In OneBeacon Insurance Co. v. T. Wade Welch & Associates, the 5th Circuit affirmed a $28 million judgement for bad faith ruling that the One Beacon "prior knowledge" exclusion did not apply.

As with many Lawyers Professional Liability Insurance policies OneBeacon issued a series of professional liability policies to T. Wade Welch & Associates beginning in December 2006 with a January 5, 1995 prior acts date. In the application for the first policy, Wade Welch, the principal of the firm, represented that after inquiring of each lawyer in the firm, he was not aware of “any fact or circumstance, act, error, omission or personal injury which might be expected to be the basis of a claim or suit” against the firm.”  This continued with each subsequent renewal.

The Welch law firm representing DISH failed to timely file a discovery motion against Russian Media Group.  In February 2008 the district court approved sanctions for Dish's failure to respond to discovery.  After the order Attorney Welch informed One Beacon of the discovery dispute and the sanctions order.  One Beacon declined coverage stating the the firm had not disclosed the error on the 2007 to 2008 renewal application.  The jury sided with the Welch Law Firm agreeing that the exclusion only applied to a wrongful act that the firm could reasonable foresee at the time of the application would result in a malpractice claim.  The jury awarded the law firm $33 million which the judge reduced to $28 million.

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