Attorney Told He’s Not a Victim of Insurance Scam

We’ve got a pretty good spam blocker, so I haven’t seen a “check scam” pitch in quite a while.  Here’s one I pulled out of quarantine; some of the names have been changed to protect the guilty:

RE: Mutual Partnership with You/Firm

 Dear Prospective Agent,

My Name is Leo Herman, Human Resource Manager of Universal Medicare. Universal Medicare is a surgical and medical equipment manufacturing company based in India, United Kingdom and the Peoples Republic of China(P.R.C) with company registration number 03307219. Our company export Medical and Surgical equipments into Canada, USA, Europe and Central America.

Due to increase in demand of our products in North and South American continent,we decided to move our products fully into the continent of

America.

We are searching for reliable person/company will act as PAYMENT RECEIVABLE AGENT in collecting funds owed to us by our deliquent

customers within your region.

We wish to partner with you/your company. Partnership scope includes placing orders for products from customers and receiving payments for

products supplied.

You can work part time and you need no prior experience. Should you be interested in this cooperation or have questions/inquiries in this regard, please feel free to email us; neveryoumind@not.telling

Thank you and I await your prompt response .

Leo Herman

Universal Medicare

200 City Road,

London EC1V 2PH

Tel: 44 (0) 000 000 0000

Email:

Leo’s got pretty poor grammar and lousy spelling for a professional Brit., but when it comes to clients, who can be choosy, right?  A New Hampshire attorney wishes he had been a little more selective after falling for a somewhat more sophisticated variation on this theme.  

One night, the attorney received an email purporting to come from Richard Downey, an lawyer with the Law Offices of Richard L. Downey & Associates in Fairfax, Virginia.  Downey is a real attorney and his website pops right up on Google.   The email, however, did not come from the real Downey.  The bogus email said that Downey would be “sending a client over for a business litigation matter,” and asked the New Hampshire lawyer to “[a]dvise of [his] availability.”  If available, “Downey” would “have [his] client contact [the New Hampshire lawyer] directly with pertinent information.” 

The New Hampshire lawyer didn’t respond right away, so he got an identical email from the “Downey” poser late the following night— this time from a different email address.  The next morning the lawyer responded to the first email, telling “Downey” he was “completely available.”  The day after that the New Hampshire lawyer gave a similar response to “Downey’s” second email.

A few days later, “Downey” wrote back, saying he had “forwarded your contact to my client to establish direct contact and provide pertinent information for your review.”  A short while later, the New Hampshire lawyer got an email from a person claiming to be “Martin Joachim,” of Bendtsteel A/S in Frederiksvaerk, Denmark.  “Joachim” said he had been referred by Richard Downey and promised to forward more information later about “our legal matter.”

After several more days, “Joachim” sent an email with some details on the “legal matter.”  It said that Mill Steel Supply of Manchester, New Hampshire had made a partial payment for unspecified "goods" supplied by Bendtsteel, leaving over $500,000 outstanding.  Bendtsteel wished to maintain its good relationship with Mill Steel Supply, but thought that retaining the New Hampshire lawyer "and the introduction of legal pressure may initiate immediate payment." "Joachim" went on to say:

Our expectation of your services for now will be within the scenario of a phone call or demand letter to our customer. This approach will trigger the much needed response from our customer towards payment.

When all available options have been exhausted, litigation may be introduced as a last resort. We will forward the pertinent document for your review.

You may send your retainer document for the board to review as we intend to commence immediately.

The New Hampshire lawyer cleared conflicts and sent “Joachim” an engagement letter, by email.  “Joachim” emailed back a signed engagement letter and a piece of good news: Mill Steel had agreed to pay, after learning of Bendtsteel’s intention “to retain legal services as regards our claim.”  After a few more emails, “Joachim” advised the New Hampshire attorney that Mill Steel Supply had "made a part payment to you/your firm to avoid litigation," and that the payment would be sent directly to Whittington's office.

It wasn't long before the New Hampshire attorney received a UPS package containing a check in the amount of $195,790, purportedly issued by Citibank N.A. on behalf of Mill Steel and payable to the attorney’s firm.  The New Hampshire attorney promptly advised “Joachim,” asking whether he wanted the funds wired and suggesting the lawyer keep a $2,000 retainer for his firm.   “Joachim” agreed to the retainer, and directed the New Hampshire attorney “to transfer by swift to our creditor MS CAR FACTORY COMPANY LTD in CHIBA-KEN, JAPAN the sum of $188,978.000 (USD).”  As instructed, the attorney deposited the check and requested the wire transfer.

Hours after the funds were transferred, the attorney’s bank learned that Citibank had dishonored the check and tried (unsuccessfully) to withdraw the wire.  “Joachim” absconded with the money.  The bank seized the attorney’s remaining trust funds to offset its loss and sued the New Hampshire attorney for the balance.  The attorney, in turn, made a claim with his professional liability carrier.  The insurer denied the claim and sued the attorney for a declaration that there was no coverage.

The insurance company argued that there were two reasons why there was no coverage.   First, the carrier noted that the policy only applies to “professional services,” which are defined as “services or activities performed for others as an attorney in an attorney-client relationship.”  According to the insurer, “Joachim,” wasn’t a real guy, or at least he wasn’t a real client.  As such, there was no attorney-client relationship, thus no “professional services” and therefore, no coverage.  Nonsense, argued the lawyer.  All that’s required is an attorney's “good faith belief . . . that he had entered into a legitimate attorney-client relationship.”  

Each side had a bunch of cases to support their position, but the court said it didn’t have to resolve this “interesting” question.  Instead, it could decide the case on the basis of this exclusion:

THIS POLICY DOES NOT APPLY TO ANY CLAIM ARISING FROM OR IN CONNECTION WITH . . . [a]ny conversion, misappropriation or improper commingling by any person of client or trust account funds or property, or funds or property of any other person held or controlled by an Insured in any capacity or under any authority, including any loss or reduction in value of such funds or property.

Rejecting several different arguments offered by the attorney, the court ruled that this exclusion was “clear and unambiguous as applied to the facts of this case.”

First, the New Hampshire attorney argued that the “funds” represented by Joachim’s bogus check were never in the attorney’s trust account and so the exclusion did not apply.    The court disagreed, saying those weren’t the pertinent “funds.”  Rather, the funds at issue were the very real dollars that had disappeared from the attorney’s trust account.  These were indisputably “controlled” by the attorney, at least insofar as he had issued the order to send them to Japan.

The attorney also argued that the exclusion was ambiguous because it could have been drafted differently, excluding claims “arising out of, in connection with, or in consequence of . . . the dishonoring of any financial instrument.”  To this, the court said:

Determining whether a policy exclusion is ambiguous, though, does not turn on whether the insurer might have included another, more precise exclusion. As already discussed, ambiguity turns instead on whether “the parties may reasonably differ about the interpretation of the language” of the exclusion that was actually included in the policy.

The court had already decided that the attorney’s interpretation was not “reasonable.” 

The attorney made one last stab at a “reasonable expectation” argument, claiming “no law firm purchasing professional liability insurance would expect that permitting its client trust account to be pilfered would not be covered.”  Alas, the court did not agree that the New Hampshire attorney had been scammed by his insurance company.  “It suffices to say in response that if the plain and unambiguous language of the insurance policy excludes coverage for those acts, the insured law firm should expect just that.”

You can read the full opinion here.  It has been appealed.