John O'Quinn.

The U.S. Court of Appeals for the Fifth Circuit has denied an attempt by the late John M. O'Quinn's law firm to have an excess insurance carrier pay a portion of a $46.5 million settlement he paid back to breast implant plaintiffs for overcharging them on litigation expenses.

O'Quinn, who was a partner in Houston's O'Quinn & Laminack and earned a reputation as one of Texas' most successful plaintiffs attorneys before he died in a 2009 car crash, represented plaintiffs against breast implant manufacturers on a 40 percent contingency-fee basis.

O'Quinn earned approximately $263.4 million in contingency fees in the case, reflecting his success, and his clients never contended that O'Quinn was negligent or committed legal malpractice.

However, they later alleged that O'Quinn should not have deducted certain expenses from the settlement amounts paid to each plaintiff, including general expenses that paid for professional association dues, other lawyer's fees, flowers, fundraising and office overhead.

The dispute was sent to arbitration and a panel awarded $41.4 million to O'Quinn's clients, a decision which was affirmed by a state court. O'Quinn appealed the decision but later paid the clients $46.5 million. O'Quinn sought to recover $15 million of that amount from his primary and excess professional liability insurance carriers.

O'Quinn's primary insurance carrier paid its full policy limits of $5 million, but his excess insurance carrier, Lexington Insurance, refused to pay its policy limit of $10 million. A federal trial court concluded that there was no coverage under the terms of the excess policy—a decision O'Quinn's firm appealed to the Fifth Circuit.

In its recent decision, the Fifth Circuit also concluded that Lexington had no duty to indemnify O'Quinn and his law firm under the excess policy, noting the arbitration panel's conclusion that they breached their fiduciary duty to the clients by the actions they took regarding the general expenses.

“The district court concluded, and we agree, that the definition of 'Loss' does not cover the remedy that the arbitration panel imposed as a consequence of the breach of fiduciary duty,” wrote Judge Priscilla Owen. “The definition of 'Loss' says that 'Loss does not include fines, penalties, sanctions … [or] reimbursement of legal fees. The arbitration panel's award is either a fine, penalty, sanction, reimbursement of legal fees, or each of these.'”

Sharon McCally, a Houston attorney who represents O'Quinn and his law firm on appeal, did not return a call for comment.

Mike Choyke, a partner in Houston's Wright, Close & Barger who represents Lexington on appeal, also did not return a call for comment.