Minnesota Lawyers Mutual Insurance v. Batzli

UNPUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 10-1684

MINNESOTA LAWYERS MUTUAL INSURANCE COMPANY,

Plaintiff - Appellant,

v.

TERRENCE RAYMOND BATZLI; BATZLI WOOD & STILES, PC,

Defendants - Appellees.

No. 10-1839

MINNESOTA LAWYERS MUTUAL INSURANCE COMPANY,

Plaintiff - Appellant,

v.

TERRENCE RAYMOND BATZLI; BATZLI WOOD & STILES, PC,

Defendants - Appellees.

No. 10-1910

MINNESOTA LAWYERS MUTUAL INSURANCE COMPANY,

Plaintiff - Appellee,

v.
TERRENCE RAYMOND BATZLI; BATZLI WOOD & STILES, PC,

Defendants - Appellants.

Appeals from the United States District Court for the Eastern
District of Virginia, at Richmond. Henry E. Hudson, District
Judge. (3:09-cv-00432-HEH)

Argued: May 12, 2011 Decided: August 4, 2011

Before KING, SHEDD, and WYNN, Circuit Judges.

Affirmed by unpublished opinion. Judge Wynn wrote the majority
opinion, in which Judge King joined. Judge Shedd wrote a
dissenting opinion.

ARGUED: Danny Mark Howell, SANDS ANDERSON, PC, McLean, Virginia,
for Minnesota Lawyers Mutual Insurance Company. William F. D.
Gallalee, WILLIAMS MULLEN, Richmond, Virginia, for Terrence
Raymond Batzli and Batzli Wood & Stiles, PC. ON BRIEF: Michael
T. Marr, Jeffrey H. Geiger, Mikhael D. Charnoff, Douglas A.
Winegardner, SANDS ANDERSON, PC, McLean, Virginia, for Minnesota
Lawyers Mutual Insurance Company. Harold E. Johnson, WILLIAMS
MULLEN, Richmond, Virginia, for Terrence Raymond Batzli and
Batzli Wood & Stiles, PC.

Unpublished opinions are not binding precedent in this circuit.

2
WYNN, Circuit Judge:

When reviewing the denial of a post-verdict motion for

judgment as a matter of law, we view the evidence in the light

most favorable to the party that prevailed at trial and will

affirm the denial of the motion “unless we conclude that the

jury lacked ‘a legally sufficient evidentiary basis’” to render

the challenged verdict. Sloas v. CSX Transp. Inc., 616 F.3d

380, 392 (4th Cir. 2010) (quoting King v. McMillan, 594 F.3d

301, 312 (4th Cir. 2010)). In this case, the district court

denied a motion for judgment as a matter of law, made by

Minnesota Lawyers Mutual Insurance Company (“Minnesota Mutual”),

that challenged the jury’s verdict that Minnesota Mutual

breached its professional liability insurance contract by

refusing to defend Terrence Batzli, a lawyer, and Batzli Wood &

Stiles, P.C., his law firm (collectively “the insureds”),

against a malpractice suit brought by one of Batzli’s former

clients. Because there was sufficient evidence in the record

for a reasonable jury to conclude that Minnesota Mutual breached

the contract, we affirm.

I.

A.

In November 2004, Richard J. Chasen (“Richard Chasen”)

hired Terrence Batzli (“Batzli”) of the law firm Batzli Wood &

3
Stiles, P.C., (“Batzli Wood”) to represent him in his divorce

from Karen Chasen. As part of that representation, Batzli

engaged in property settlement negotiations with Karen Chasen’s

attorney, Murray Janus (“Janus”).

Richard Chasen had various degrees of ownership in a number

of businesses, including Chasen Properties, LLC, (“Chasen

Properties”), a family business in which Richard Chasen, Karen

Chasen, and their three children each owned a 20% interest. In

their answers to interrogatories, both Richard and Karen Chasen

indicated a belief that Karen Chasen’s interest in Chasen

Properties was marital property. Richard Chasen was

uncomfortable with Karen Chasen’s continued ownership of 20% of

Chasen Properties, particularly because that entity owned the

building housing N. Chasen & Son, Inc., Richard Chasen’s largest

business. Accordingly, Richard Chasen advised Batzli that he

wanted to obtain Karen Chasen’s interest in Chasen Properties

during the settlement negotiations.

On October 27, 2005, Batzli sent Janus a letter with a

settlement proposal. After proposing Karen Chasen’s retention

of certain assets such as the marital home and her current

automobile, the document proposed the transfer to Richard Chasen

of Karen Chasen’s interests in “JACKAN, Chasen Properties, the

Chasen Family Limited Partnership, and her interest in all other

4
marital assets.” J.A. 487. 1 The letter also proposed that

Richard Chasen would pay Karen Chasen a $345,000 lump sum in

addition to a series of installment payments totaling $657,000.

In response, Janus sent Batzli a letter on December 29,

2005, stating points of agreement as well as certain

counterproposals. Importantly, the letter proposed that instead

of transferring her interests in the Chasen Family Limited

Partnership and JACKAN to Richard Chasen, Karen Chasen would

transfer those interests to the couple’s children in equal

percentages. Karen Chasen also rejected the proposed payment

structure and suggested that Richard Chasen instead pay her a

lump sum of $500,000. The letter did not mention the transfer

of Karen Chasen’s interest in Chasen Properties, and in its

conclusion Janus wrote, “I believe this would resolve all issues

between the parties.” J.A. 491.

Batzli responded via letter on January 4, 2006, suggesting

that Richard Chasen would buy Karen Chasen’s interests in the

Chasen Family Limited Partnership and JACKAN, but making no

mention of Chasen Properties. Ultimately, Richard Chasen

decided not to buy those interests and, on January 9, 2006,

Batzli sent a letter to Janus stating, “[Richard] will agree,

1
Citations herein to “J.A. __” refer to the contents of the
Joint Appendix filed by the parties in this appeal.

5
with regard to Karen’s interest in the Chasen Family Limited

Partnership and JACKAN, that Karen’s interest will simply be

transferred to the children.” J.A. 109. Batzli did not mention

Chasen Properties in this correspondence either.

Notwithstanding, Batzli believed he had negotiated a deal

under which Karen Chasen would transfer her interest in Chasen

Properties to Richard Chasen. However, Batzli drafted an

Agreement and Stipulation (“the Agreement”) which called for the

transfer of Karen Chasen’s interests in JACKAN and the Chasen

Family Limited Partnership to the children. Despite Batzli’s

intention to draft the Agreement so that Karen Chasen’s interest

in Chasen Properties would be transferred to Richard Chasen, he

failed to do so. As drafted, the Agreement indicated that

Richard Chasen would retain “[h]is interest in Chasen

Properties, LLC” instead of “their interest” in the business.

J.A. 119. Batzli and Richard Chasen both reviewed the document,

and neither noticed the omission before Richard Chasen and Karen

Chasen signed the Agreement on January 11, 2006. 2

2
Richard Chasen would later testify that when he signed the
document, he believed that Karen Chasen’s interest in Chasen
Properties was supposed to transfer to him under the Agreement.
He based this belief on the “initial instructions” given to
Batzli upon his retention as counsel “as well as the previous
negotiations that had gone back and forth between Mr. Batzli and
Mr. Janus.” J.A. 358.

6
 Thereafter, Batzli sent Janus a follow-up document for

Karen Chasen to sign to affect the transfer of her 20% ownership

in Chasen Properties to Richard Chasen. Recognizing that the

Agreement did not address Karen Chasen’s interest in Chasen

Properties, Janus responded that his client had not agreed to

such a transfer. Nonetheless, Janus stated that Karen Chasen

would be willing to transfer her interest in Chasen Properties

to the couple’s children as she had done, pursuant to the

Agreement, with respect to her interests in JACKAN and the

Chasen Family Limited Partnership. Thereafter, Batzli called

Janus, who reiterated that Karen Chasen never intended to

transfer her interest in Chasen Properties to Richard Chasen.

Janus further asserted that Karen Chasen’s interest was separate

property, as it had been gifted to her individually by Richard

Chasen’s parents.

Having realized his drafting omission, Batzli discussed

various options with Richard Chasen. Richard Chasen indicated

that he was unwilling to accept Karen Chasen’s offer to transfer

her interest in Chasen Properties to the children. Batzli and

Richard Chasen also discussed the option of moving to set aside

the Agreement on the theory that there was not a meeting of the

minds. Richard Chasen declined to pursue that option because he

considered the Agreement favorable to him even without the

7
transfer of Karen Chasen’s 20% interest in Chasen Properties. 3 A

third option was to move for correction of the Agreement on the

grounds that Batzli had made a scrivener’s error when he drafted

the Agreement. Richard Chasen chose the third option.

On August 24, 2006, at his client’s direction, Batzli filed

a motion 4 in the Circuit Court of the City of Richmond, Virginia,

seeking correction of a scrivener’s error “[p]ursuant to

3
Under the Agreement, Richard Chasen received all of his
interest in N. Chasen & Son, Inc., the value of which had
appreciated by some $2 million during the marriage. Janus had
expressed to Batzli Karen Chasen’s position that the business
was therefore “hybrid property” and she was entitled to a
portion of the appreciation. See Va. Code Ann. § 20-
107.3(A)(3)(a) (2008) (“In the case of the increase in value of
separate property during the marriage, such increase in value
shall be marital property . . . to the extent that marital
property or the personal efforts of either party have
contributed to such increases, provided that any such personal
efforts must be significant and result in substantial
appreciation of the separate property.”). Richard Chasen told
Batzli he did not want to risk the possibility that a divorce
court, identifying this increase as marital property, might give
a portion to Karen Chasen. By keeping the Agreement in effect,
Richard Chasen hoped to avoid this possibility. See id. § 20-
107.3(I) (“Nothing in this section shall be construed to prevent
the affirmation, ratification and incorporation in a decree of
an agreement between the parties pursuant to §§ 20-109 and 20-
109.1.”).
4
Batzli initially did not charge Richard Chasen for the
work done in preparing, drafting, or arguing the motion; Batzli
claimed that he gave Richard Chasen “courtesy discounts” for the
purpose of client relations. J.A. 289. Later, Batzli sent a
bill for a month’s worth of work, asking Chasen if he would pay
half the amount on the theory that the error was a “joint
mistake,” but Batzli ultimately accepted no money for that work
either. J.A. 292.

8
Virginia Code § 8.01-428(B).” 5 J.A. 462. The motion asked the

court to change the Agreement to say that Richard Chasen would

receive “their interest” in Chasen Properties instead of only

“his interest.” Essentially, the motion asserted that Karen

Chasen’s silence with respect to the portion of the October 27,

2005 proposal that mentioned Chasen Properties constituted her

assent to the transfer of her interest in the business to

Richard Chasen. However, the court found that there was no

evidence that Karen Chasen ever agreed to transfer her 20%

interest in Chasen Properties. Moreover, the court held that

Karen Chasen’s silence was insufficient to indicate her

agreement to the proposed transfer. See Va. Farm Bureau Mut.

Ins. Co. v. Hodges, 238 Va. 692, 695, 385 S.E.2d 612, 613 (1989)

(“A binding contract is not formed until the offeree

communicates an acceptance to the offeror.”). Accordingly, the

court denied the motion to correct the alleged scrivener’s

error.

Thereafter, the Court of Appeals of Virginia affirmed the

Circuit Court’s denial of Richard Chasen’s scrivener’s error

motion, stating “[t]here is no evidence in this record to

5
This statute permits a court to correct “[c]lerical
mistakes in all judgments or other parts of the record and
errors therein arising from oversight or from an inadvertent
omission . . . .” Va. Code Ann. § 8.01-428(B) (2008).

9
suggest a meeting of the minds (i.e., a contract—offer and

acceptance) over wife’s relinquishment of her interest in Chasen

Properties. As the trial court properly noted, wife’s silence

on this issue cannot be found to be an acceptance of husband’s

offer.” Chasen v. Chasen, No. 0004-07-2, 2008 WL 2092260 at *4

(Va. Ct. App. May 20, 2008). 6

B.

Months after the decision by the Court of Appeals of

Virginia, Batzli Wood renewed its Professional Liability Policy,

which was issued by Minnesota Mutual. 7 The renewed policy ran

from October 1, 2008 to October 1, 2009. The policy provided

coverage for any “act, error, or omission of the INSURED or a

person for whose acts the INSURED is legally responsible” 8 that

occurred “(1) during the POLICY PERIOD; or (2) prior to the

POLICY PERIOD and on or after the PRIOR ACTS RETROACTIVE DATE,

if the INSURED had no knowledge of facts which could reasonably
6
There were two arguments on appeal. One concerned the
denial of the scrivener’s error motion. The other asserted that
the trial court erred in awarding Karen Chasen $10,000 per month
in spousal support; the latter issue has no bearing on this
appeal. Chasen, 2008 WL 2092260 at *1.
7
Minnesota Mutual had insured Batzli Wood and Batzli
against malpractice since 2005.
8
While Batzli Wood was the “named insured,” the policy made
clear that Batzli was himself, as an employee acting on behalf
of Batzli Wood, an “insured” as well.

10
support a CLAIM at the effective date of this policy.” 9 J.A.

563. Under the policy, the insured was required to “give

immediate written notice” to Minnesota Mutual “in the event of a

CLAIM.” J.A. 568. The policy stated that a “claim” is made

whenever “an act, error or omission by any INSURED occurs which

has not resulted in a demand for DAMAGES but which an INSURED

knows or reasonably should know, would support such a demand.”

J.A. 563. Coverage under the policy was explicitly conditioned

on compliance with the notice requirement.

On January 8, 2009, Richard Chasen filed a malpractice suit

against Batzli and Batzli Wood in the Circuit Court of Henrico

County, Virginia, based on Batzli’s omission in drafting the

Agreement. After receiving a “courtesy copy” of the complaint

on or about January 9, 2009, Batzli gave notice of the claim to

Minnesota Mutual via letter on January 14, 2009. Minnesota

Mutual responded by denying coverage because Batzli failed to

comply with the policy’s notice requirement. 10 Batzli was

9
Here, all relevant conduct related to Batzli’s
representation of Richard Chasen took place prior October 1,
2008 but after the prior acts retroactive date which, in the
case of Batzli, was the date on which he “first entered the
private practice of law.” J.A. 559.
10
Because both Batzli Wood and Batzli fell under the
policy’s definition of an “insured,” the notice requirement
could have been triggered by knowledge possessed by either
entity. However, there is no evidence that Batzli Wood had
knowledge of any facts, other than those known to Batzli, which
(Continued)
11
formally served with the Chasen complaint on June 29, 2009.

Batzli again notified Minnesota Mutual of the claim, but the

insurance company once again denied coverage.

On July 9, 2009, Minnesota Mutual filed an action in

federal court in the Eastern District of Virginia seeking a

declaratory judgment that it was not required to defend the

Chasen malpractice action. Minnesota Mutual asserted that, at

the latest, when Batzli filed the scrivener’s error motion he

was aware of facts that he knew, or should have known, would

support a demand for damages. On August 5, 2009, Batzli filed

an answer and counterclaim. Under the counterclaim Batzli

sought a declaratory judgment that Minnesota Mutual was

obligated to defend against the Chasen malpractice suit and

indemnify the insured in the event of an unfavorable judgment in

the malpractice case. Moreover, Batzli asserted a legal claim

for breach of contract based on Minnesota Mutual’s denial of

coverage.

The parties filed cross-motions for summary judgment. The

district court denied the cross-motions, reasoning that there

was “a genuine factual dispute between the parties as to whether

it was reasonable for Batzli to anticipate a claim by Mr.

would be relevant to a demand for damages based on Batzli’s
representation of Richard Chasen.

12
Chasen.” J.A. 170. The district court granted Batzli’s request

for a jury trial on the breach of contract counterclaim and

stated that the declaratory judgment claims would be decided

after that trial.

Trial began on March 1, 2010, and a central issue was

whether Batzli’s notice to Minnesota Mutual was too late to

comply with the policy’s notice provision. Batzli argued that

he complied with the notice provision by notifying Minnesota

Mutual when he first received the complaint and again after

receipt of formal service, so Minnesota Mutual’s denial of

coverage constituted a breach of contract. Minnesota Mutual

argued that Batzli had sufficient knowledge to trigger the

contract’s notification requirement well before receipt of the

complaint and Batzli’s failure to notify Minnesota Mutual under

those circumstances constituted a failure to satisfy a condition

placed on coverage. During the trial, Minnesota Mutual made two

motions for judgment as a matter of law (one after Batzli rested

his case and another at the close of all evidence); the district

court denied both. Ultimately, the jury found for Batzli and

awarded damages of $8,400.

Thereafter, Minnesota Mutual filed a renewed motion for

judgment as a matter of law under Rule 50(b) of the Federal

Rules of Civil Procedure. First, Minnesota Mutual contended

that Batzli failed to present sufficient evidence to establish

13
that the attorney’s fees sought were reasonable and necessary,

so Batzli could not state a prima facie case for breach of

contract based on actual damages. Second, Minnesota Mutual

argued that Batzli’s failure to plead nominal damages barred any

attempt to establish a prima facie case by reliance thereon.

Finally, Minnesota Mutual argued that Batzli failed to prove

that he was entitled to coverage because there was insufficient

evidence that the policy’s notice requirement had been

satisfied.

The district court agreed with Minnesota Mutual’s first

argument, reasoning that “Batzli’s failure to provide evidence

of the reasonableness of the fees, such as the nature of the

services performed, the length of such services, and the

applicable rates for such representation, left the jury with

insufficient evidence to justify the damages awarded.” Minn.

Lawyers Mut. Ins. Co. v. Batzli, No. 3:09CV432-HEH, 2010 WL

2024487 at *4 (E.D. Va. May 19, 2010). Accordingly, the court

set aside the award of attorney’s fees. However, because

Minnesota Mutual failed to convince the court that “nominal

damages must be specifically plead or that a court is foreclosed

from inferring such damages under the facts at hand,” the court

rejected Minnesota Mutual’s second argument. Id. at *5. The

court awarded nominal damages and deemed this sufficient to

14
satisfy the damage element of Batzli’s prima facie case for

breach of contract.

Next, the district court considered Minnesota Mutual’s

argument that Batzli’s notice of a claim by Richard Chasen was

untimely as a matter of law. It was uncontested that Karen

Chasen would not have agreed to transfer her interest in Chasen

Properties to Richard Chasen. The court opined that this fact,

combined with Richard Chasen’s apparent overall satisfaction

with the Agreement, was enough to support the jury’s conclusion

that a reasonable person in Batzli’s position would not have

thought that his drafting omission would support a demand for

damages. Additionally, the court noted that Richard Chasen

never indicated an intention to sue, promptly paid attorney’s

fees, and maintained a positive attorney-client relationship

with Batzli during the divorce proceedings. Ultimately, the

court determined that there was sufficient evidence to permit a

reasonable jury to find in Batzli’s favor, so it denied

Minnesota Mutual’s Rule 50(b) motion. Minnesota Mutual

appealed. 11

11
Minnesota Mutual filed its notice of appeal of the denial
of its 50(b) motion on June 18, 2010. On July 12, 2010, the
district court entered a Final Order declaring that Minnesota
Mutual has “an obligation to provide a defense and to indemnify
against all claims asserted” in the Chasen malpractice suit.
J.A. 767. Minnesota Mutual filed a notice of appeal of the
(Continued)
15
 On appeal, Minnesota Mutual argues that the district court

considered improper evidence when concluding that a jury could

find in favor of Batzli on the notice issue. Minnesota Mutual

also contends that Batzli failed to establish the element of

damages necessary for a prima facie case of breach of contract

and that the court erred when determining that nominal damages

satisfied that element. Batzli filed a cross-appeal, arguing

that the district court erred in reducing the damage award from

$8,400 to a nominal award of $1 because there was sufficient

evidence to support the jury’s award of actual damages.

II.

We review the denial of a renewed motion for judgment as a

matter of law de novo. Sloas, 616 F.3d at 392. “On appeal, we

view the evidence in the light most favorable to the prevailing

party and will affirm the denial of a Rule 50(b) motion unless

we conclude that the jury lacked ‘a legally sufficient

evidentiary basis’ to find in that party’s favor.” Id. (quoting

McMillan, 594 F.3d at 312). “[W]e are not permitted to retry

factual findings or credibility determinations reached by the

jury. Rather, we are to assume that testimony in favor of the

Final Order on July 21, 2010. Both of Minnesota Mutual’s
appeals were consolidated into the instant case.

16
non-moving party is credible, ‘unless totally incredible on its

face,’ and ignore the substantive weight of any evidence

supporting the moving party.” Cline v. Wal-Mart Stores, Inc.,

144 F.3d 294, 301 (4th Cir. 1998) (quoting Duke v. Uniroyal,

Inc., 928 F.2d 1413, 1419 (4th Cir. 1991)). Ultimately, “[i]f

reasonable minds could differ about the verdict, we are obliged

to affirm.” ABT Bldg. Prods. Corp. v. Nat’l Union Fire Ins. Co.

of Pittsburgh, 472 F.3d 99, 113 (4th Cir. 2006).

Mindful of this deferential standard of review, we must

determine whether there was sufficient evidence presented at

trial to allow a reasonable jury to conclude that Minnesota

Mutual breached its contract with Batzli Wood and Batzli by

denying coverage. To establish a claim for breach of contract

under Virginia law, 12 a plaintiff must demonstrate: “(1) ‘a legal

obligation of a defendant to the plaintiff,’ (2) ‘a violation or

breach of that right or duty,’ and (3) ‘a consequential injury

or damage to the plaintiff.’” Westminster Investing Corp. v.

12
Because this case commenced in the Eastern District of
Virginia, was based on diversity jurisdiction, and concerned a
dispute over the coverage provided by an insurance policy issued
in Virginia, we apply Virginia law. See Klaxon Co. v. Stentor
Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941) (holding that a
federal court sitting in diversity jurisdiction must apply the
choice-of-law principles of the State in which the federal court
is located); Buchanan v. Doe, 246 Va. 67, 70, 431 S.E.2d 289,
291 (1993) (“[T]he law of the place where an insurance contract
is written and delivered controls issues as to its coverage.”).

17
Lamps Unlimited, Inc., 237 Va. 543, 546, 379 S.E.2d 316, 317

(1989) (quoting Caudill v. Wise Rambler, 210 Va. 11, 13, 168

S.E.2d 257, 259 (1969)); cf. Filak v. George, 267 Va. 612, 619,

594 S.E.2d 610, 614 (2004) (“The elements of a breach of

contract action are (1) a legally enforceable obligation of a

defendant to a plaintiff; (2) the defendant’s violation or

breach of that obligation; and (3) injury or damage to the

plaintiff caused by the breach of obligation.”).

Here, the “obligation” in question was Minnesota Mutual’s

duty to defend against the malpractice suit brought by Richard

Chasen. However, because the notice requirement in the policy

operated as a condition to coverage, Minnesota Mutual argues

that it owed no legally enforceable duty to defend.

A. Proof of Minnesota Mutual’s Breach

To address Minnesota Mutual’s contention, we must determine

whether a reasonable jury could have concluded that the insured

satisfied the policy’s notice requirement. Under the insurance

contract, Batzli was required to “give immediate written notice”

to Minnesota Mutual whenever “an act, error or omission by any

INSURED occurr[ed] which ha[d] not resulted in a demand for

DAMAGES but which an INSURED [knew] or reasonably should [have

known], would support such a demand.” J.A. 563 Virginia courts

have consistently held that, to be entitled to coverage, an

18
insured must “substantially comply” with such notice provisions.

See, e.g., Craig v. Dye, 259 Va. 533, 537, 526 S.E.2d 9, 12

(2000). 13

Of course, in this case, notice was eventually supplied to

Minnesota Mutual. However, under the policy, the duty to notify

Minnesota Mutual arose whenever the insured did something that

he knew, or reasonably should have known, would support a demand

for damages. Thus, we must consider whether there was

sufficient evidence in the record to support a jury

determination that, prior to learning that he was a defendant in

the malpractice suit, Batzli neither knew, nor reasonably should

have known, that deficiencies in his representation of Richard

Chasen would support a claim for damages.

Minnesota Mutual attacks the district court’s conclusion

that there was sufficient evidence to support the jury’s

13
As stated in Atlas Ins. Co. v. Chapman, 888 F.Supp. 742
(E.D. Va. 1995),
[t]he rationale behind the rule requiring compliance with
the notice provision is compelling. Absent the requirement of
prompt notice by the insured of all accidents and occurrences
which could implicate the policy, the insurer is at the mercy of
its insured’s willingness to reveal such potential claims. As
the Virginia Supreme Court has made plain, notice provisions are
designed to afford the insurer the opportunity to make a timely
investigation of all circumstances surrounding the accident and
to prepare an adequate defense if necessary on behalf of the
insured.
Id. at 745 (citing North River Ins. Co. v. Gourdine, 205
Va. 57, 62, 135 S.E.2d 120, 123 (1964)).

19
determination, arguing that the court erred as a matter of law

by improperly basing its decision on evidence that had no

bearing on the issue. Specifically, Minnesota Mutual asserts

that the district court erred by basing its decision on 1)

Richard Chasen’s failure to threaten suit and/or Batzli’s

subjective belief that Richard Chasen would not sue him; 2)

Batzli’s belief that he enjoyed a good-attorney client

relationship with Richard Chasen; and 3) whether a claim brought

by Richard Chasen would be meritorious.

To the extent that Minnesota Mutual argues that the

district court erred by relying on Richard Chasen’s subjective

impressions of the circumstances, Minnesota Mutual misreads the

court’s opinion. To begin, the district court was well aware

that the test employed is an objective one, and quoted the

following from Dan River, Inc. v. Commercial Union Ins. Co., 227

Va. 485, 317 S.E.2d 485 (1984):

Failure to give timely notice will not be excused when
the insured only subjectively concludes that coverage
under the policy will not be implicated. Such a policy
provision requires the insurer to be notified
whenever, from an objective standpoint, it should
reasonably appear to the insured that the policy may
be involved.

Id. at 489, 317 S.E.2d at 487. Moreover, Minnesota Mutual

misinterprets the basis of the district court’s decision. The

court noted that the evidence established that Karen Chasen

would not have agreed to transfer her interest in Chasen

20
Properties to Richard Chasen. The court stated that “[t]his

uncontested fact, coupled with Chasen’s apparent overall

satisfaction with the other favorable terms of the property

settlement Agreement, provided a legally sufficient basis for

the jury to conclude that Batzli did not reasonably believe that

his drafting error could support a claim for damages.” Batzli,

2010 WL 2024487 at *6. In short, Minnesota Mutual is correct

that a court cannot rely on an insured’s subjective belief that

his client will not sue, but is incorrect in asserting that

subjective beliefs formed the foundation of the district court’s

judgment.

Minnesota Mutual also contends that the district court

erred by considering the likelihood of Richard Chasen’s success

on the merits in the event that a claim were brought. Once

again, Minnesota Mutual mischaracterizes the district court’s

analysis. The court did not opine that Batzli did not need to

notify Minnesota Mutual because any foreseeable potential claim

would lack merit; instead, it determined that there was no

reasonably foreseeable potential claim. The distinction is

perhaps confusing because both conclusions could potentially

result from the determination that Batzli’s error caused no

damage to his client. See Campbell v. Bettius, 244 Va. 347,

352, 421 S.E.2d 433, 436 (1992) (“In a legal malpractice action,

the fact of negligence alone is insufficient to support a

21
recovery of damages. The client must prove that the attorney’s

negligence proximately caused the damages claimed.”).

Like the district court, we are unconcerned with the

ultimate merits of a potential claim. However, we also conclude

that a reasonable belief that an insured’s error caused no harm

to the insured’s client is relevant to whether an objectively

reasonable person in the insured’s position would expect his

error to give rise to a claim for damages. See Commercial

Underwriters Ins. Co. v. Hunt & Calderone, P.C., 261 Va. 38, 540

S.E.2d 491 (2001). In Hunt & Calderone, an accountant missed a

filing deadline for one of her clients and knew the error

could potentially result in a loss of a $125,000 tax
credit for the client, but she did not think that a
claim would result because she was told by an
administrator of the government tax credit program
that sufficient funds would likely be available after
all the timely applications had been processed.

Id. at 38, 540 S.E.2d at 492. Further, when told of the error,

the client said he was satisfied with the assurances made by the

government administrator. Id. However, when funds proved

unavailable, the client sued the accountant, who then sought a

defense from her professional liability insurer. The insurer

denied coverage because the accountant had not notified the

insurer when the initial error occurred. The Supreme Court of

Virginia ruled that, on these facts, the accountant was entitled

22
to a defense under the insurance contract. Id. at 44, 540

S.E.2d at 494.

This case is analogous. The evidence demonstrates that

shortly after realizing his drafting error, Batzli learned of

facts supporting a reasonable belief that no harm had been done

to his client by the error. To begin, a reasonable jury could

conclude that no damage to Richard Chasen resulted from his

payment of fees for Batzli’s services. See Rutter v. Jones,

Blechman, Woltz & Kelly, P.C., 264 Va. 310, 314, 568 S.E.2d 693,

695 (2002) (stating in a malpractice suit arising from lawyer’s

alleged drafting error that “the fee [the client] paid the

defendants for their services was not an injury resulting from

legal malpractice. It was merely the agreed-upon cost of the

service, the consideration given for the contract, and not the

damage or injury arising from the breach of the contract.”). 14

14
Notably, there was no evidence that Richard Chasen’s
payment of Batzli’s legal fees was contingent on Batzli
negotiating the transfer of Karen Chasen’s interest in Chasen
Properties. In any event, a contingent fee arrangement would
arguably have been unenforceable on public policy grounds absent
extenuating circumstances. See Smith v. Ramey, No. 8511, 1988
WL 619384 at *2 (Va. Cir. Ct. 1988) (recognizing prohibition of
“contingent fee contracts in domestic relations cases except in
extraordinary circumstances”); see also 7 Am. Jur. 2d Attorneys
at Law § 260 (2007) (“A fee contract contingent on procuring a
divorce, or contingent in amount on the amount of alimony,
support, or property settlement to be obtained, is against
public policy and void.”).

23
 More importantly, Janus told Batzli that Karen Chasen’s

interest in Chasen Properties was separate property that she was

unwilling to transfer to Richard Chasen. Indeed, Karen Chasen

testified that she would not have signed an agreement to such a

transfer. 15 A reasonable jury therefore could have determined

that Batzli could not have anticipated a demand for damages for

failing to procure that which was unprocurable. 16

15
The following excerpt from Karen Chasen’s deposition
testimony, which was presented to the jury, clarifies that Karen
Chasen would not have agreed to transfer her interest in Chasen
Properties to Richard Chasen:
Q: . . . . Prior to signing the agreement—or at any time—
did you ever agree to give your interest in Chasen Properties,
LLC to [Richard] Chasen?
A: No.
. . . .
Q: If you had read this agreement and it had stated that
you had transferred your interest in Chasen Properties, LLC to
[Richard Chasen], would you have signed that agreement?
A: I would not have signed it.
J.A. 391.

16
Additionally, we find no support for the contention that
Batzli’s error harmed Richard Chasen by causing him to pay for
more than he received under the Agreement. Stated differently,
there is no support for the argument that Richard Chasen might
not have been willing to pay as much if he had known that he was
not getting Karen Chasen’s interest in Chasen Properties as part
of the deal. However, the $500,000 that Richard Chasen paid was
first proposed by Karen Chasen, who obviously did not consider
it consideration for her transfer of her interest in Chasen
Properties. Also, the jury heard evidence that “there was no
document or spreadsheet that showed how the 500k [figure] was
arrived at.” J.A. 307. Moreover, Batzli testified that “the
$500,000 was paid to get her to agree to what she ultimately
agreed to.” J.A. 308.

24
 Minnesota Mutual argues that evidence of other harm would

have led a reasonable lawyer in Batzli’s position to notify his

insurer. First, Minnesota Mutual contends that Batzli should

have known that his failure to recognize the drafting error kept

him from arguing during the spousal support hearing that Karen

Chasen had additional income-producing separate property.

However, a reasonable jury could instead have focused on Karen

Chasen’s testimony that she never received any money or income

from her 20% interest in Chasen Properties. Minnesota Mutual

also argues that Batzli should have known that his conflict of

interest in pursuing the scrivener’s error motion instead of

seeking to have the Agreement set aside constituted actionable

malpractice. But a reasonable jury could have relied on

evidence showing that Richard Chasen, not Batzli, made the

decision to pursue the scrivener’s error motion.

In addition to evidence supporting a reasonable belief that

there was no loss to the client, there was evidence, as in Hunt

& Calderone, that the client was comfortable with the result,

notwithstanding the professional error. The jury heard evidence

that Richard Chasen rejected the idea of seeking to set aside

the Agreement and renegotiate. Indeed, under the Agreement as

written, Richard Chasen received the full interest in an

arguably joint asset that had appreciated by $2 million during

the marriage. The jury heard testimony that it was more

25
important to Richard Chasen to keep that aspect of the deal

intact than to pursue Karen Chasen’s interest in Chasen

Properties. Further, the jury heard evidence that,

notwithstanding the error, Batzli secured for his client $4

million of a $6 million estate.

Under these circumstances, viewing the evidence in the

light most favorable to Batzli, as we must, we conclude that the

jury had a sufficient evidentiary basis to conclude that Batzli

reasonably thought his drafting error would not result in a

claim until he learned from Richard Chasen that a claim would in

fact be filed, at which point he promptly notified Minnesota

Mutual. Likewise there was sufficient evidence to support the

jury’s conclusion that prior to October 1, 2008, the effective

date of the policy, Batzli had no knowledge of facts that could

reasonably support a demand for damages. Minnesota Mutual was

therefore obligated to provide insurance coverage under the

insurance contract. Because there is no dispute that Minnesota

Mutual subsequently denied coverage, there was also sufficient

evidence in the record to support the jury’s conclusion that

Minnesota Mutual breached that obligation.

B. Proof of Damage to Batzli

Next, Minnesota Mutual maintains that there was

insufficient evidence presented at trial to permit a reasonable

26
jury to conclude that the damage element of a breach of contract

claim had been satisfied. Minnesota Mutual agrees with the

trial court’s determination that actual damages were not proven

to a reasonable degree of certainty. However, Minnesota Mutual

challenges the district court’s determination that an award of

“nominal damages” supported by the evidence at trial was

sufficient to make out a prima facie case for breach of

contract. We find no merit to Minnesota Mutual’s argument.

It stands to reason that Minnesota Mutual’s refusal to

defend the malpractice suit forced Batzli to retain legal

counsel. Moreover, there was evidence that the cost of those

legal services was billed to Batzli. In other words, there was

sufficient evidence to support a determination that there was

“injury or damage to the plaintiff caused by the breach of

obligation.” Filak, 267 Va. at 619, 594 S.E.2d at 614. The

district court awarded nominal damages for that breach.

Significantly, the Virginia Supreme Court has explained that

“[n]ominal damages are those recoverable where a legal right is

to be vindicated against an invasion that has produced no actual

present loss of any kind or where, from the nature of the case,

some injury has been done the amount of which the proofs fail to

show.” News Leader Co. v. Kocen, 173 Va. 95, 107-08, 3 S.E.2d

385, 390 (1939) (quotation omitted); see also 22 Am. Jur. 2d

Damages § 8 (2003) (“The term ‘nominal damages’ describes two

27
types of awards: (1) those damages recoverable where a legal

right is to be vindicated against an invasion that has produced

no actual, present loss of any kind; and (2) the very different

allowance made when actual loss or injury is shown, but the

plaintiff fails to prove the amount of damages.”).

The district court relied on the inferred nominal damages

that result from the violation of the legal rights created by

the contract. Minnesota Mutual correctly argues that such

damages are insufficient to satisfy the third prong of a prima

facie case for breach of contract. However, neither of the

cases on which Minnesota Mutual relies stands for the

proposition that nominal damages can never satisfy the third

element in a Virginia breach of contract claim.

In Orebaugh v. Antonious, 190 Va. 829, 58 S.E.2d 873

(1950), the court considered an action by a property owner

alleging that a contractor hired to install a heating system

breached his contract because the heating system failed to

operate properly. Id. at 830, 58 S.E.2d at 873. However, the

evidence also showed that the property owner had since sold the

property with the heater still inoperable. There was no

evidence of the sale price or evidence that the property owner

took less for the property because of the faulty heating system.

The court stated that the plaintiff did not “introduce any

evidence from which it could be determined that she suffered any

28
loss or damage” other than the nominal damages inferred from the

violation of her legal rights under the contract. Id. at 833.

As such, the court held that judgment in favor of the plaintiff

was in error. Id. at 834.

In Bailey v. Potter, No. 1:05c936(JCC), 2006 WL 1582410

(E.D. Va. June 5, 2006), the court considered an action brought

by an employee alleging that her employer breached a contractual

duty to review the employee’s leave requests to ensure they were

“properly coded.” 17 Plaintiff alleged that the employer breached

the contract by improperly coding some of her leave time as

“Leave Without Pay” instead of “Office of Worker Compensation

Program Leave Without Pay.” Id. at *3. The court concluded that

“there was no meaningful difference between” the two time codes

and that, consequently, if the leave time was coded as the

plaintiff desired, “Plaintiff would receive no benefit

whatsoever.” Id. The court then rejected the plaintiff’s

assertion that nominal damages inferred from the inconsequential

violation of her legal rights would satisfy the third element of

a breach of contract suit. Id. at *4 (“Essentially, Plaintiff

seeks to eviscerate the “consequential injury or damage” element

17
Although we distinguish Bailey, we also note that, as an
unpublished opinion, it bears no precedential weight that would
necessarily alter our analysis. United States v. Ruhe, 191 F.3d
376, 392 (4th Cir. 1999) (“[U]npublished opinions are not
binding precedent in this circuit.”); see also Local Rule 36(c).

29
of a claim for breach of contract, as nominal damages would

always be inferred upon the allegation of a breach of a binding

agreement.”).

This case is distinguishable from Orebaugh and Bailey

because here, “actual loss or injury is shown, but the plaintiff

fails to prove the amount of damages.” See 22 Am. Jur. 2d

Damages § 8 (2003). Batzli demonstrated that he had to pay

attorney’s fees as a result of Minnesota Mutual’s breach, but

failed to prove that the amount claimed was reasonable. 18 As

such, nominal damages were appropriate. 19 Both Orebaugh and

Bailey involved circumstances where there was no evidence that

any damage (other than the abstract damage caused by violation

of legal rights created by a contract) resulted from the breach

of contract. In other words, both cases held that nominal

damages of the first sort discussed in Kocen cannot support a

18
See infra, Section III.
19
We reject Minnesota Mutual’s contention that Batzli’s
failure to specifically plead nominal damages barred the award
thereof, particularly when the counterclaim asked the court to
award, in addition to the costs and fees incurred in prosecuting
the counterclaim and defending the Chasen malpractice suit,
“such other and further relief as the Court deems just.” [J.A.
76] See Yniguez v. State, 975 F.2d 646, 647 n.1 (9th Cir.
1992)(per curiam)(“Although the plaintiff’s complaint does not
expressly request nominal damages, it did request ‘all other
relief that the Court deems just and proper under the
circumstances.’ That is sufficient to permit the plaintiff to
pursue nominal damages.”).

30
breach of contract action. However, those cases provide no

support for the contention that nominal damages can never

satisfy the damage element of a prima facie case for breach of

contract under Virginia law.

Indeed, in Crist v. Metropolitan Mortg. Fund, Inc., 231 Va.

190, 343 S.E.2d 308 (1986), the court reviewed a breach of

contract action in which the trial court awarded nominal damages

but denied compensatory damages. The court affirmed, stating

“[b]ecause damages, if any, cannot be established with

reasonable certainty, no actual damages can be recovered.

Accordingly, we will affirm the judgment of the trial court

denying compensatory damages but awarding nominal damages of

$100.” Id. at 195, 343 S.E.2d at 311. Crist therefore

contradicts Minnesota Mutual’s contention that a breach of

contract cannot be established absent proof of actual damages,

as well as the contention that nominal damages are insufficient

to satisfy the damage prong of the prima facie case.

In sum, we conclude that there was sufficient evidence

presented to the jury to permit its conclusion that Minnesota

Mutual owed a duty to its insured and that the breach of that

duty caused the insured to suffer damage. Consequently, the

jury had a legally sufficient evidentiary basis to find for the

insured on the breach of contract counterclaim. See Filak, 267

Va. at 619, 594 S.E.2d at 614. Accordingly, we affirm the

31
denial of Minnesota Mutual’s renewed motion for judgment as a

matter of law.

III. Batzli’s Cross Appeal

In his cross appeal, Batzli contends that the district

court erred when reducing the damage award from $8400 to $1 and

argues that the evidence supported the jury’s award of

compensatory damages. Batzli concedes that ruling in his favor

would require our determination that he presented sufficient

evidence to permit a reasonable jury to determine that the

attorney’s fees sought were reasonable and necessary. See Hiss

v. Friedberg, 201 Va. 572, 577, 112 S.E.2d 871, 876 (1960)

(“[W]here a breach of contract has forced the plaintiff to

maintain or defend a suit with a third person, he may recover

the counsel fees incurred by him in the former suit provided

they are reasonable in amount and reasonably incurred.”)

(emphasis added); accord Fidelity Nat’l Title Ins. Co. of N.Y.

v. S. Heritage Title Ins. Agency, 257 Va. 246, 254, 512 S.E.2d

553, 558 (1999).

Minnesota Mutual does not contest the fact that its refusal

to provide coverage under the policy necessitated Batzli’s

independent retention of legal counsel to defend the Chasen

complaint—i.e. that Batzli incurred damages. To support the

contention that the damage award was reasonable, Batzli points

32
to the malpractice complaint which he argues demonstrates the

complexity and high stakes of the case, the fact that the

complaint had been “pending” for a year, 20 and Batzli’s testimony

that he had incurred $8,400 in legal fees for the defense of the

malpractice action. We conclude that such a paltry evidentiary

showing was insufficient as a matter of law to support a

determination that the amount awarded as damages was

“reasonable.”

In Chawla v. BurgerBusters, Inc., 255 Va. 616, 499 S.E.2d

829 (1998), the Supreme Court of Virginia stated:

In determining whether a party [seeking recovery of
attorney’s fees] has established a prima facie case of
reasonableness, a fact finder may consider, inter
alia, the time and effort expended by the attorney,
the nature of the services rendered, the complexity of
the services, the value of the services to the client,
the results obtained, whether the fees incurred were
consistent with those generally charged for similar
services, and whether the services were necessary and
appropriate.

Id. at 623, 499 S.E.2d at 833. In Mullins v. Richlands Nat’l

Bank, 241 Va. 447, 403 S.E.2d 334 (1991), the court said: “In

determining a reasonable fee, the fact finder should consider

such circumstances as the time consumed, the effort expended,

20
Notwithstanding Batzli’s argument to the contrary, the
amount of time that had elapsed since the complaint was filed is
irrelevant to our inquiry given the absence of any evidence
regarding what, if any, actions were taken by Batzli’s lawyers
to defend against the Chasen complaint during that time.

33
the nature of the services rendered, and other attending

circumstances. Ordinarily, expert testimony will be required to

assist the fact finder.” Id. at 449, 403 S.E.2d at 335. 21

Here, there was no testimony regarding how much time

Batzli’s lawyers spent on the defense of the Chasen complaint,

no indication of what services they performed in their

representation of Batzli, and no testimony, expert or otherwise,

regarding the rates charged by lawyers defending malpractice

suits in Virginia. In light of Chawla and Mullins, we conclude

that Batzli’s argument—that $8,400 was per se reasonable in

light of the amount sought in the “complex” malpractice action—

is meritless. See Crist, 231 Va. at 195, 343 S.E.2d at 311. In

short, Batzli had the burden of demonstrating that the

attorney’s fees paid to the lawyers defending the Chasen

complaint were reasonable, and he failed to satisfy that burden.

This allocation of the burden of proof is also dispositive

of Batzli’s second argument. Batzli maintains that because

21
Expert testimony is not necessarily required if lay
testimony can establish the reasonableness of the fee award.
For instance, when a party seeking attorney’s fees submitted
“almost 300 pages of contemporaneous time records detailing the
activities for which fees were sought” and “affidavits of its
attorneys upon the reasonableness of the hourly rates charged
and the accuracy of the time billed,” the court ruled that
expert testimony was not necessary. Tazewell Oil Co., Inc. v.
United Va. Bank, 243 Va. 94, 111-12, 413 S.E.2d 611, 620-21
(1992). No such time records or affidavits were presented in
this case.

34
Minnesota Mutual did not object to the evidence entered in

support of the reasonableness determination, he is foreclosed

from arguing that the amount awarded was unreasonable. However,

applying such a rule would relieve the plaintiff of the burden

of making a prima facie case simply because his opponent was

silent. We decline Batzli’s invitation to so dramatically shift

the burden of proof.

Ultimately, to decide the cross appeal in Batzli’s favor

would require the absurd conclusion that a party establishes the

“reasonableness” of attorney’s fees if (when viewed in the light

most favorable to that party), the evidence shows that the fees

were assessed in a difficult case. However, following Chawla

and Mullins, we conclude that more is required to support a

determination that the attorney’s fees assessed were

reasonable. 22 Because Batzli failed to present evidence to

establish the reasonableness of the attorney’s fees for which he

22
As discussed above, the district court did not rely on
the actual compensatory damages award of $8,400 to confirm
Batzli’s satisfaction of the damage element of a prima face
breach of contract claim. Instead, the court imposed nominal
damages. Indeed, if precisely quantifiable actual damages were
the only basis for finding a breach of contract in this case,
the court would have been compelled to grant Minnesota Mutual’s
motion. See Bennett v. Fairfax Cnty., Va., 432 F.Supp.2d 596,
600 (E.D. Va. 2006) (stating that a court “must enter judgment
as a matter of law if . . . the verdict in favor of the non-
moving party would necessarily be based on speculation and
conjecture.”)(quotation omitted).

35
was to be compensated through the jury’s award of damages, the

district court did not err by setting aside that damage award.

IV.

In sum, while reasonable minds may disagree regarding

whether Batzli should have notified Minnesota Mutual earlier

than he did, even when faced with reasonable disagreement about

the propriety of the verdict, we must affirm the denial of a

renewed motion for judgment as a matter of law. ABT Bldg.

Prods. Corp, 472 F.3d at 113. We conclude that the jury had a

sufficient evidentiary basis to support its conclusion that

Minnesota Mutual breached its insurance contract by refusing to

defend Batzli and Batzli Wood against the Chasen complaint.

Accordingly, we affirm the district court’s denial of Minnesota

Mutual’s motion for judgment as a matter of law. Also, because

the factual determinations necessarily made by the jury in the

trial as to Batzli’s counterclaim are dispositive, we also

affirm the grant of declaratory judgment to Batzli.

AFFIRMED

36
SHEDD, Circuit Judge, dissenting:

Terrence Batzli’s Professional Liability Insurance Policy

with Minnesota Lawyers Mutual does not cover an error made prior

to the liability policy’s date, “which an insured knows or

reasonably should know, would support” a demand for damages.

(J.A. 25.) The majority holds that there was sufficient

evidence for the jury to find that Batzli lacked, or that any

reasonable person in his position would have lacked, such

knowledge under the facts of this case. In my view, Batzli

reasonably should have known, as a matter of law, that he faced

a potential demand for damages from Mr. Chasen. Therefore, with

due respect, I dissent.

As the majority correctly notes, when determining whether

sufficient evidence exists to support a jury verdict, “we may

not substitute our judgment for that of the jury.” Price v.

City of Charlotte, N.C., 93 F.3d 1241, 1249 (4th Cir. 1996).

However, “[w]hile we are compelled to accord the utmost respect

to jury verdicts . . . [we] have a duty to reverse the jury

verdict[] if the evidence cannot support it.” Id. at 1249-1250

(internal citations omitted).

The evidence presented in this case cannot support the jury

verdict. The record clearly establishes that Batzli knew he had

committed a significant error and that his error could support a

claim for damages. Batzli believed that there was an agreement

37
between Mr. and Ms. Chasen, pursuant to which Ms. Chasen would

give her 20% interest in Chasen Properties, LLC to Mr. Chasen.

Batzli drafted a property settlement agreement (“the Agreement”)

between Mr. and Ms. Chasen with the intent of ensuring Mr.

Chasen would receive Ms. Chasen’s 20% interest. However, Batzli

admittedly made an error in drafting the Agreement and testified

to this fact before the jury, stating:

And that’s where I made the error. I said “his
interest.” It should have said “their interest” in
Chasen Properties, LLC.

(J.A. 258.) Batzli also admitted his error to Mr. Chasen in a

letter and, consequently, offered to bear the costs of the

action in state court to correct the error. Moreover, upon

realizing his error, Batzli said that he felt sick about it and

had lost sleep over it.

Finally, Batzli knew this error resulted in significant

financial and personal costs for Mr. Chasen. Batzli knew Mr.

Chasen believed the 20% interest was worth $440,000. In

addition to the monetary value, Batzli also knew how important

it was to Mr. Chasen’s business that he receive Ms. Chasen’s 20%

interest. Without that 20% interest, Mr. Chasen stood to lose

control of Chasen Properties, LLC. Mr. Chasen explicitly

expressed this concern to Batzli in a letter, writing:

[W]ith only a 20% ownership on my part, it would be
easy for her and the kids to remove me as
director/manager of chasen properties [sic]. If I own

38
 at least 34% . . . it is more difficult for them to
remove me form [sic] that roll [sic] and Karen [Ms.
Chasen] can have no part of the process. I just can
not [sic] have Karen owning part of any entity that I
am part of . . . much less part of my business
location!

(J.A. 461.) Furthermore, in a letter to Batzli’s law partner,

who worked on the case with Batzli, Mr. Chasen wrote that he was

“still in shock that the appeal [to correct the error] failed on

all fronts,” (J.A. 551) and Mr. Chasen did not respond to

Batzli’s request for payment of the attorneys’ fees incurred in

the state court action. Against this factual backdrop, Batzli

should have known that his error would support a demand for

damages. *

Despite these facts, the majority concludes there is

sufficient support for the jury verdict based largely on

evidence that addresses the merits of Mr. Chasen’s malpractice

claim. Such evidence is irrelevant as to whether a reasonable

lawyer could expect a demand for damages. The liability policy

requires only that the insured report an act, error, or omission

*
The majority asserts that Batzli could not reasonably
expect a claim for damages because Mr. Chasen had suffered no
damages. To the contrary, Mr. Chasen was damaged. Mr. Chasen
agreed to the settlement with the understanding that he would be
receiving Ms. Chasen’s 20% interest in Chasen Properties, LLC.
Therefore, Mr. Chasen’s damages are – at a minimum – the
difference between what Mr. Chasen paid for the Agreement and
what he would have paid for a settlement that did not contain
Ms. Chasen’s 20% interest.

39
that would support a demand for damages, not that such a demand

would ultimately be successful.

The majority believes that testimony by Ms. Chasen that she

would never have relinquished her 20% interest supports the jury

verdict. The majority reasons that Mr. Chasen was not damaged

because in a divorce action, Mr. Chasen was not legally entitled

to have this non-marital asset included in a settlement.

However, Ms. Chasen’s testimony actually underscores the

materiality of Batzli’s admitted error. Because the divorce

court did not have jurisdiction over and could not award Ms.

Chasen’s 20% interest through a court order, the only way Mr.

Chasen could have received her 20% interest was through the

Agreement, which Batzli failed to properly draft.

Additionally, as support for the jury verdict, the majority

relies upon the fact that Mr. Chasen did not want to set aside

the Agreement. This fact, as well, is irrelevant as to whether

Batzli should have known if Mr. Chasen would have a claim for

damages. Mr. Chasen negotiated the Agreement to receive a

number of assets, including Ms. Chasen’s 20% interest in Chasen

Properties, LLC. The fact that Mr. Chasen wanted to keep what

he actually received in the otherwise favorable Agreement is

irrelevant in determining whether he was entitled to what he

thought he had also received -- Ms. Chasen’s 20% interest.

Therefore, Batzli should have known that his error would support

40
a claim for damages despite the fact that Mr. Chasen was,

overall, satisfied with the Property Settlement. See 17A Am.

Jur. 2d Contracts § 708 (“As a general rule, upon the breach of

a contract, the injured party may, by election, rescind and

recover the value of any performance, or stand by the contract

and recover damages for the breach.”); Richmond v. Hall, 466

S.E.2d 103, 107 (Va. 1996) (recognizing that rescission and a

suit for damages are alternate contractual remedies).

In sum, the evidence in this case clearly establishes that

Batzli should have known that he made an error that would

support a demand for damages and failed to report this error to

the insurance company. Pursuant to the plain language of the

liability policy, this claim was not covered and, therefore, the

insurance company did not have a duty to defend or indemnify

Batzli against Mr. Chasen’s malpractice claim. For this reason,

I would reverse the judgment of the district court and enter

judgment in favor of Minnesota Lawyers Mutual.

41