The opinion of the court was delivered by: RAYMOND J. BRODERICK
The material facts concerning which there are no genuine issues are as follows: Nicholas A. Clemente is an attorney and a member of the Pennsylvania Bar. In 1982, Mr. Clemente and his firm entered into an agreement with the United Food and Commercial Workers Union Local 919 ("the union"), located in Hartford, Connecticut, to provide prepaid legal services to union members. The agreement was renewed each year until May, 1988, when it was terminated by the union.
Mr. Clemente is not admitted to practice in the State of Connecticut. He therefore fulfilled his obligations under his contract with the union by engaging the Connecticut law firm of J. William Gagne, Jr. & Associates to provide the actual legal services to union members, under Mr. Clemente's management and supervision.
In the Spring of 1988, Mr. Clemente purchased Lawyer's Professional Liability Insurance from the defendant, The Home Insurance Company, policy no. LPL-F-201497 ("the policy"). The policy was issued to him on May 25, 1988, and was effective from April 2, 1988, through April 2, 1989. The policy was a "claims-made" policy, limited "to liability for only those claims that are first made against the Insured during the policy period." (Policy, p.1). It obligates the Company to pay all claims in excess of the deductible that arise "by reason of any act, error or omission in professional services rendered or that should have been rendered by [Mr. Clemente] or by any person for whose acts, errors or omissions [he] is legally responsible, and arising out of the conduct of [his] profession as a lawyer. . . ." Id.
On February 22, 1988, Mr. Clemente was formally notified by the union that it planned to audit him and his firm, as well as the Gagne firm, in connection with their legal services contract with the union. By letter dated May 27, 1988, counsel for the union terminated its prepaid legal services agreement with Mr. Clemente. On August 1, 1988, the union filed suit against Mr. Clemente and his firm, alleging breach of fiduciary duty under the Employee Retirement Income Security Act of 1974 ("ERISA"), breach of contract, breach of the duty of good faith and fair dealing, fraudulent misrepresentation, conversion, and violation of the Connecticut Unfair Trade Practices Act. On February 13, 1989, Mr. Clemente and his firm filed a third party complaint against Mr. Gagne seeking indemnity and/or contribution on all of the claims asserted by the union.
Mr. Clemente did not notify the Company upon receiving service of the complaint in the Connecticut litigation. Instead, he engaged counsel on his own. Mr. Clemente's counsel in the Connecticut litigation was not designated by the Company, nor did he obtain the Company's written consent to his choice of counsel. Mr. Clemente incurred legal fees and costs of $ 318,909.71. None of these costs and fees were incurred by the Company.
Mr. Clemente's chosen counsel defended the Connecticut litigation through settlement on November 26, 1990. The terms of the settlement provided that Mr. Gagne and the trustees of the union each pay Mr. Clemente $ 45,000.00 in settlement of his claims against them. The parties also agreed that Mr. Clemente would pay the union $ 90,000.00 in settlement of its claims against him. In actuality, Mr. Gagne and the trustees each paid $ 45,000.00 directly to the union rather than through Mr. Clemente. In connection with the settlement of the Connecticut litigation, Mr. Clemente submitted to the parties involved therein an affidavit purporting to list all of his assets, thereby confirming his "limited financial wherewithal." The affidavit did not list the insurance policy at issue in this action as one of Mr. Clemente's assets subject to that litigation.
Mr. Clemente seeks to recover his "claim expenses" incurred in connection with the defense and settlement of the Connecticut litigation. The policy defines "claim expenses" as follows:
(a) fees charged by any lawyer designated by the Company;
(b) all other fees, costs and expenses resulting from the investigation, adjustment, defense and appeal of a claim, if incurred by the Company;
(c) fees charged by any lawyer designated by the Insured with the written consent of the Company.
Mr. Clemente notified the Company of his claim on January 29, 1991, approximately two years and five months after the Complaint was served upon him in the Connecticut litigation on August 1, 1988, and approximately ...