Downey v. First Indem. Ins.

214 F.Supp.3d 414

Philip A. DOWNEY, Plaintiff,

v.FIRST INDEMNITY INSURANCE, et al., Defendants.

CIVIL ACTION No. 13–4545

United States District Court, E.D. Pennsylvania.

Signed October 14, 2016

Matthew B. Weisberg, Weisberg Law PC, Morton, PA, Graham F. Baird, Law Offices of Eric A. Shore PC, Philadelphia, PA, for Plaintiff.

Clinton J. Wolbert, George Rockas, Wilson Elser Moskowitz Edelman & Dicker LLP, Boston, MA, Kristi A. Buchholz, William J. Taylor, Jr., Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, Philadelphia, PA, Carolyn Bates Kelly, Koch & Demarco LLP, Wendy H. Koch, Koch and Corboy, Jenkintown, PA, for Defendants.

MEMORANDUM OPINION

Goldberg, District Judge

The issue presented in this breach of contract action¹ is whether Defendants are obligated to provide legal malpractice coverage to Plaintiff, Philip A. Downey, Esq. Plaintiff alleges that Defendants, First Indemnity Insurance,² Andrew Biggio (collectively "First Indemnity Defendants"), First Mercury Insurance Company ("First Mercury"), and State National Insurance Company ("State National"), collectively failed to provide him with the professional malpractice insurance policy that he requested—one that would leave him with "no gaps in coverage" from his previous policy with a separate carrier. As a result of Defendants' alleged failure to furnish the requested policy, Plaintiff faced uninsured exposure for a legal malpractice claim filed against him by a former client.

Before me are the First Indemnity Defendants' motion for summary judgment, and First Mercury and State National's motion for summary judgment. Both sets of Defendants argue that the plain and unambiguous language of the policy excludes the claim for which Plaintiff seeks coverage. Defendants further assert that the "reasonable expectations" doctrine relied upon by Plaintiff is inapplicable.

For the reasons set forth below, I conclude that the unambiguous language of the policy excludes Plaintiff's claim for coverage. I further conclude that the "reasonable expectations" doctrine is inapplicable to this case. Consequently, I will grant both motions.

I. FACTUAL AND PROCEDURAL BACKGROUND

The following facts are undisputed, unless otherwise noted:

During the pertinent time period, Plaintiff was an attorney, licensed to practice law in Pennsylvania. In July 2007, responding to a solicitation he had received from insurance brokers, First Indemnity Defendants, Plaintiff sought to purchase a new Lawyers Professional Liability ("LPL") insurance policy. On July 27, 2007, Plaintiff submitted an initial insurance application to First Indemnity, but did not receive a response. (Pl.'s Statement of Facts "SOF" ¶¶ 1, 12.)

On August 18, 2007, Plaintiff's malpractice insurance policy with his prior carrier, Philadelphia Insurance Companies, ended. (First Merc. & State Nat'l Mot. Summ. J., Ex. H, p. 13; First Indem. Mot. Summ. J., Ex. E.) At that point in time, Plaintiff maintained his own independent practice, but was also "Of Counsel" with the law firm of Kenney, Egan, McCafferty & Young. (Pl.'s Resp., Ex. D; Pl.'s Dep. 18:6–10; 19:17–20.)

In September 2007, as Plaintiff was preparing to leave the Kenney firm to focus exclusively on his own practice, the Downey Law Firm, LLC, he claims to have spoken on the telephone with First Indemnity Insurance agent, Defendant Andrew Biggio, about acquiring a new LPL policy. Plaintiff claims that he made it clear to Biggio that he wanted malpractice coverage that did not leave any "gaps" between his prior policy with Philadelphia Insurance Companies and the start date of his new policy through First Indemnity Insurance. (Pl.'s SOF ¶¶ 13–14.) Plaintiff testified that Biggio assured him there would not be any gaps in coverage between his old and new policies. (Pl.'s Dep. 52:3–7.) Biggio denies that he ever made such a statement, nor did he recall actually speaking with Plaintiff. (Biggio Dep. 9:12–17; 20:19–24; 21:1–18.) These facts are thus disputed.

It is undisputed, however, that Plaintiff faxed a second insurance application to Biggio on September 22, 2007. (Pl.'s Resp., Ex. C; First Merc. & State Nat'l Mot. Summ. J., Ex. H.) On page ten (10) of his completed application, in response to the question, "Coverage requested to be effective on ––––/––––/–––– (month/day/year)", Plaintiff filled in the corresponding blank spaces with "10/1/2007" [October 1, 2007]. (First Merc. & State Nat'l Mot. Summ. J., Ex. H, p. 10.) On page two (2) of his completed application, Plaintiff indicated that the establishment date of his new firm, of which he was the sole proprietor, was going to be "10/1/2007." (Id. at p. 2 ¶¶ 5, 7.) On page thirteen (13) of his completed application, Plaintiff indicated that his firm was not currently insured against malpractice claims. (Id. at p. 13.)

On October 6, 2007, Plaintiff received a quote from First Indemnity Insurance, which had been signed by both Defendant Andrew Biggio and another First Indemnity officer, John Biggio. (First Merc. & State Nat'l Mot. Summ. J., Ex. J.) At the top of the page, in capital letters, the quote states that the "Proposed Effective Date" will be "10/1/2007." (Id. ) Toward the bottom of the same page, in capital letters, the quote lists "Conditions: ‘Claims Made Policy Covering 1 Attorney, Retro–Active Date 10/1/2007.’ " Also attached to the quote was the following disclosure:

PRIOR ACTS COVERAGE INFORMATION

The claims-made lawyers professional liability insurance policy only covers claims resulting from acts, errors or omissions by an insured in the performance of professional services as a lawyer, provided that the claim is first made against you and reported during the policy term. The act, error or omission alleged in the claim must have taken place during the policy period or subsequent to the "Prior Acts Date" stated as an endorsement to the policy. This means that claims from acts, errors or omissions committed before the "Prior Acts Date" are not covered by this policy. If no prior acts exclusion is attached to the policy, "Full Prior Acts" coverage not limited by a date, is provided for acts, errors or omissions committed by the insured before the policy period. (Id. )

Once Plaintiff submitted his premium, Andrew Biggio sent the policy to Plaintiff on October 24, 2007. (First Merc. & State Nat'l Mot. Summ. J., Ex. J.) The "Declarations" page of the policy lists the "policy period" as "10/01/2007 [to] 10/01/2008." Toward the top of the "Declarations" page, in capital letters, the policy states that it is a claims made policy, and "covers only those claims first made against the insured during the policy period and reported in writing to [Defendants] pursuant to the terms herein." (Id. ) A schedule of endorsements appeared on the second page of the policy. A "Retroactive Date Endorsement" was listed within that schedule. The Retroactive Date Endorsement itself reads:

This policy does not apply to any CLAIMS or CLAIMS arising from, attributable to, or based upon any WRONGFUL ACT(S) committed or alleged to have been committed by [Plaintiff] prior to the corresponding retroactive date.

"NAME OF ATTORNEY AND RETROACTIVE DATE" appeared immediately below the above-quoted language. "Philip A. Downey, 10/01/2007" appears directly thereafter. (Id. )

Plaintiff renewed the policy for another year on September 24, 2008, which meant that his coverage extended through October 1, 2009.³ (First Merc. & State Nat'l Mot. Summ. J., Ex. B.) On July 6, 2009, one of Plaintiff's former clients filed a complaint against him, alleging that he committed legal malpractice on July 5, 2007 by failing to file a claim within the applicable statute of limitations. Plaintiff contacted the First Indemnity Defendants to notify them that he had been sued. At this point in time, the First Indemnity Defendants acted as the "underwriting manager[s] for First Mercury/State National, meaning [they] wrote, quoted, [and] issued ... policies on behalf of First Mercury and State National ... in [all] 50 states." (Biggio Dep. 13:6–18.)⁴ Thus, First Indemnity advised Plaintiff to contact First Mercury regarding his claim, which he did on August 3, 2009.

On August 7, 2009, First Mercury sent a letter to Plaintiff denying coverage. The letter explained that "[t]he wrongful acts/errors which give rise to this claim...are before your retroactive date of 10/1/07. As the provisions [of the policy] make clear, claims are not covered which arise from errors/wrongful acts occurring before the applicable retroactive date[.]" (First Indem. Mot. Summ. J., Ex. D at p. 3.)

On September 25, 2009, Plaintiff contacted his former malpractice insurance carrier, Philadelphia Insurance Companies, which also denied coverage in a letter dated December 31, 2009. (First Indem. Mot. Summ. J., Ex. F.)⁵

On August 7, 2013, exactly four years after First Mercury denied coverage, Plaintiff filed his initial complaint in this Court. He filed a one-count amended complaint on February 7, 2014, asserting "breach of contract (simple and professional) / unjust enrichment / quasi-contract / promissory estoppel" against all Defendants.

Plaintiff generally avers that as a result of Defendants' collective failure to furnish the policy that he requested, and that which Andrew Biggio represented would be provided, he was left with a gap in coverage. As a result, Plaintiff claims to have incurred over $250,000 in attorneys' fees and costs, and potentially faces exposure for substantial uninsured damages. (Am. Compl. ¶ 46.)

On March 12, 2014, shortly after filing their answer, and before the discovery process started, the First Indemnity Defendants filed a motion for summary judgment arguing that Plaintiff's claims were barred by the four-year statute of limitations for breach of contract claims in Pennsylvania. First Mercury and State National joined that motion on March 18, 2014. Plaintiff responded by arguing that the "reasonable expectations" doctrine applied, and thus the alleged breach (i.e., the date on...