The opinion of the court was delivered by: NEWCOMER
This case was tried before the Court sitting without a jury on July 27-28, 1978. The plaintiffs seek a declaratory judgment to the effect that certain losses they incurred are covered by a policy of insurance issued by the defendant St. Paul Fire and Marine Insurance Company.
Plaintiff Brokers Title Company, Inc. is a corporation organized and existing under the laws of the Commonwealth of Pennsylvania and having its principal office in Philadelphia, Pennsylvania. Title Guarantee Company, also a plaintiff, is a corporation organized and existing under the laws of the State of Maryland and having its principal offices in Baltimore, Maryland.
Defendant St. Paul Fire and Marine Insurance Company (St. Paul) is a corporation organized and existing under the laws of Minnesota and having its principal office in St. Paul, Minnesota.
This is an action for declaratory judgment seeking the Court's construction of the terms of an insurance policy. The amount in controversy is in excess of ten thousand dollars ($ 10,000) exclusive of interest and costs.
This case arises out of the same series of events which was the subject of earlier findings of fact and conclusions of law made by this Court. See Bernard Smith and Betty Smith v. The Title Guarantee Company v. Brokers Title Company, Inc., C.A. 74-2710 (E.D.Pa.1977). Those findings of fact are reaffirmed and incorporated herein by reference.
Brokers Title is a title insurance company. In August of 1969, the company was handling the settlement of the sale of 42 Lee Lynn Lane in Abington Township, Montgomery County, Pennsylvania. Bernard Smith and Betty Smith were purchasing the property from Morris Smith and Mary Smith. The settlement was held on August 18th, 1969, in the offices of Brokers Title.
On the day of the settlement the president of Brokers Title, Verne Mockler, spoke to a representative of the Montgomery County Tax Claims Bureau and determined that there were real estate taxes due on the property for the years 1967 and 1968.
On September 2, 1969, Brokers Title received one thousand, nine hundred fifty-one dollars and forty cents ($ 1,951.40) from Morris and Mary Smith to satisfy the outstanding tax liens on the property. One of the employees of Brokers Title thereafter sent a check for $ 1,951.40 to the City of Philadelphia in an attempt to discharge the lien. Unfortunately, the property was located in Montgomery County, not Philadelphia, and the check was returned uncashed. By the time Brokers Title sent the check to the proper taxing authority, the property had been sold at a tax sale. The prospective purchasers, Bernard and Betty Smith, had lost the property.
In Bernard and Betty Smith v. Title Guarantee Company, et al., this Court found that Brokers Title's negligence was the cause of the loss of the property, and also held Title Guarantee liable for the negligence of its agent, Brokers Title. Judgment was entered in favor of Bernard and Betty Smith and against Title Guarantee in the amount of $ 59,746. Brokers Title was held liable to Title Guarantee in the same amount, in a judgment entered on April 6, 1977. On July 6, 1977 this Court entered an amendment to the judgment declaring Brokers Title liable to Title Guarantee in the amount of $ 92,130.40. The additional $ 32,384.40 was added to the obligation of Brokers Title to compensate Title Guarantee Company for a payment it made to United Brokers Mortgage Company to satisfy the mortgage debt that Bernard and Betty Smith incurred before their loss of the property.
Before any of the events arising out of the 42 Lee Lane settlement, Brokers Title purchased from St. Paul Fire and Marine Insurance Company an "errors and omissions" insurance policy. That policy states:
"(T)he Company agrees with the Insured . . .
I. COVERAGE: To pay on behalf of the Insured . . . all sums which the Insured . . . shall become obligated to pay by reason of the liability imposed on him by law or contract for damages arising from any claim made against the Insured . . . and caused by any negligent act, error or omission of the Insured or any persons now or heretofore employed by the Insured in the performance of professional services for others in the Insured's professional capacity as Title Insurance agent . . ."
Eight exclusions from coverage were set forth in the policy. Exclusion G is the clause at issue:
"This policy does not apply
(G) To claims based upon or arising out of handling or ...