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Pelagatti v. Minnesota Lawyers Mutual Insurance Co.

United States District Court, Third Circuit

June 25, 2013

GUSTINE PELAGATTI, SR., Plaintiff,
v.
MINNESOTA LAWYERS MUTUAL INSURANCE CO., Defendant.

MEMORANDUM

EDUARDO C. ROBRENO, J.

Gustine J. Pelagatti, Sr. (Plaintiff) brings this action against Minnesota Lawyers Mutual Insurance Co. (Defendant), seeking a declaratory judgment and damages arising from allegations that Defendant breached its contractual duty to defend Plaintiff pursuant to a legal-malpractice policy and Pennsylvania’s bad faith statute, 42 Pa. Cons. Stat. § 8371.[1]Plaintiff and Defendant filed cross-motions for summary judgment. For the reasons that follow, the Court will grant Defendant’s Motion for Summary Judgment and deny Plaintiff’s cross-motion.

1. BACKGROUND

On or around February 4, 2003, Plaintiff purchased a legal-malpractice insurance policy from Defendant. Pl.’s Mot. Summ. J. ¶ 1, ECF No. 14. Plaintiff renewed the policy annually between 2003 and 2010. Pl.’s Mot. Summ. J. Ex. 2, Pl.’s Aff. ¶ 2. Plaintiff completed a Firm Information Verification Form to continue his insurance coverage from Defendant in late 2009. Def.’s Mot. Summ. J. Ex. L, Firm Verification Form. On the form, Plaintiff checked an option that reads:

There have been changes to the Firm Name, Schedule of Lawyers or significant changes to the previously submitted application information or the firm is aware of a claim(s) or circumstances that could reasonably result in claims or disciplinary actions that have not been reported to Minnesota Lawyers Mutual. The undersigned will provide immediate written notification on this form or an attachment describing the changes, claims, potential claims and disciplinary actions to Minnesota Lawyers Mutual before accepting the quotation.

Id. Plaintiff noted on the form that his firm’s name had changed, but he did not discuss any potential or outstanding claims. Id.

Plaintiff executed a request to issue insurance coverage after filling out the form described above. Def.’s Mot. Summ. J. Ex. M, Request-to-Issue. Plaintiff’s insurance policy (the Policy) was a claims-made policy that became effective on February 1, 2010. Id. The coverage section of the Policy specifies as follows:

WE will pay, subject to OUR limit of liability, all DAMAGES the INSURED may be legally obligated to pay and CLAIM EXPENSE(S), due to any CLAIM, provided that:
(1) the CLAIM arises out of any act, error or omission of the INSURED or a person for whose acts the INSURED is legally responsible;
(2) the act, error, or omission occurred on or after the PRIOR ACTS RETROACTIVE DATE and prior to the expiration date of the POLICY PERIOD;
(3) the CLAIM results from the rendering of or failure to render PROFESSIONAL SERVICES;
(4) the CLAIM is deemed made during the POLICY PERIOD; and
(5) the CLAIM is reported to U.S. during the POLICY PERIOD or within 60 days after the end of the POLICY PERIOD.

Def.’s Mot. Summ. J. Ex. P, Policy, at 1. Relevant to this action, the Policy specifies that a claim is made when “an INSURED first becomes aware of any act, error or omission by any INSURED which could reasonably support or lead to a demand for damages.” Id.

On June 18, 2006, Tondalia Cliett’s son drowned on an unsupervised beach in Ocean City, New Jersey (the City). Pl.’s Mot. Summ. J. Ex. 3, Ocean City Police Incident Report, at 1. The next month, Cliett retained Plaintiff to represent her in her own right and as administratrix of her son’s estate in a wrongful death and survival action against the City. Pl.’s Mot. Summ. J. ¶ 8. At no point during Plaintiff’s representation of Cliett was he admitted to practice law in New Jersey.[2] Def.’s Mot. Summ. J. Ex. B, Pelagatti Dep., at 11:17-20, May 22, 2012.

On September 18, 2006, ninety days after Cliett’s son’s death, Plaintiff filed a complaint in the United States District Court for the District of New Jersey on Cliett’s behalf. Def.’s Mot. Summ. J. Ex. A, Cliett v. City of Ocean City, No. 06-4368 (JBS), 2007 WL 2459446 (D.N.J. Aug. 24, 2007). On November 24, 2006, the City filed a motion to dismiss Cliett’s complaint for failure to place the City on notice of the action as required by the New Jersey Tort Claims Act (NJTCA). Id. at *6. Plaintiff untimely filed the required Notice of Claim with the City after receiving the motion to dismiss. He filed a motion for leave to file a late notice of claim in the district court a week later. Id. at *2. The district court converted the City’s motion to dismiss into a motion for summary judgment, granted summary judgment for the City and denied Plaintiff’s motion. Def.’s Mot. Summ. J. Ex. D, Order, Aug. 21, 2007.

Plaintiff then filed a timely motion for reconsideration; shortly thereafter, he voluntarily withdrew the motion and instead appealed to the Third Circuit. Def.’s Mot. Summ. J. Ex. C, Cliett v. City of Ocean City Docket, at 3. The Third Circuit dismissed Cliett’s appeal as untimely because Plaintiff filed it more than thirty days after the district court’s final order. Def.’s Mot. Summ. J. Ex. G, Order, July 13, 2008.

After the Third Circuit dismissed the appeal, Plaintiff wrote to the district court and asked that it reinstate Plaintiff’s previous motion for reconsideration. Def.’s Mot. Summ. J. Ex. H, Order, Nov. 13, 2008. The district court denied Plaintiff’s application, saying that Cliett should have filed a new motion instead of reinstating the original motion but that she no longer could do so because such a motion would be untimely. Id. Plaintiff then appealed the district court’s decision to the Third Circuit. Def.’s Mot. Summ. J. Ex. I, Notice of Appeal. The Third Circuit upheld the district court’s order denying the application. Def.’s Mot. Summ. J. Ex. J, Cliett v. City of Ocean City, 346 F. App’x 771 (3d Cir. 2009). The next month, Plaintiff informed Cliett by letter that the appeal was unsuccessful. Def.’s Mot. Summ. J. Ex. K, Letter from Gustine Pelagatti, Esq., to Tondalia Cliett (Oct. 14, 2009).[3]

On February 3, 2010, Cliett filed a legal-malpractice suit against Plaintiff in her own right and as administratrix of her son’s estate in the Superior Court of New Jersey, Law Division, Atlantic County. Pl.’s Mot. Summ. J. Ex. 20, Cliett v. Pelagatti Compl. In her complaint, Cliett alleged that Plaintiff negligently failed to file the required Notice of Claim in her son’s wrongful death suit within the ninety-day period required by the NJTCA. Id.

On February 23, Plaintiff’s son was served with Cliett’s complaint; Plaintiff informed Defendant of the suit a week later. Def.’s Mot. Summ. J. Ex. Q, Email from Gustine Pelagatti, Esq., to Debbie Toberman 1 (Mar. 3, 2010). One of Defendant’s claims attorneys, Anne Hill, notified Plaintiff that Defendant declined to defend and indemnify Plaintiff in Cliett’s action. Def.’s Mot. Summ. J. Ex. R, Letter from Anne Hill, Claims Attorney, Minn. Lawyers Mut. Ins. Co., to Gustine Pelagatti, Esq. 1 (Apr. 13, 2010). Hill specified that Defendant would not cover Plaintiff because Plaintiff failed to give Defendant timely notice of the claim and because Plaintiff did not notify Defendant of the claim within the relevant claims period. Id. Specifically, Hill pointed out that Plaintiff’s claim arose in 2006, when Plaintiff became aware that Cliett’s suit was dismissed because of his failure to comply with the relevant ...


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