The Superior Court of New Jersey, Appellate Division, recently affirmed a trial court’s decision to deny coverage to an attorney and his law firm who had been sued in an underlying malpractice action. Connelly v. Frohling Hudak & McCarthy, PC, No. A-5798-07 (N.J. Super. Ct. App. Div., Sept. 9, 2010). The attorneys allegedly failed to file a lawsuit on behalf of their purported clients. The clients subsequently sent the firm a letter expressly referencing the firm’s negligence and a potential malpractice claim, and also recorded a telephone call with one of the attorneys in which the attorney purportedly “raised the possibility that he might have negligently failed to file plaintiffs’ suit.” Based on these facts, the trial court found that the attorneys knew or should have known about the potential claim against the firm and failed to disclose it in their application for malpractice insurance. The court held that the omission constituted a material misrepresentation that the insurer reasonably relied upon in issuing the policy and which justified the insurer’s denial of coverage. The Appellate Division affirmed. For a copy of the opinion, please click here.