, and where the claimed damages resulted from conflicts of interest with the interest of any client or former client or with the interest of any person claiming an interest in the same or related business enterprise.

The Antonelli firm and Stout appealed, arguing the Ferguson action was covered because (1) a number of terms within the BEE were ambiguous; and (2) even if the BEE applied to the Ferguson complaint on the whole, the Ferguson plaintiffs “might prove only the allegations falling within coverage without proving the allegations within the exclusion.”

Ambiguity

The Antonnelli firm and Stout first argued that a number of terms within the BEE were ambiguous and therefore should be construed in their favor, contending that favorable construction would demonstrate that the Ferguson complaint did not fall within the BEE.  Addressing each part of the BEE individually, the court rejected the argument:

Under the terms of the Policy, the BEE excludes coverage for claims (1) “arising out of professional services” (2) rendered “in connection with any business enterprise” (3) owned, controlled, or managed, by any insured, and (4) resulting “from conflicts of interest with the interest of any client or former client.”

There is no dispute that this case “aris[es] out of professional services” that Appellants provided to the Ferguson plaintiffs, thereby satisfying the first requirement of the BEE. Appellants counseled Andros and others to renounce their interest in the WET patents in order to avoid their creditors....

Further, and just as clearly, these “professional services” were rendered “in connection with [a] business enterprise,” meeting the second requirement of the exclusion. The phrase “in connection with” is a common insurance phrase that is given particularly broad scope. See, e.g., Goldman Paper Stock Co. v. Richmond, F. & P.R., 212 Va. 293, 296 (Va. 1971) (“in connection with” broader than “arising out of”); see also Coregis Ins. Co. v. Am. Health Found., Inc., 241 F.3d 123, 128-29 (2d Cir. 2001) (explaining “in connection with” encompasses more than causal connection); Metro. Prop. & Cas. Ins. v. Fitchburg Mut. Ins., 793 N.E.2d 1252, 1255 (Mass. App. 2003) (“In connection with” should “not be construed narrowly but [is] read expansively in insurance contracts.”) (collecting cases). Moreover, although the phrase “business enterprise” is not defined by the policy, there can be little dispute that it encompasses the various corporations involved here -- Telefind, Flatt Morris, and NTP.

The Ferguson complaint also clearly meets the third requirement of the exclusion since it alleges that Appellants owned, controlled, or managed at least Flatt Morris and NTP. Stout served as a trustee for Flatt Morris, and Appellants eventually acquired a majority equity interest. Similarly, Stout helped incorporate NTP. NTP had no employees and Stout, other attorneys at the Antonelli Firm, and their families were among NTP’s few shareholders.

Finally, the asserted damages surely resulted “from conflicts of interests.” The defendant attorneys in this case allegedly obtained complete ownership and control of their clients’ assets and exploited those assets for personal benefit. This conduct violates any number of Virginia professional ethics rules....

Accordingly, the court found the allegations of the Ferguson complaint fell unambiguously within the BEE.

Potentiality

The appellants also argued that even if the BEE applied to the Ferguson complaint on the whole, because the Ferguson plaintiffs “might prove only the allegations falling within coverage without proving the allegations within the exclusion, the district court should have found a duty to defend.” For example, the appellants argued, the Ferguson plaintiffs might prove that appellants provided professional services by advising their clients how to avoid their creditors, but fail to show that these services were rendered “in connection with any business enterprise” or resulted “from conflicts of interest.” Essentially, the appellants argued that the Ferguson action could amount to only a claim for legal malpractice.

The court of appeals rejected the appellants’ argument, pointing out that Virginia’s potentiality rule required the court to examine the complaint and determine whether any potential judgment under that complaint would fall within the policy. Such a process, the court emphasized, does not disregard the actual allegations that are made:

In the Ferguson complaint, each cause of action is premised on an agreement between plaintiffs and Appellants that they would share any WET proceeds. As both parties acknowledged at oral argument, because the plaintiffs consented to every initial step of Appellants’ strategy, if Appellants had shared the WET proceeds with the Ferguson plaintiffs, there would be no loss for the Ferguson plaintiffs to recover. Without any potential loss, there can be no duty to defend. See Va. Elec. & Power Co. v. Northbrook Prop. & Cas. Ins. Co., 475 S.E.2d 264, 265-66 (Va. 1996) (explaining insurer has no duty to defend where there is no possibility that insurer will be required to indemnify insured). Thus because the breach of the agreement is central to any potential recovery, Appellants cannot obtain a defense by having a court assume plaintiffs will fail to prove the heart of their allegations. Rather, we must evaluate the Ferguson complaint presuming that plaintiffs will prevail. In doing so, we conclude that MLM has no duty to defend because the BEE applies.

The court also rejected the appellants’ reliance on authority finding a duty to defend where alternative allegations fall within the policy:

Appellants’ reliance on authority finding a duty to defend where some alternative allegations fall within the policy is also unavailing. Cases considering alternatively worded complaints do not look to any conceivable cause of action. They require that the complaint actually asserts the claim. See, e.g., Fuisz v. Selective Ins. Co., 61 F.3d 238, 245 (4th Cir. 1995) (avoiding intentional act exclusion because “each of the four causes of action” alleged “reckless disregard” in addition to “actual malice”). Given that the Ferguson complaint does not assert legal malpractice as an alternative theory, we will not infer such potential liability.

Thus, the court found that the BEE exclusion applied to exclude coverage for the Ferguson action.

 

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Obamacare Smack Down

In case you have been under a rock, two weeks ago SCOTUS held 3 days of hearings the legality and constitutionality of Obamacare.

Their decision is expected this summer, possibly June or July.

Last week the President took an unprecedented swipe at the Supreme Court, in effect challenging the jurisdiction and ability of the high court to challenge or overrule any law passed by Congress.

Earlier this week a 3 judge panel from the 5th US Circuit Court specifically asked A. G. Holder to rule on the authority of the US Supreme Court with regard to their ability to judge if a law is constitutional or not.

Today A. G. Holder responded.

"We respect the decisions made by the courts since Marbury v. Madison," Holder said Wednesday, referring to the landmark 1803 case that established the precedent of judicial review. "Courts have final say."

One wonders if A. G. Holder will be sleeping on the couch tonight for disagreeing with the President.

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How to Last Longer in Bed for Men Things to Try for a Solution

The age old question of how to last longer in bed for men is finally starting to gain some momentum in the clinical department. In fact, it seems that Europe is far ahead of the US when it comes to treating premature ejaculation, so that men can finally have a solution for how to last longer in bed.

For example, the European Society for Sexual Medicine, back in 2006, conducted an extensive study on how to last longer in bed for men. Their study revealed that the average time that a man with premature ejaculation lasts in bed is fewer than two minutes, about 1.8 seconds to be exact. When compared to the average man who does not suffer from premature ejaculation, there was not too much of a difference; as these men lasted about 7.3 minutes in bed on average.

Oddly enough, some men know how to last longer in bed sometimes, and others they dont; as that same study stated that some men with PE were able to last up to 25 minutes on rare occasions, adding even more confusion to the spectrum. And, Professor Waldinger, who worked on the study, reported that about 2.5% of men are unable to breach 90 seconds after vaginal penetration. To be blunt, thats some rather short sexual encounters.

 Treatment Options

The method of treatment that you pursue is entirely up to you for how to last longer in bed for men, and its also one that should be based upon how long you can last to begin with. If you make it past the few minute mark each time, your case is considered to be mild. In these instances, you can learn how to last longer in bed by using some simple toys, lubes, creams, ointments or even thicker condoms and numbing topical gels. For men who are unable to breach the 90 second mark in bed, however, more extensive therapy may be required with a doctor.

You can try to masturbate for longer periods of time for how to last longer in bed, which will cross over into the bedroom ultimately.

You can consider talking to your physician about certain antidepressant medications, which have demonstrated a large success rate with how to last longer in bed for men.

You can use condoms that contain a gel inside of them that numbs your penis tip for how to last longer in bed for men.

You can try using a penis ring to increase circulation, so that your penis is less sensitive and you can last longer.

You can try reading e-books and using subliminal CDs that help with how to last longer in bed for men

You can also consider natural supplements like male enhancers that naturally increase your libido and stamina, and help organically answer how to last longer in bed for men. 

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The Big Shift

Less care means lower health care costs. Possibly. Or it may just mean your insurance plan won't cover some things. If you want a test or procedure, you must pay.

Maybe that's a good thing.

Maybe not.

According to Yahoo News, as much as 30 percent of health-care spending goes to procedures, tests, and hospital stays that do not improve a patient's health.

If true, that is an astounding figure.

This is not a government study, but results from data collected and compiles by the American Society of Clinical Oncology.

Although the task force emphasized that its recommendations -- winnowed from about 10 suggestions by oncologists -- were driven by medical considerations, the report makes clear that expense was a major factor. A number of cancer drugs cost nearly $100,000 but extend life a few months or not at all. Widely-used imaging tests cost up to $5,000 yet do not benefit patients.

Many cancer drugs are expensive, some as much as $8,000 per dose. Most of the time the cost of the medication is covered by Medicare or private insurance.

If these recommendations are incorporated into future health insurance plans (including Medicare and Medicaid) the only way to receive these procedures is for the patient or their family to pay out of pocket.

At one large health maintenance organization, for instance, 49 percent of patients with a common form of lung cancer but with poor "performance status" (they were largely confined to a bed or chair and capable of only limited self-care) received chemo. Research shows, however, that it is unlikely to extend their life or improve its quality.

Similarly, many patients receive three and even four kinds of chemo after not responding to earlier rounds. Yet in the largest study of its kind, only 2 percent of lung-cancer patients responded to a third form of chemo; 0 percent responded to a fourth form. In another study, withholding fourth-line chemotherapy from patients with non-small-cell lung cancer or colorectal cancer did not shorten their lives compared to that of similar patients receiving last-ditch treatments.

This is a tough call.

When looking at stats, it seems like a no-brainer. But when the one in need of a test or treatment is you or a family member the perspective changes.

In breast-cancer patients who have been successfully treated, such as Shari Baker, neither the advanced imaging nor blood tests for molecules associated with tumors improve survival. (The tests do help patients treated for colorectal cancer, however.) Most recurrences are found through a physical exam or mammogram. Yet the advanced tests are routine.

"Why do doctors keep doing them?" Schnipper asks. "Most of them are aware of the evidence that these tests don't benefit patients. But in my own experience treating breast-cancer patients, sometimes when I go through the explanations of how these things don't help a patient will say, 'but it will help me sleep at night.' And I do it."

Tough call.

If your insurance refuses to cover a test or treatment, what will you do?

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How The Health Insurance Industry Fights the High Costs of Medical Care

For many families, finding affordable health insurance is a task akin to the search for the Holy Grail. Depending on where in the country you live, a family health insurance plan can cost as much as $800-$1000 per month. Even when you split that cost between employee and employer, that's a major chunk of nearly anyone's monthly budget. And while it's popular to swear under your breath at the greed of the health insurance industry, a look at the cost of medical care is an eye-opening shock for many people. The expenses associated with a broken arm, for instance, can easily mount into several thousands of dollars.

** The Health Insurance Industry has a stake in keeping people healthy.

The high cost of health insurance is the direct result of the high cost of medical care. It's a simple matter of economics. The more it costs to take care of each subscriber, the more the insurance companies have to charge all their subscribers. This cost/expense ratio is what has made most health insurance companies embrace the idea of providing preventive care to their subscribers. It's a simple matter of business sense - healthy people don't cost the insurance companies a lot of money.

Accidents may be the first type of medical need that springs to mind when people consider buying health insurance, the major insurance companies all agree that accidents aren't the major cost drain on medical resources. That place is reserved for chronic illnesses like diabetes, heart disease, cancer and high blood pressure. Because of this, it makes good business sense for health insurance companies to encourage their subscribers to adopt preventive health strategies. That pays off in special benefits for health conscious consumers.

** Preventive Health Benefits Help Keep Costs Low

Among the benefits that have become commonplace for major health insurance providers are routine physicals, medical screenings for all subscribers, discounts on health club and gym memberships, payment of dues for weight loss groups and lowered subscription fees for non-smokers.

Some health insurance companies and HMO's go even further in their preventive efforts. Because of the high risk of serious injury or fatality for infants in automobile accidents, Fallon Community Health Plan of Massachusetts has for years teamed with local organizations to provide free infant car seats to families with newborns. In the same spirit of prevention, many HMOs offer free stress management and stress reduction workshops to all subscribers because stress has been identified as a leading risk factor in nearly every major illness.

** Seeking a Cure
The quest for affordable health care has also prompted health insurance companies and HMOs to help fun research and health initiatives all over the country. The health insurance industry underwrites millions of dollars of medical research annually in an effort to lower the costs of health care. Their dollars fund grants to enroll low income and other hard to insure populations, and to offer eye, dental and health care to inner city and poor rural populations. The industry estimates that routine preventive eye and dental care, as well as routine medical screenings and physicals can identify illnesses at early stages and prevent conditions and costs from escalating out of reach.

** Get the Most from Your Health Insurance
You pay for it - you should certainly get the most possible benefit from your health insurance plan. Here are some suggestions for ways that you can make your health insurance plan work for you:

• 
  - Join a gym.
  Check the benefits that your HMO or health insurance plan offers. Chances are good that one of them is a discount good on membership at a local gym or health club. Get fit - it saves THEM money... but it saves YOUR life.
  


• 
  - Lose weight.
  Take advantage of nutritional counseling and memberships in weight loss support groups to get down to your ideal weight. Added bonus? Many health insurance plans offer a lower tier cost for subscribers who are at healthy weights.
  


• 
  - Quit smoking.
  Non-smokers are another group that often enjoy lower health insurance premiums. Many HMOs and health insurance providers offer free smoking cessation programs to help you get smoke free and healthy.
  


• 
  - Attend medical screenings and health fairs.
  Many health insurance providers sponsor 'wellness fairs' where you can have your blood pressure tested, get free medical screenings and learn about alternative medical techniques like massage therapy, acupuncture and yoga. Take advantage of special events to learn more and get healthy.
  

It may be popular to demonize the health insurance industry, but today more than ever, the health insurance industry has a stake in keeping you healthy. Find out what your health insurance company has to offer you by visiting their web site, or calling customer service.

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It ain't easy bein' green: MVNHS© Edition

So your primary doc's practice is two miles away, and you rely on him to help manage your health care. Two miles? No biggie, right?

Um:

"Avril Mulcahy, 83, was told to address the “green travelling issues” over her journeys from her home in Westcliff-on-Sea, Essex, to the West Road Surgery. The surgery wrote to Mrs Mulcahy, telling her to register with a new GP within 28 days. "

That's right: this poor British senior citizen has apparently failed to placate the Green Gods©, and must now try to find a new primary care doc. That, of course, pre-supposes that this is even possible.

Adding insult to injury, Miss Avril relies on her doc for her prescription med refills, theoretically putting her health (if not her life) at risk.

Now, there are those that would say "well, that could never happen here." But how do you know? What's to stop HHS Secretary Shecantbeserious to find a Carbon Footprint mandate inside the bill we had to pass to learn what's in it?

[Hat Tip: Best of the Web]

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