Bay Cities Paving & Grading, Inc. v. Lawyers' Mutual Insurance company

In Bay Cities Paving & Grading, Inc. v. Lawyers' Mutual Insurance company (1993) 5 Cal.4th 854 (Bay Cities), an attorney representing a contractor filed a mechanic's lien but failed to serve a stop notice or file a complaint to foreclose the lien. As a result of these two negligent acts, the contractor was unable to collect the money owed. The contractor sued, and sought to recover from the lawyer's malpractice carrier, asserting the two negligent acts gave rise to two separate claims under the policy. The California Supreme Court resolved the question under a "primary rights" analysis, but alternatively analyzed the case on whether the acts of malpractice were "related" under the policy. The key provision of the policy in Bay Cities read: "'Two or more claims arising out of a single act, error or omission or a series of related acts, errors or omissions shall be treated as a single claim.'" (5 Cal.4that p. 866.) The court rejected the lower court's determination that "related" was ambiguous, and referred only to causal relationships. Instead, Bay Cities determined the word "related" was not inherently ambiguous, even if not defined by the policy. After considering both the common usage and its application in the policy at issue, the court in Bay Cities concluded that two claims should be treated as one if they were either causally or logically related. The court recognized the word "related" was extremely broad, but cautioned a policy's coverage limits may not extend to every logical relationship: "We do not suggest, however, that, in determining the amount of coverage, the term 'related' would encompass every conceivable logical relationship. At some point, a relationship between two claims, though perhaps 'logical,' might be so attenuated or unusual that an objectively reasonable insured could not have expected they would be treated as a single claim under the policy. In the present case, there is no attenuation or surprise to the insured." (Id. at p. 873.) Because the attorney's omissions arose out of the same transaction, involved the same client, were committed by the same attorney, and resulted in the same injury, the court determined they were logically related and therefore constituted only a single claim. (Ibid.)