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CAROSELLA & FERRY, P.C. v. TIG INSURANCE COMPANY

January 1, 2001

CAROSELLA & FERRY, P.C., PLAINTIFF,
v.
TIG INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Yohn, J.

Memorandum and Order

Gail and John Bradley ("the Bradleys") filed suit against plaintiff Carosella & Ferry, P.C. ("Carosella") for malpractice. Carosella — having purchased a malpractice insurance policy from defendant TIG Insurance Company ("TIG") — filed for coverage on the Bradley suit. TIG declined coverage, and Carosella subsequently sued TIG for breach of contract and bad-faith conduct under 42 Pa. C.S.A. § 8371.

Before the court is TIG's motion for summary judgment on the breach of contract issue. First, TIG contends that if the insured had a reasonable basis to foresee that a malpractice claim would be made against the insured for the provision of services rendered prior to the start of the policy period, the policy does not cover claims arising from the provision of those services. Second, TIG contends that the policy does not cover claims made prior to the start of the policy period.

Several months prior to the start of the policy period, the Bradleys' attorney wrote Carosella a letter stating that the Bradleys planned to sue Carosella for malpractice. The letter provided a reasonable basis to foresee that the Bradleys would make a claim against Carosella and in any case, the letter is itself a claim made prior to the start of the policy period. Accordingly, TIG's decision to decline coverage does not constitute a breach of the policy.

I. Facts

The facts are undisputed. On October 29, 1998, Carosella received a letter from the Bradleys' lawyer. Def.'s Mem. at Ex. A; Ex B (request and response to Admission #1). Carosella had represented the Bradleys in 1997. Pl.'s Mem. at 6. The letter is entitled "Re: Bradley v. Carosella & Ferry, P.C." and in relevant part states:

"On November 3, 1997, on behalf of the Bradleys and their corporation, you filed a petition to open judgment. Unfortunately, that petition did not assert certain facial defects in the confessed judgments, nor did your petition seek to strike the confessed judgments. . . .
"You are hereby notified of the intention of Mr. and Mrs. Bradley to file an action against you and your law firm for professional malpractice consisting of your failure timely to litigate the issues raised in our subsequent Motion to Strike Confessed Judgment. If you have not already done so, please notify your errors and omissions carrier at once. . . .
"We will presently pursue a direct appeal and/or a motion [seeking reconsideration]. In any event, the Bradleys continue to sustain damage consisting, at a minimum, of the expense of this extraordinary litigation. Please ask your carrier to contact me at once."

Def.'s Mem. at Ex. A. On November 4, 1998, Carosella wrote back and stated that the Bradleys did not have any grounds for their malpractice claim, stated that Carosella would not contact its errors and omissions carrier, and threatened to file suit against the Bradleys and their new lawyers if the threatened malpractice suit were filed. Def.'s Mem. at Ex. C.

On August 17, 1999, the Bradleys filed a malpractice suit against Carosella in the Court of Common Pleas of Chester County. Pl.'s Mem. at 6. Soon after, Carosella was served notice of the suit, and in turn, Carosella notified its liability carrier, TIG, of the complaint and requested that TIG provide a defense. Id. Carosella had purchased a TIG malpractice insurance policy for the period extending from March 1, 1999 through March 1, 2000.

TIG investigated Carosella's claim and determined that the policy purchased by Carosella did not cover the Bradleys' suit. Def.'s Mem. at 6. On October 13, 1999, TIG issued its decision to Carosella. Id. Subsequently, Carosella represented itself and filed a motion for judgment on the pleadings. Pl.'s Mem. at 6. The motion was granted. Id.

Carosella sued TIG in state court for breach of contract and bad-faith conduct in violation of 42 Pa.C.S.A. ยง 8371, and TIG removed the action to the Eastern District of Pennsylvania. TIG moved for summary judgment on the breach of contract issue, while Carosella moved for summary judgment on the bad-faith conduct issue. However, both parties have requested that the court resolve the breach of contract allegation first. Letter from Attorneys for ...


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