Searching over 5,500,000 cases.


searching
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.

PHILADELPHIA INDEMNITY INSURANCE v. FEDERAL INSURANCE CO.

May 26, 2004.

PHILADELPHIA INDEMNITY INSURANCE COMPANY, Plaintiff,
v.
FEDERAL INSURANCE COMPANY and CHUBB CORPORATION, Defendants



The opinion of the court was delivered by: JAMES KELLY, Senior District Judge

MEMORANDUM AND ORDER

Presently before the Court is a Motion for Summary Judgment filed by Defendant Federal Insurance Company ("Federal"), the Response filed by Plaintiff Philadelphia Indemnity Insurance Company ("Philadelphia Indemnity"), and Federal's reply thereto. Philadelphia Indemnity is an insurance company that was reinsured by The Chubb Corporation and its subsidiary, Federal, (collectively, the "Defendants") under a professional liability insurance policy (the "Policy"). On January 30, 2001, Philadelphia Indemnity was sued by its insured, Insureon.com, but did not notify the Defendants of the Insureon.com complaint until May 2002. Philadelphia Indemnity and Insureon.com settled the suit for $1.6 million on or about June 6, 2002. The Defendants refused to provide authority and contribution for the settlement due to its concern that, pursuant to the terms of the Policy, Philadelphia Indemnity's notice of the "Claim," which by definition included the Insureon.com complaint, may have been untimely. Philadelphia Indemnity filed this suit against the Defendants seeking declaratory relief, alleging state common law claims of breach of contract and promissory estoppel, and breach of fiduciary duty and bad faith pursuant to 42 Pa. Cons. Stat. § 8371 (the "Bad Faith statute").

The Defendants argue that summary judgment is appropriate here because, pursuant to the Policy terms, Philadelphia Indemnity failed to provide notice of the Insureon.com complaint, as soon as practicable, permitting the Defendants to disclaim coverage for the Insureon.com "Claim." Consequently, the Defendants contend that Philadelphia Indemnity's bad faith claim and accompanying request for punitive damages must fail as a matter of law. For the following reasons, Federal's Motion is GRANTED.

  I. UNDISPUTED FACTS

 A. The Policy

  Philadelphia Indemnity was an insured under the Policy by the Defendants that provided coverage from July 20, 2000 to July 20, 2002.*fn1 Under the Policy, Philadelphia Indemnity would receive $10 million for each covered loss during each "Policy Period" and was subject to a $250,000.00 deductible. (Pl.'s Mem. Opp'n Mot. Summ. J., at 2.) The Policy obligated the Defendants

 
1. To pay on behalf of the Insureds for Loss which the Insureds shall become legally obligated to pay as a result of any Claim first made against the Insureds during the Policy Period or, if elected, the Extended Reporting Period, arising out of any Wrongful Act committed by the Insureds or any person for whose acts the Insureds are legally liable during or prior to the Policy Period while performing Insurance Services including the alleged failure to perform Insurance Services.
(Am. Compl., Ex. B (emphasis in original).)*fn2 The Policy defines "Claim" to include "a civil proceeding commenced by the service of a complaint or similar pleading," and defines "Wrongful Act" as:
any error, misstatement, misleading statement, act, omission, neglect or breach of duty committed, attempted, or allegedly committed, or attempted, by the Insureds or any person for whose acts the Insureds are legally liable, . . . performing Insurance Services or Financial Services including alleged failure to perform Insurance Services or Financial Services.
(Id. at Definitions 1 26.) Endorsement 5 of the Policy (the "notice provision") makes timely notice of a "Claim" a condition precedent to coverage under the Policy:
The Insured(s) shall, as a condition precedent to exercising their rights under this Policy, give to the Company written notice as soon as practicable . . . of any Claim made against the Insured(s) for a Wrongful Act, of which the Insured's General Counsel or equivalent officer first becomes aware of such Claim. (Id. at Endorsement No. 5.)
  The Vice President of Claims for Philadelphia Indemnity, William Benecke ("Benecke"), testified that he is responsible for providing notice to the Defendants under the Policy, and that he sometimes delegates that responsibility to the Assistant Vice President of Philadelphia Indemnity in the professional liability group, Michael Barrile ("Barrile"). (Mot. Summ. J. Statement of Undisputed Facts ("SUF") ¶ 69.)
  Under the terms of the Policy, Philadelphia Indemnity was to obtain the Defendants approval before incurring "Defense Costs." (Am. Compl., Ex. B, "Defense and Settlement" ¶ 7.):
Defense Costs means that part of the Loss consisting of reasonable costs, charges, fees (including but not limited to attorneys' fees and experts' fees) and expenses (other than regular or overtime wages, salaries or fees of the directors, officers or employees of the Insured Organization) incurred in defending or investigating Claims and the premium for appeal, attachment or similar bonds.
(Id., "Definitions" ¶ 26.)

 B. Insureon.com's Claim Against Philadelphia Indemnity

  Insureon.com was insured under a directors and officers policy issued by Philadelphia Indemnity. During this policy's period, Warrior Insurance Group ("Warrior") filed a lawsuit against Insureon.com. After suit was filed, Insureon.com made a claim for coverage to defend the Warrior matter with Philadelphia Indemnity under the directors and officers policy. A Claims Counsel for Philadelphia Indemnity, Sheryl Jordan ("Jordan"), was assigned to Insureon.com's claim for coverage. (SUF ¶ 4.) Philadelphia Indemnity retained the law firm of Arter & Hadden to assess the claim and the firm recommended that coverage be denied. (Pl.'s Opp'n SUF ¶ 5.) Pursuant to this recommendation, Benecke received for review and signature a declination of coverage letter to Insureon.com that explained the denial. (Id. ¶ 6.) Benecke signed this letter on August 23, 2000. (Id. ¶ 7.)

  In response to Benecke's August 23, 2000 letter, subsequent letters were exchanged between counsel for Insureon.com and counsel for Philadelphia Indemnity, and of which were carbon copied to Jordan. (SUF ¶ 8, 9.) On January 24, 2001, five months after being denied coverage, Insureon.com filed a complaint against Philadelphia Indemnity in the Superior Court of the State of California in the County of Alameda ("Alameda Superior Court"). (Id. ¶ 12.) The complaint contained four counts, two of which were against Philadelphia Indemnity.*fn3 (Am. Compl., Ex. A.) Insureon.com labeled these four causes of action with headers, set off from the numbered paragraphs of allegations, centered, bolded, and capitalized: the first cause of action was styled, "BREACH OF CONTRACT (Against Philadelphia)," and the third cause of action was styled, "TORTIOUS BREACH OF COVENANT OF GOOD FAITH & FAIR DEALING (Against Philadelphia)." (Id.)

 C. Insureon.com Complaint Against Philadelphia Indemnity

  On or about January 30, 2001, Insureon.com's complaint was served on Philadelphia Indemnity, addressed to James J. Maguire, Jr., President and Chief Operating Officer ("Maguire") of Philadelphia Insurance Companies. (Pl.'s Opp'n SUF ¶ 15.) The Insureon.com complaint was forwarded from Maguire to Benecke, who then forwarded it to Jordan. (SUF ¶ 16.) Both Maguire and Benecke testified that they did not read the complaint before forwarding it on. (SUF ¶ 17, 18.)

 D. Legal Bills Incurred from the Insureon.com Matter

  A March 9, 2001 invoice from Arter & Hadden, representing work performed by the law firm in February 2001, billed Philadelphia Indemnity for analyzing the Insureon.com complaint and specifically labels ...


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.