Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.


November 17, 1992

M. MARK MENDEL, et al.

The opinion of the court was delivered by: BY THE COURT; HARVEY BARTLE, III

 Bartle, J.

 Plaintiffs M. Mark Mendel, Esquire ("Mendel"), Daniel E. Murray, Esquire ("Murray"), and M. Mark Mendel, Ltd. ("Mendel Ltd.") (collectively "the insureds"), have instituted this diversity action against their professional liability insurance carrier, The Home Insurance Company ("Home"). The insureds seek to compel Home to pay on their behalf a judgment of $ 1,690,670 which was jointly and severally entered against them as a result of an adverse jury verdict in this Court on December 9, 1991, in the case of Silver v. Mendel, et al., Civil Action No. 86-7104 ("Silver"). Home has counterclaimed for a declaratory judgment, seeking a declaration that it has no obligation to its insureds under the policy. Before the Court are cross-motions for summary judgment.

 The backdrop for this action arises out of a highly charged business dispute between Marc Silver ("Silver"), a principal in the Marshall-Silver Construction Company ("Marshall-Silver") and its subcontractor Barton and Company ("Barton"). During 1984 insureds Mendel and Murray, in addition to practicing law, were officers of Barton. The Barton-Silver dispute escalated to the point where, in mid-1984, Mendel apparently made certain threats, including a threat to destroy Silver's business. Thereafter, in December, 1984, the law firm of Mendel Ltd., representing Barton and two other creditors, filed in this District, under Murray's signature, a petition for involuntary bankruptcy against Marshall-Silver. Several months later, the Bankruptcy Court dismissed the petition because the additional creditors failed to post the required bond.

 In December, 1986 Silver and Marshall-Silver filed separate actions in this Court against the insureds arising out of the allegedly wrongful bankruptcy filing. Substantial activity in both cases, including various motions and appeals to the Court of Appeals of this Circuit, followed. As of June 14, 1990, upon the resolution of the pretrial appeals, the Marshall-Silver suit had been dismissed. In the Silver case, however, three claims remained against the insureds: (1) intentional interference with contractual relations; (2) intentional interference with prospective contractual relations; and (3) intentional infliction of emotional distress. Only after the completion of the pretrial appellate process did Home attempt to reserve its right to cover the insureds based on the intentional nature of the acts alleged.

 The Silver case was tried before The Honorable Joseph L. McGlynn, Jr. and a jury between November 25 and December 9, 1991. The jury, in answer to special interrogatories, found that each of the insureds had intentionally interfered with Silver's contractual and prospective contractual relations. It returned a verdict in favor of Silver and against the insureds for $ 1,690,670. Judgment was entered on the verdict.

 In the meantime, in the spring of 1986, the insureds had notified Home, their professional liability insurer, of an adversary proceeding Silver had filed in the Bankruptcy Court. Silver alleged that the bankruptcy petition, which Mendel Ltd. had filed against Marshall-Silver, had been filed in bad faith. Home, in July, 1986, retained H. Robert Fiebach, Esquire ("Fiebach"), of the Philadelphia law firm of Wolf, Block, Schorr and Solis-Cohen to represent the insureds. Fiebach continued to represent Home in both the Silver and Marshall-Silver lawsuits which were filed against the insureds late in 1986.

 The insureds argue that they are entitled to summary judgment on all claims *fn1" on one or more of the following grounds: (1) the exclusion clause of the Home policy does not exclude coverage for the intentional economic torts which gave rise to the Silver judgment; (2) Mendel Ltd. is an "innocent party" and is protected by a waiver clause in the policy which exempts innocent parties from the exclusion clause upon which Home relies; (3) Home is estopped from denying coverage because, even if it is assumed that the company's reservation of rights letter was sent as early as September of 1990, the nearly four year delay in giving notice prejudiced the insureds as a matter of law; and (4) there is no evidence whatsoever that Home ever notified its insured Murray of any reservation of rights before November, 1991, on the eve of the Silver trial.

 Home challenges each of the grounds upon which the insureds rely in their motion. In addition, it moves for summary judgment on the following grounds: (1) the policy excludes from coverage the "deliberately wrongful acts" which gave rise to the judgment in the Silver case; (2) the issuance of its September, 1990 reservation of rights letter precludes any claim of prejudice on the part of the insureds; and (3) no basis exists for finding bad faith by Home, pursuant to 42 Pa. Cons. Stat. Ann. ยง 8371, if that statute is held applicable to the case at bar.

 Summary Judgment Standards

 The standards for deciding summary judgment motions under Rule 56 of the Federal Rules of Civil Procedure are well settled. *fn2" To obtain summary judgment, the moving party must establish that no genuine issues of material fact remain in dispute. Celotex Corporation v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986). An issue is "genuine" only if there is a sufficient evidentiary basis for a reasonable jury to find for the non-moving party. A factual dispute is "material" if it might affect the outcome of the action under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 248, 106 S. Ct. 2505, 2511, 2510, 91 L. Ed. 2d 202 (1986).

  In deciding whether the summary judgment standard has been met, the evidence, of course, must be viewed in the light most favorable to the non-moving party. Mellon Bank Corp. v. First Union Real Estate Equity and Mortg. Invest., 951 F.2d 1399, 1404 (3d Cir. 1991). Further, in ruling on a summary judgment motion a court may, in appropriate cases, render partial summary judgment pursuant to Rule 56(d) of the Federal Rules of Civil Procedure. See Cohen v. Board of Trustees, 867 F.2d 1455 (3d Cir. 1989) (in banc) and Fed. R. Civ. P. 56(d). *fn3"

 The Exclusion Clause

 The exclusion clause of the Home professional liability policy issued to the insureds, provides in Section I(a) that:

I. This policy does not apply:
(a) to any judgment or final adjudication based upon or arising out of any dishonest, deliberately fraudulent, criminal, maliciously or deliberately wrongful acts or omissions committed by the insured. However, notwithstanding the foregoing, the Company will provide a defense for any such claim without any liability on the part of the Company to pay such sums as the insured shall become legally obligated to pay as damages.

 (emphasis added).

 The parties agree that the question of the applicability of this exclusion clause to the judgment returned in the Silver case is a question of law as to which extrinsic evidence need not be considered. See Niagara Fire Insurance Co. v. Pepicelli, Pepicelli, Watts & Youngs, P.C., 821 F.2d 216, 219 (3d Cir. 1987).

 Home has invoked the clause, and has refused to indemnify the insureds as to the Silver judgment on the ground that the intentional torts which resulted in that judgment were "deliberately wrongful acts" included in the exclusion clause. The insureds, however, argue (1) that their intentional economic torts were not "deliberately wrongful acts" under the exclusionary clause; (2) that the term "deliberately wrongful acts," which was not defined in the policy, is unclear and ambiguous; and (3) that such ambiguity requires that the exclusionary clause be construed in favor of the insureds.

 Under Pennsylvania law, which both parties agree is applicable, policy ambiguities must be resolved in favor of the insured. An ambiguity exists "if words may reasonably admit of different meanings." Mellon Bank N.A. v. Aetna Business Credit, Inc., 619 F.2d 1001, 1011 (3d Cir. 1980) (emphasis added). *fn4" Policy language must not be tortured, however, to create an ambiguity where none exists and policy provisions should be read to avoid ambiguities if possible. See Niagara Fire, 821 F.2d at 220.

 No basis exists for concluding that the subject exclusion clause is ambiguous. We agree with Home Ins. Co. v. Bullard, 850 F.2d 692, 1988 U.S. App. LEXIS 9357, *8, *12-13 (6th Cir. 1988), which held that an identical exclusionary clause was applicable to intentional acts. *fn5" See also Warren v. Lemay, 144 Ill. App. 3d 107, 494 N.E.2d 206, 209, 98 Ill. Dec. 279 (1986).

 An intentional and unprivileged interference must be established to prove an intentional interference with contractual relations, or with prospective contractual relations. Adler, et al. v. Epstein, et al., 482 Pa. 416, 393 A.2d 1175, 1182-1184 (1978), cert. denied 442 U.S. 907, 99 S. Ct. 2817, 61 L. Ed. 2d 272 (1979); see also Geyer v. Steinbronn, 351 Pa. Super. 536, 506 A.2d 901, 909-910 (1986). The terms "deliberate" and "intentional" are synonymous. See Home Ins. Co. v. Bullard, supra; Warren v. Lemay, supra.6 Thus, in United States Fidelity & Guaranty Co. v. Fireman's Fund Ins. Co., 896 F.2d 200 (6th Cir. 1990), the Court agreed with the District Court's "determination that the only reasonable construction of the exclusionary clause, which similarly prohibited coverage for 'dishonest, fraudulent, criminal or malicious acts,' is that Fireman's Fund contracted to provide coverage for negligent -- not intentional -- acts . . ." See also Employers Reinsurance Corp. v. Martin, Gordon & Jones, Inc., 767 F. Supp. 1355, 1359-1361 (S.D. Miss. 1991).

 There can be no question that the Home policy excludes coverage for the individual insureds Mendel and Murray since the jury found that they were each liable to Silver for intentional interference with contractual and prospective contractual relations.

 The "Innocent Party" Clause

 The issue remains, however, whether the exclusion extends to the law firm of Mendel Ltd., a corporation. Mendel Ltd. claims entitlement to coverage based on an "innocent party" policy provision which provides that insureds "who did not personally participate" in the acts giving rise to an exclusion are not subject to that exclusion. *fn7" It further argues that Pennsylvania law does not allow innocent insureds to be deprived of coverage because of the intentional acts of their co-insureds. It is, of course, axiomatic that a corporation is a creature of fiction that can only act through its officers, directors and other agents. A corporation is, however, bound by its agent's acts so long as those acts are "performed within the agent's implied or apparent authority, unless the agent acted for his own benefit without the corporation's ratification of his action." Lokay v. Lehigh Valley Cooperative Farmers, Inc., 342 Pa. Super. 89, 492 A.2d 405, 409 (1985).

 In this case, the acts at issue are those of one or more corporate officers or directors of Mendel Ltd. Mendel and Murray, officers or directors of Mendel Ltd., here spoke and acted for the corporation. Murray signed the bankruptcy filing which the Silver jury found amounted to an intentional interference with contractual relations and with prospective contractual relations. Further, the record establishes that Murray was not only a 12% shareholder in the corporation, but also the "administrative partner" and Secretary-Treasurer of the corporation, and its only corporate officer besides the President (Murray deposition at 16, 19; Mendel deposition at 33, 41). Equally significant, was a statement made by Mendel, the corporation's President and controlling shareholder (see Plaintiffs' Supplemental Exhibit A; Mendel deposition at 21), when he completed the corporation's 1986 policy renewal application statement for the Home professional liability policy. In ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.