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John K. Foster, Iii v. Westchester Fire Insurance Company; the Plus Companies

June 26, 2012

JOHN K. FOSTER, III, PLAINTIFF,
v.
WESTCHESTER FIRE INSURANCE COMPANY; THE PLUS COMPANIES, INC.; AND LOUELLA YAVORKA, DEFENDANTS.



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

MEMORANDUM OPINION AND ORDER

Pending before the court is a motion for "clarification or reconsideration" (the "motion for reconsideration") (ECF No. 62) filed by defendants Westchester Fire Insurance Company and The Plus Companies, Inc. ("moving defendants" or "defendant insurers"). The motion for reconsideration is styled as a motion filed under Federal Rule of Civil Procedure 54(b). Moving defendants request the court to reconsider its earlier decision denying moving defendants' motion for summary judgment in part. See Foster v. Westchester Fire Ins. Co., Civil Case No. 09-1459, 2011 WL 4382971 (W.D. Pa. Sept. 20, 2011). Moving defendants argue that the court in that decision erroneously placed the burden of proof and erred in determining there were factual disputes precluding the granting of summary judgment. Because moving defendants did not establish that the court clearly erred in its prior decision-but are merely quarreling with the prediction this court made (rightly or wrongly) about how the Pennsylvania Supreme Court would allocate the burden of proof-the court must deny the motion for reconsideration.

I.Factual and Procedural Background

This action involves claims by plaintiff John K. Foster III ("Foster") seeking (1) enforcement of an insurance policy pursuant to the Pennsylvania Declaratory Judgments Act, 42 PA. CONS. STAT. §§ 7531-41, (2) damages resulting from an alleged breach of contract, and (3) damages resulting from defendants' alleged bad faith in administering Foster's legal malpractice insurance policy pursuant to 42 PA. CONS. STAT. § 8371 (actions on insurance policies). For a complete recitation of the relevant facts, refer to the court's memorandum opinion addressing the cross-motions for summary judgment. Foster, 2011 WL 4382971, at *1-6. The facts collected below represent the most important facts with respect to the pending motion for reconsideration.

At the time Foster applied for his insurance policy, he was aware that a court had invalidated a trust created by a former client of his, defendant Louella Yavorka ("Yavorka"), at great expense to her, and in apparent contradiction to his counsel that the creation of the trust was probably permissible. Id.

Foster's insurance application included the following language:

IT IS IMPORTANT THAT YOU REPORT ANY CURRENTLY KNOWN CLAIMS OR CIRCUMSTANCES THAT COULD RESULT IN A CLAIM TO YOUR CURRENT INSURER. . . . WESTCHESTER FIRE INSURANCE COMPANY WILL NOT PROVIDE COVERAGE FOR CLAIMS OR INCIDENTS WHICH YOU ARE AWARE OF PRIOR TO THE INCEPTION DATE OF THIS COVERAGE IF OFFERED AND ACCEPTED.

Id. at *4. It also provided:

IMPORTANT NOTICE: Failure to report any claim made against you during your current policy term, or facts, circumstances or events which may give rise to a claim against you or your current insurance company BEFORE expiration of your current policy term may create a lack of coverage. Please see IMPORTANT NOTICE in Section VI.

Id. The application further stated that known claims were specifically excluded:

IMPORTANT NOTICE: All known claims and/or circumstances that could result in a Professional Liability claim are specifically excluded from coverage. Report all such claims and/or circumstances to your current insurer. If any circumstance, act, error, or omission exists that could result in a professional liability claim, then such claim and/or any claim arising from such act, error, omission or circumstance is excluded from coverage that may be provided under this proposed insurance. Further, failure to disclose such claim, act, error, omission or circumstance may result in the proposed insurance being void and/or subject to rescission.

Id.

On the application, Foster indicated that at that time he did not know of "any circumstance, situation, act, error or omission that could result in a professional liability claim or suit against the firm or its predecessor firm(s) or any of the current or former members of the firm or its predecessor firm(s)." Id. Foster did later acknowledge that at the time of application he thought that Yavorka might make a claim for return of his fees relating to the later-invalidated trust, but that such a claim was not a professional liability claim. Id.

Pursuant to the submission of this application, Westchester issued a professional liability insurance policy to Foster covering the period from February 9, 2008, to February 9, 2009. Id. at *5. The issued policy ...


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