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Huang & Assocs. PC v. Hanover Ins. Co.

Insurer Need Not Defend, Indemnify Law Firm in Suit Over Theft Of Client Funds at Closing

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MEMORANDUM & ORDER Plaintiff Huang & Associates, P.C., a law firm, represented the buyer in a real-estate transaction that went badly. During the closing process, unknown individuals obtained access to an email chain relating to the disbursement of funds. The lawyers at Huang failed to notice, and the fraudsters absconded with over $500,000 of the client’s funds. In an underlying lawsuit filed in New York state court, the client sued the law firm for negligence and legal malpractice. Huang & Associates’ insurer, Hanover Insurance Company, denied coverage under the law firm’s professional liability insurance policy. The firm then brought this action to compel Hanover to defend and to indemnify it and to recover damages. Hanover now moves to dismiss the complaint on the basis of a policy exclusion for claims “arising out of” or “relating…to” any attempt to convert or to misappropriate monies or property. For the reasons set forth below, that motion is granted.1 I. Background A. The Real Estate Transaction Huang & Associates represented the buyer, Liting Zhang, in connection with Zhang’s purchase of certain Staten Island real property for $958,000. Compl. in Zhang v. Law Office of Jingcong Wu, P.C.

12, 14, 17, ECF No. 1-3. While in the hands of the sellers, the property was subject to a mortgage loan of $529,950.08, owed to EastWest Bank. Id. 13. Zhang obtained a $650,000 loan from the Bank of England. Id.

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