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COREGIS INS. CO. v. BARATTA & FENERTY

July 30, 1999

COREGIS INSURANCE COMPANY,
v.
BARATTA & FENERTY, LTD., ANTHONY BARATTA, ESQ., KENNETH LEE AND DANIELLE LEE.



The opinion of the court was delivered by: Joyner, District Judge.

MEMORANDUM AND ORDER

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.

BACKGROUND

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.

DISCUSSION

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 ...


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