The Eleventh Circuit recently determined that a “misappropriation exclusion” did not wholly foreclose coverage in a malpractice lawsuit stemming from a law firm’s representation of defendants facing civil foreclosure in a RICO action. Medmarc Cas. Ins. Co. v. Fellows Labriola LLP, No. 25-10837, 2025 WL 2886733 (11th Cir. Oct. 10, 2025). In doing so, the court signaled that the phrase “relate to” commonly found in exclusionary language is not so broad as to encompass all claims that are brought in the same suit as an excluded claim.
In Medmarc, an insurance company sought a declaratory judgment that it had no coverage obligations to an insured law firm and attorney who had been sued for malpractice. The United States District Court for the Northern District of Georgia granted the insureds’ motion to dismiss, holding Medmarc had a duty to defend and the duty to indemnify was not ripe. Medmarc appealed.
The insured law firm represented multiple defendants, including a married couple, the wife’s company, and the husband’s company in a RICO and civil forfeiture action filed by the state of Georgia. The defendants executed a single fee agreement, without any mention of potential conflicts of interest arising from joint representation of all defendants. The case settled, and the consent order required a cash distribution into an IOLTA account, auction of some assets, and distributions to respective companies. The attorneys, without the individual clients’ knowledge, wired the money to the husband’s account. The husband and wife divorced, and the wife did not receive her share of the money distributed. The wife then sued for malpractice, breach of fiduciary duty, and breach of contract.
Medmarc’s Professional Liability Policy contained a misappropriation exclusion that excluded coverage for “any claim[s] or other request[s] involving or relating to any conversion, improper commingling, or misappropriation, whether by an Insured or any other person, and whether intentionally or not, of client funds or trust account funds or funds of any other person held by any Insured in any capacity.”
On appeal, Medmarc argued that the entire malpractice suit was one claim that fell under the misappropriation exclusion, based on the insurance policy’s language under the “When a Claim is First Made” section that “[a]ll claims … shall be deemed one claim.” Id. at *2. The Eleventh Circuit noted that the term “claim” was defined in the definition section, not in the same section upon which Medmarc relied. Id. at *3. The court determined that “an insured would expect that the sentence [deeming all claims one claim] impacts only when a claim is first made and would not expect it to inform the meaning of ‘claim’ beyond that.” Thus, because “insurance contracts “are to be read in accordance with the reasonable expectations of the insured where possible,” the Eleventh Circuit must read the sentence in question to modify only when a claim is first made, not the entire policy. Id. (quoting Boardman Petroleum, Inc. v. Federated Mut. Ins., 269 Ga. 326, 328 (1998)). Thus, the court determined, multiple claims existed in the suit. Medmarc, 2025 WL 2886733, at *3.
Further, because at least some of the claims fell outside of the misappropriation – namely, the allegations surrounding the firm’s breach of fiduciary duty to the clients by failing to advise them of potential conflicts of interest – the insurer was required to defend the entire suit. The Eleventh Circuit reasoned that the multiple claims did not relate to misappropriation simply because they were all asserted in the same suit and involved the same law firm, as Medmarc argued they did. Id. at *3. The court stated “[it] must not read phrases like ‘relate to’ so that they extend to the furthest stretch of [their] indeterminacy, … for really, universally, relations stop nowhere.” Id. (quoting New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655 (1995)). The Eleventh Circuit did not determine how broadly “relate to” should be interpreted; it merely held that it certainly did not expand so far as to include claims that simply involve the same parties brought in the same lawsuit. Medmarc, 2025 WL 2886733, at *3.