Conflicts Are Not Misappropriation: Eleventh Circuit Limits “Relate-To” Exclusions and Cabins Deemer Clauses to First‑Made Timing, Holding Duty to Defend Exists and Indemnity Is Unripe (Georgia Law)

Conflicts Are Not Misappropriation: Eleventh Circuit Limits “Relate-To” Exclusions and Cabins Deemer Clauses to First‑Made Timing, Holding Duty to Defend Exists and Indemnity Is Unripe (Georgia Law)

Case: Medmarc Casualty Insurance Company v. Fellows LaBriola LLP, et al.
Court: U.S. Court of Appeals for the Eleventh Circuit (Non-Argument Calendar; Not for Publication)
Date: October 10, 2025
Panel: Circuit Judges Rosenbaum, Newsom, and Tjoflat (per curiam)
Docket No.: 25-10837
Disposition: Affirmed

Introduction

This insurance-coverage appeal arises from a legal-malpractice action brought by Zankhana Patel and her company, PNP Amusement Games, LLC, against their former counsel, Fellows LaBriola, LLP, and attorney Steven M. Kushner. The malpractice suit alleges that during the resolution of a Georgia RICO and civil forfeiture action, the lawyers (a) mishandled funds disbursed by a court-appointed receiver and (b) conducted conflicted joint representation without conflict disclosure or waiver.

Medmarc Casualty Insurance Company, which issued a Lawyers Professional Liability (LPL) policy to Fellows LaBriola for the February 8, 2021–February 8, 2022 period (with Kushner as an insured), sought a declaratory judgment that it owed no duty to defend or indemnify. Medmarc invoked a policy exclusion for claims “involving or relating to” conversion, improper commingling, or misappropriation of client or trust funds, and—on appeal—argued that the policy’s “related claims” deemer clause meant the entire lawsuit should be treated as a single excluded “claim.” The district court dismissed Medmarc’s complaint, holding Medmarc owed a defense and that indemnity issues were unripe. The Eleventh Circuit affirmed.

The opinion addresses three key issues: (1) the breadth of a misappropriation exclusion containing “involving or relating to” language; (2) whether a “related claims” deemer clause located in a “When a Claim is First Made” section can collapse multiple causes of action into one for purposes of exclusions; and (3) ripeness of duty-to-indemnify disputes when a duty to defend exists under Georgia law.

Summary of the Opinion

  • Duty to defend affirmed. Applying Georgia law, the court held that because the underlying complaint alleges conflict-of-interest breaches that “have nothing to do with misappropriation, conversion, or improper commingling,” those claims fall outside the misappropriation exclusion. When any claim is arguably covered, the insurer must defend the entire suit.
  • “Related claims” deemer clause cabins to timing, not coverage scope. The court rejected Medmarc’s attempt to treat the entire lawsuit as “one claim” (and thereby excluded) via the deemer clause. Placed in the policy’s “When a Claim is First Made” section, the clause affects only when a claim is deemed made, not the meaning or number of “claims” for coverage or exclusion analysis.
  • “Relate to” has limits. The court refused to stretch “involving or relating to” in the exclusion to reach conflict-of-interest allegations merely because they appear in the same lawsuit or involve the same parties. Citing Supreme Court guidance about the indeterminacy of “relates to,” the court drew a practical boundary: same suit/same parties is not enough.
  • Indemnity claim unripe. Because Medmarc owes a defense and the duty to indemnify turns on facts resolved in the underlying case, the indemnity question is not ripe until that case concludes.

Analysis

Precedents Cited and Their Influence

  • Georgia duty-to-defend principles. The court relied on Georgia cases holding that if the complaint’s allegations “even arguably” trigger coverage, the insurer must defend, and any doubts are resolved in favor of the insured. See BBL‑McCarthy, LLC v. Baldwin Paving Co., 285 Ga. App. 494, 497–98 (2007); Auto Owners Ins. Co. v. Neisler, 334 Ga. App. 284, 287 (2015). Exclusions are narrowly and strictly construed against the insurer. See Nationwide Mut. Fire Ins. Co. v. Dillard House, Inc., 651 F. Supp. 2d 1367, 1377 (N.D. Ga. 2009); Wilkinson v. Georgia Farm Bureau Mut. Ins. Co., 351 Ga. App. 891, 893 (2019).
  • Reasonable expectations canon. The policy must be read in accordance with the insured’s reasonable expectations where possible. Boardman Petroleum, Inc. v. Federated Mut. Ins., 269 Ga. 326, 328 (1998). This principle informed the court’s refusal to read a timing-focused “deemer” sentence as redefining “claim” for all purposes.
  • Limits of “relate to.” Borrowing from ERISA preemption jurisprudence, the court invoked New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655 (1995), warning not to read “relate to” to “the furthest stretch of indeterminacy.” This tempered the misappropriation exclusion’s breadth.
  • Defense vs. indemnity and ripeness. Under Georgia law, the duty to defend and duty to pay are “separate and independent.” Penn-Am. Ins. Co. v. Disabled Am. Veterans, Inc., 268 Ga. 564, 565 (1997). The duty to defend is judged against the complaint and policy at the outset; indemnity depends on facts as ultimately determined. The court cited Allstate Ins. Co. v. Emps. Liab. Assur. Corp., 445 F.2d 1278, 1281 (5th Cir. 1971), and ripeness doctrine (Trump v. New York, 592 U.S. 125 (2020); Cheffer v. Reno, 55 F.3d 1517 (11th Cir. 1995)). GTE Directories Pub. Corp. v. Trimen Am., Inc., 67 F.3d 1563, 1569 (11th Cir. 1995), underscores that early declaratory relief is appropriate only when future contingencies are “almost inevitable”—a threshold not met here.
  • Distinguishing contrary authority. The court distinguished Snell v. United Specialty Ins. Co., 102 F.4th 1208 (11th Cir. 2024) (Alabama law); Cincinnati Ins. Co. v. Holbrook, 867 F.2d 1330 (11th Cir. 1989) (duty to defend); and Maryland Cas. Co. v. Pacific Coal & Oil Co., 312 U.S. 270 (1941), Lake Carriers’ Ass’n v. MacMullan, 406 U.S. 498 (1972), and Standard Accident Ins. Co. v. Meadows, 125 F.2d 422 (5th Cir. 1942) (whether there is insurance at all), noting that the present case concerns specific coverage obligations for an existing insured under Georgia law.

Legal Reasoning

1) The deemer clause does not collapse multiple causes of action for coverage analysis. Medmarc’s central appellate pivot was that the policy’s “When a Claim is First Made” provision—stating that “all claims…involving a single act, error, or omission or a series of related acts, errors, or omissions shall be deemed to be one claim”—meant the entire malpractice suit was a single “claim” squarely within the misappropriation exclusion. The court rejected this for two reasons:

  • Forfeiture. Medmarc did not make the “one claim” argument in the district court; it argued there only that all asserted claims “relate to” misappropriation. Although the panel noted the preservation shortfall, it also explained why the argument failed on the merits.
  • Policy structure and insured expectations. The “one claim” sentence appears in the “When a Claim is First Made” section, not in the definitions. The policy separately defines “Claim” as “a demand or suit for damages” received by the insured. Given the clause’s placement and wording, a reasonable insured would understand the deemer to control only timing (first-made) and, by implication, related issues such as limits and retroactivity—not to redefine “claim” wholesale or to decide the number of distinct liability theories/causes of action asserted in a complaint for purposes of exclusions. Any ambiguity must be construed against the insurer.

2) The misappropriation exclusion does not sweep in conflict-of-interest allegations that do not involve funds handling. The policy excludes “any claim or other request involving or relating to any conversion, improper commingling, or misappropriation…of client funds or trust account funds or funds of any other person held by any Insured.” The court drew a clear line:

  • What is excluded? Claims truly “involving or relating to” mishandling of client or trust funds—such as conversion or commingling—may be excluded.
  • What is not excluded? Separately pleaded conflict-of-interest allegations—failure to recognize conflicts in joint representation, failure to advise, failure to seek waivers, and failure to withdraw—“have nothing to do with misappropriation, conversion, or improper commingling.” They therefore fall outside the exclusion.
  • “Relate to” is not limitless. The insurer’s broad formulation—arguing that all counts “involve or relate to” misappropriation because they are in the same suit between the same parties about the same representation—was rejected. “Relate to” cannot be read at “the furthest stretch of its indeterminacy.” As the panel put it, the boundary “surely cannot be” as low as “same parties, same suit.”

3) If any claim is covered, the insurer must defend the entire suit. Reiterating Georgia’s well-settled rule, the court held that because at least one non-excluded claim is alleged, Medmarc owes a defense for the whole action. Given that holding, the panel did not reach the parties’ competing definitions of “misappropriation,” “commingling,” and “conversion.”

4) Duty to indemnify is not ripe while a duty to defend exists and the underlying case is unresolved. The duty to defend depends on the policy and allegations; it is assessed at the outset. The duty to indemnify turns on facts as found in the underlying litigation. Because outcomes and factual predicates remain contingent, courts avoid premature indemnity rulings unless the relevant contingencies are “almost inevitable.” That exceptional certainty was absent, so the indemnity claim was dismissed as unripe.

Impact

For insurers (especially LPL carriers in Georgia and within the Eleventh Circuit):

  • Deemer clauses limited to timing unless clearly stated otherwise. Placing a related-claims aggregation rule in a “When First Made” section will be read as governing when a claim is made, not as collapsing multiple coverage theories for exclusion analysis. If an insurer intends broader application, the drafting must unmistakably signal that—though even then, Georgia’s rules of narrow construction for exclusions and insureds’ reasonable expectations may constrain overbroad readings.
  • “Relate to” is bounded. Even capacious exclusionary phrases such as “involving or relating to” will not reach independent liability theories that are factually and legally distinct from the excluded peril. Conflict-of-interest claims will not be pulled into a misappropriation exclusion merely because the complaint also alleges trust account mishandling.
  • Defense obligations are count-sensitive. In mixed-claim complaints, Georgia law obligates a defense if any cause of action is arguably covered. Adjusters should evaluate each count and be prepared to defend under a reservation, rather than seek wholesale declination based on a single exclusion.
  • Timing of declaratory relief on indemnity. Absent near-certainty about outcome-determinative facts, indemnity disputes will be dismissed as unripe where a defense is owed. Carriers should anticipate litigating indemnity after the underlying case concludes or after factual predicates are established.

For insured law firms and practitioners:

  • Coverage may exist despite trust-account exclusions. Where malpractice complaints include distinct conflict-of-interest or other non-funds-handling theories, insureds can often secure a defense notwithstanding misappropriation exclusions.
  • Pleading separations matter. The clear articulation of conflicts-related breaches as separate counts can preserve defense coverage even when funds-handling issues are also alleged.

For policy drafters:

  • Clarity and placement count. If “related claims” aggregation is intended to affect exclusions, limits, and definitions universally, the clause should be placed in the definitions and state that it applies “for all purposes of this policy.” Even then, Georgia’s interpretive rules may constrain enforcement against insureds.
  • Define connective phrases. Consider defining “relating to” or using more precise causal connectors (e.g., “directly or indirectly arising out of”)—though courts may still cabin these phrases when they threaten to swallow coverage.

Complex Concepts Simplified

  • Claims-made policy. Coverage typically hinges on when a “claim” is first made against the insured and reported to the insurer, rather than when the underlying conduct occurred.
  • Related-claims “deemer” clause. A policy provision that treats multiple claims arising from related acts as a single claim for specific purposes (often timing and limits). In this case, because the clause appeared under “When a Claim is First Made,” the court read it as affecting only the “first-made” timing question.
  • Misappropriation/commingling/conversion exclusion. A common LPL exclusion that removes coverage for allegations of mishandling client or trust funds—whether intentional or negligent, and whether by the insured or someone else—when those funds are held by the insured (e.g., in an IOLTA account).
  • IOLTA account. “Interest on Lawyers’ Trust Accounts” are bank accounts where lawyers hold client funds in trust. Mishandling IOLTA funds often triggers exclusions and disciplinary issues.
  • “Relate to.” A connective phrase in policy exclusions intended to broaden scope. Courts, however, limit it to prevent limitless reach; mere commonality of parties or shared litigation is not enough.
  • Duty to defend vs. duty to indemnify. The duty to defend is broader and arises if the complaint alleges any facts potentially within coverage; it is assessed at the outset. The duty to indemnify requires paying covered judgments or settlements and depends on the facts as ultimately adjudicated.
  • Ripeness. A jurisdictional doctrine preventing courts from deciding hypothetical or contingent disputes. Indemnity issues are often unripe until the underlying liability is resolved.
  • Reasonable expectations and contra proferentem (against the drafter). Ambiguities in insurance policies are construed to match what an average insured would reasonably expect, and unclear terms—especially in exclusions—are interpreted against the insurer that drafted them.

What the Court Did Not Decide

  • The precise meanings of “misappropriation,” “commingling,” and “conversion,” because at least one set of allegations (conflicts) plainly fell outside those concepts.
  • Whether every count in the underlying suit is covered or excluded; it sufficed that at least one claim was covered to trigger the defense of the entire suit.
  • Any issues concerning policy period, prior-acts coverage, or retroactive dates; those were not before the court.

Key Takeaways

  • In Georgia, exclusions using “involving or relating to” will not be read to absorb independent claims—such as conflicts of interest—that do not themselves implicate the excluded peril.
  • A “related claims” deemer, when housed in a “When First Made” section, affects timing, not the count or nature of claims for exclusion analysis.
  • If any claim in the complaint is arguably covered, the insurer must defend the entire action.
  • When a defense is owed, duty-to-indemnify disputes are generally unripe until the underlying litigation concludes.
  • Insurers seeking early coverage resolutions should carefully preserve arguments at the trial level; appellate courts may deem new theories forfeited.

Conclusion

This unpublished Eleventh Circuit decision, applying Georgia law, stakes out two practical constraints in LPL coverage litigation: (1) a misappropriation exclusion—even one using “involving or relating to”—does not swallow distinct conflict-of-interest claims that have nothing to do with funds handling; and (2) a “related claims” deemer clause situated in a “When First Made” section cannot be repurposed to collapse multiple causes of action into a single excluded claim. Reinforcing Georgia’s long-standing rules on the breadth of the duty to defend and the narrow construction of exclusions, the court required Medmarc to defend the entire malpractice suit. It also reaffirmed that indemnity questions are unripe while a defense is owed and the underlying matter remains unresolved. For insurers, insureds, and drafters, the opinion is a cautionary roadmap on the limits of exclusionary language and the importance of policy structure and placement in shaping insureds’ reasonable expectations.

Case Details

Year: 2025
Court: Court of Appeals for the Eleventh Circuit

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