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Northbrook Insurance Co. v. Kuljian Corp.

decided: October 15, 1982.


Appeal from the United States District Court for the Eastern District of Pennsylvania.

Before Gibbons, Weis and Sloviter, Circuit Judges. Gibbons, Circuit Judge, dissenting.

Author: Sloviter


SLOVITER, Circuit Judge:

After a bench trial in a diversity action, the district court entered judgment requiring defendant, one of two "named insureds" on a professional liability insurance policy, to pay the deductible amount notwithstanding that it was the other "named insured" which had incurred the underlying liability. The district court rejected the defendant's contention that the policy was ambiguous. We affirm.


H.A. Kuljian & Company and The Kuljian Corporation are concededly separate entities, both having been founded by Harry A. Kuljian. In 1934, Harry A. Kuljian, a professional engineer, began business as a sole proprietor under the name H.A. Kuljian & Co. performing consulting engineering services. That business was incorporated in 1941 as H.A. Kuljian & Company, Inc., expanding into the field of contracting and construction. In 1944, Harry A. Kuljian and James Cherry, an architect, established an unincorporated business under the name H.A. Kuljian & Company to perform engineering and architecture services. To avoid confusion, the name of the corporation was changed in 1946 to The Kuljian Corporation. Thus, at the time relevant for this lawsuit, The Kuljian Corporation's principal business was construction; H.A. Kuljian & Company's business was architecture and engineering. Harry A. Kuljian died in 1974; Cherry had retired previously, and the company ceased to undertake any new business. It continued to exist and receive money for contracts entered into earlier.

The Northbrook Insurance Company issued a professional liability insurance policy, on or about September 12, 1975, to H.A. Kuljian & Company and The Kuljian Corporation.*fn1 The policy provided that Northbrook made the agreement "in consideration of . . . . the undertaking of the Insured to pay the deductible as described herein and in the amount shown in the Declarations"; that Northbrook agreed to pay "on behalf of the Insured all sums in excess of the deductible amount stated in the Declarations which the Insured shall become legally obligated to pay as damages . . . ." provided that "the Insured's legal liability arises out of the performance of professional services as described in the Declarations . . . ."; that the deductible amount "shall include loss payments and claims expenses, whether or not loss payment is made"; and that the "Named Insured" will pay such part of the claims expenses as demanded but that "the total payments requested from the Named Insured in respect of each single claim shall not exceed the deductible amount . . . ."

"Insured" is defined in the policy as follows:

II. Insured. The unqualified word "Insured" whenever used in this Policy shall mean the Named Insured so designated in the Declarations and any partner, director, officer or employe of the Named Insured while acting in the course of his duties conducted by him for and on behalf of the Named Insured solely in their professional capacity as described in the Declarations.

In applying for this policy, Edward Kuljian, as President of The Kuljian Corporation, had listed "The Kuljian Corporation; H.A. Kuljian & Company" under the heading "Name of applicant." As a result, the policy Declarations identified the Named Insured as "The Kuljian Corporation; H.A. Kuljian & Company." Likewise, the application specified the applicants to be architects, civil engineers, electrical engineers, mechanical engineers, structural engineers and environmental engineers without differentiating those lines of business engaged in by The Kuljian Corporation from those lines of business engaged in by H.A. Kuljian & Company. Consequently, the policy Declarations listed the "Named Insured's Professional Activity" as "Architecture; Civil; Structural, Mechanical, Electrical and Environmental Engineering."

The policy Declarations fixed the deductible amount at $25,000. The effective date of the policy was specified as September 5, 1975 to September 5, 1976.

In late 1975, shortly after the issuance of the Northbrook policy, H.A. Kuljian & Company was named as one of the defendants in two actions filed by the PENN-DELCO Union School District to recover damages arising from the allegedly negligent design and/or construction of the roof of a junior high school building. The claim against H.A. Kuljian & Company was based upon its alleged negligence in the preparation of the plans and specifications. Northbrook was responsible for the potential liability of H.A. Kuljian & Company by virtue of paragraph I of the policy, which specified coverage as extending to claims first made during the policy period. The Kuljian Corporation was named in one of the actions as an additional defendant by one of the original defendants but was never served.*fn2 Counsel stipulated at trial that The Kuljian Corporation had no contractual relationship with the School District and was in no way liable in the PENN-DELCO lawsuits. App. at 32a.

After the PENN-DELCO lawsuits were filed, George Mooradian, counsel for H.A. Kuljian & Company, informed Richard Traub, counsel for Northbrook, of the existence of the actions, and shortly thereafter was authorized by Traub to conduct the litigation on behalf of Northbrook, but was asked to confer with Traub before taking major decisions. At that time, Mooradian was ...

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