Malpractice insurer owes lawyer $1

A lawyer who erred in drafting a property settlement agreement was under no obligation to report it when he renewed his malpractice insurance, the 4th U.S. Circuit Court of Appeals has held.

Thursday’s unpublished opinion affirms a nominal damage award of $1 to Terrence Raymond Batzli and his Richmond, Va.-area firm in a dispute with Minnesota Lawyers Mutual Insurance Co., which had insured them since 2005.

MLM refused to defend a suit by Richard Chasen over the drafting error that left Chasen’s ex-wife with 20 percent of a family business.

The property settlement agreement, signed in January 2006, involved several businesses but failed to mention Karen Chasen’s share of Chasen Properties LLC.

The omission was discovered months later. Batzli and Richard Chasen discussed several options and chose to seek reformation based on scrivener’s error. That failed, and the Virginia Court of Appeals affirmed in May 2008.

In October 2008, MLM renewed Batzli’s policy. But it only learned of his drafting error in January 2009, after Chasen filed a malpractice suit.

MLM refused to defend, and the coverage question headed to court.

The jury awarded Batzli $8,400 for defending against Chasen’s suit. The judge reduced it to $1.

The 4th Circuit affirmed in a 2-1 opinion written by Judge James A. Wynn Jr.

The jury’s verdict on coverage was supported by evidence that Chasen never said he would sue, promptly paid Batzli’s bill and continued a positive attorney-client relationship, Wynn wrote.

Also, evidence that Karen Chasen would not have agreed to the transfer anyway showed Batzli reasonably believed his mistake caused no harm. The jury apparently didn’t fault Batzli “for failing to procure that which was unprocurable,” the court noted.

But the majority also found that Batzli’s testimony about his fees being reasonable was too “paltry” to support the jury’s award.

Dissenting, Judge Dennis W. Shedd said Batzli’s testimony clearly showed he knew he had made a significant error that could support a damage claim.

Deborah Elkins of The Daily Record’s sister paper, Virginia Lawyers Weekly, contributed to this article.