The opinion of the court was delivered by: Joyner, District Judge.
The plaintiff, Coregis Insurance Company ("Coregis"), has filed
a motion for summary judgment pursuant to Fed.R.Civ. P. 56.
Coregis seeks a court determination in its favor that it has no
obligation to defend or indemnify the defendants Baratta &
Fenerty, Ltd., and Anthony Baratta (collectively "Baratta"). For
the reasons set forth below, the motion is granted.
The underlying controversy from which this declaratory judgment
action originates is a medical malpractice suit in which the
defendants Kenneth Lee and Danielle Lee (collectively the "Lees")
were plaintiffs. The Lees employed Baratta*fn1 to initiate a
medical malpractice action in 1979 and, on March 23, 1981,
Baratta filed the Lees complaint in the Montgomery County Court
of Common Pleas. In August 1991, the Prothonotary's Office sent
written notice to Baratta advising them that the case would be
dismissed for inactivity unless they filed a Certificate of
Active Service. On September 17, 1991, the Common Pleas Court
dismissed the Lees medical malpractice suit for lack of activity
pursuant to Local Rule of Civil Procedure No.406.
On December 20, 1993, Baratta filed a Petition Nunc Pro Tunc to
have the case reinstated. In January 1994, Baratta met with the
Lees to inform them of the dismissal and to discuss the actions
Baratta was taking to get the case reinstated. The Common Pleas
Court denied Baratta's petition on February 22, 1995. Baratta
appealed the Common Pleas Court denial for reinstatement and the
appeal was ultimately denied by the Pennsylvania Superior Court
on November 20, 1995 and again by the Supreme Court of
Pennsylvania on April 18, 1996.
Baratta submitted a renewal application for professional
liability insurance to Coregis on April 24, 1996.*fn2 On the
application Baratta answered "No" to a question inquiring whether
the applicant, its predecessor firms or any individual is aware
of any circumstance, act, error, omission or personal injury
which might be an expected basis of a claim or suit that has not
previously been reported.
In November 1996, the Lees commenced a legal malpractice suit
against Baratta by Writ of Summons in the Montgomery County Court
of Common Pleas. Baratta reported the claim to Coregis on
December 3, 1996. Coregis acknowledged the claim and reserved its
rights to deny coverage based on a prior knowledge exclusion that
is included in the parties' insurance contract. After being
notified that the Lees filed a complaint on October 17, 1998
against Baratta, Coregis filed a declaratory judgment action with
this court to obtain a declaration of Coregis' rights
and obligations under the insuring agreement.
I. SUMMARY JUDGMENT STANDARD
Rule 56 of the Federal Rules of Civil Procedure establishes
that "if the pleadings, depositions, answers to interrogatories,
and admissions on file, together with affidavits, if any, show
that there is no genuine issue as to any material fact," then the
moving party is entitled to summary judgment. Fed.R.Civ. P.
56(c). The district courts are obligated to determine whether all
the evidence can reasonably support a verdict for the non-moving
party. Allstate Ins. Co. v. Brown, 834 F. Supp. 854, 856
(E.D.Pa. 1993). In making this determination, all of the facts
must be reviewed in the light most favorable to and all
reasonable inferences must be drawn in favor of the non-moving
party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106
S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). An issue is genuine if
the fact-finder could reasonably hold in the non-movant's favor
with respect to that issue and that a fact is material if it
influences the outcome under the governing law. Anderson, 477
U.S. at 247-48, 106 S.Ct. 2505. Although the moving party bears
the initial burden of demonstrating the absence of genuine issues
of material fact, the non-movant must established the existence
of each element of its case. Celotex Corp. v. Catrett,
477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986).
II. INSURANCE CONTRACT INTERPRETATION
Inasmuch as this case was commenced pursuant to
28 U.S.C. § 2201 (empowering the federal courts to enter declaratory
judgments) and jurisdiction is premised upon the parties'
diversity of citizenship pursuant to 28 U.S.C. § 1332, we are
required to apply the substantive law of Pennsylvania in this
action. Nationwide Ins. Co. v. Resseguie, 980 F.2d 226, 229 (3d
Cir. 1992), citing Erie Railroad Co. v. Tompkins, 304 U.S. 64,
58 S.Ct. 817, 82 L.Ed. 1188 (1938). Under Pennsylvania insurance
law, the contract language must be construed in accordance with
its plain and ordinary meaning. O'Brien Energy Sys., Inc. v.
American Employers' Ins. Co., 427 Pa. Super. 456, 461,
629 A.2d 957, 960 (1993). Where the policy provision is ambiguous, it is
construed in favor of the insured. Standard Venetian Blind Co.
v. American Empire Ins. Co., 503 Pa. 300, 304, 469 A.2d 563, 566
(1983). Where it is clear and unambiguous, a court is required to
give effect to that language. Standard Venetian Blind, 503 Pa.
at 305, 469 A.2d at 566.
The Court of Appeals for the Third Circuit has elaborated on
these principles by stating that a court should read insurance
provisions to avoid ambiguities. Niagara Fire Ins. Co. v.
Pepicelli, Pepicelli, Watts and Youngs, P.C., 821 F.2d 216, 220
(3d Cir. 1987). An insurance policy provision is ambiguous if a
reasonable person on considering it in the entire context of the
policy would honestly differ as to its meaning. Niagara Fire
Ins., 821 F.2d at 220. Accordingly, when an insurer seeks to
deny coverage ...