United States District Court, E.D. Pennsylvania
In this case, Westport Insurance Corporation (“Westport”) has filed a declaratory judgment action against Anastasios Papadopoulos (“Papadopoulos”) and Peter G. Mylonas and the Law Offices of Peter George Mylonas, P.C. (collectively, the “Mylonas Defendants”). Westport seeks a ruling from this Court that its liability to the Mylonas Defendants under a professional liability insurance policy (the “Policy”) is limited to $500, 000. (Doc. No. 1 at 7.) Westport defended the Mylonas Defendants pursuant to the Policy in a state court lawsuit filed by Papadopoulos. In the lawsuit, Papadopoulos obtained a $525, 000 verdict against the Mylonas Defendants.
Papadopolous has filed an Amended Answer and Counterclaims against Westport and the Mylonas Defendants. (Doc. Nos. 27, 28.) The counterclaims essentially involve allegations that Westport has failed to recognize the full extent of its liability to the Mylonas Defendants under the Policy. Papadopoulos’s interest in Westport’s position that there is a $500, 000 limitation of liability under the Policy arises from the $525, 000 verdict he received in his favor in state court. In Count I of the Amended Counterclaims, Papadopoulos seeks a declaratory judgment that the state court lawsuit constitutes more than one “claim” under the Policy, thus establishing that Westport’s liability to the Mylonas Defendants is $1, 000, 000, the full amount of coverage, instead of $500, 000 per claim as provided in the Policy. (Doc. No. 27 at 10-11; Doc. No. 28 at 4-5.) In Count II, Papadopoulos seeks a declaratory judgment that professional liability insurance policies issued to lawyers that have “eroding limits” are void as against the public policy of Pennsylvania. (Doc. No. 27 at 12-16; Doc. No. 28 at 6-10.) Insurance policies with “eroding limits” reduce the amount of coverage available to indemnify an insured by the expenses incurred by the insurer in defending the insured. In Count III, Papadopoulos asserts that Westport and the Mylonas Defendants have acted in bad faith by unreasonably eroding the limits of the Policy in defending against the state court lawsuit filed by Papadopoulos. (Doc. No. 27 at 17-20; Doc. No. 28 at 11-14.)
Before the Court is Westport and the Mylonas Defendants’ Motion to Dismiss Counts II and III of Papadopoulos’s Amended Counterclaims. (Doc. Nos. 29, 30.) For reasons that follow, the Motion to Dismiss (Doc. Nos. 29, 30) will be granted, and Counts II and III of Papadopoulos’s Amended Counterclaims will be dismissed with prejudice.
In December 2010, Westport issued the Policy to the Law Offices of Peter George Mylonas, P.C. (Doc. No. 1 ¶¶ 2, 12.) Westport defended Peter Mylonas, an attorney licensed in Pennsylvania, and the Law Offices of Peter George Mylonas, P.C. (collectively, the “Mylonas Defendants”) under the terms of the Policy in the state court lawsuit filed by Papadopoulos. (Id. ¶¶ 23-26.) Papadopoulos received a judgment in his favor in the amount of $525, 000, and Westport’s defense of the Mylonas Defendants under the Policy continues to this day. (Id. ¶¶ 26-28.)
The Policy has a per-claim limit of liability of $500, 000 and an aggregate limit of liability of $1, 000, 000. (Id. ¶ 14.) As noted, in the present case Westport has filed a Complaint seeking a declaratory judgment that its liability under the Policy is limited to $500, 000 on the basis that Papadopoulos’s state court lawsuit against the Mylonas Defendants constitutes only one “claim” under the Policy. (Id. ¶¶ 29-31.)
On February 18, 2015, Papadopoulos filed an Answer to the Complaint with Counterclaims against Westport and the Mylonas Defendants. (Doc. Nos. 23, 24.) On March 31, 2015, Papadopoulos filed an Amended Answer with Counterclaims. (Doc. Nos. 27, 28.) Westport has filed a Motion to Dismiss Counts II and III of Papadopoulos’s Amended Counterclaims. (Doc. No. 29.) The Mylonas Defendants have joined in Westport’s Motion. (Doc. No. 30.) The Motion is now ripe for a decision.
III. STANDARD OF REVIEW
The motion to dismiss standard under Federal Rule of Civil Procedure 12(b)(6) is set forth in Ashcroft v. Iqbal, 556 U.S. 662 (2009). After Iqbal it is clear that “threadbare recitals of the elements of a cause of action, supported by mere conclusory statements do not suffice” to defeat a Rule 12(b)(6) motion to dismiss. Id. at 663; see also Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ethypharm S.A. France v. Abbott Labs., 707 F.3d 223, 231 n.14 (3d Cir. 2013) (citing Sheridan v. NGK Metals Corp., 609 F.3d 239, 262 n.27 (3d Cir. 2010)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. Applying the principles of Iqbal and Twombly, the Third Circuit in Santiago v. Warminster Twp., 629 F.3d 121 (3d Cir. 2010), set forth a three-part analysis that a district court in this Circuit must conduct in evaluating whether a complaint survives a 12(b)(6) motion to dismiss:
First, the court must “tak[e] note of the elements a plaintiff must plead to state a claim.” Second, the court should identify allegations that, “because they are no more than conclusions, are not entitled to the assumption of truth.” Finally, “where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.”
Id. at 130 (quoting Iqbal, 556 U.S. at 675, 679). “This means that our inquiry is normally broken into three parts: (1) identifying the elements of the claim, (2) reviewing the complaint to strike conclusory allegations, and then (3) looking at the well-pleaded components of the complaint and evaluating whether all of the elements identified in part one of the inquiry are sufficiently alleged.” Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011).
A complaint must do more than allege a plaintiff’s entitlement to relief, it must “show” such an entitlement with its facts. Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009) (citing Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234-35 (3d Cir. 2008)). “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘shown’-‘that the pleader is entitled to relief.’” Iqbal, 556 U.S. at 679. The “plausibility” determination is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id.
A. Count II of Papadopoulos’s Amended Counterclaims Will Be Dismissed ...