JULY 2008 BAD FAITH CASES
INSURER’S MOTION TO DISMISS DENIED WHERE POTENTIAL FOR POLICY COVERAGE EXISTED FOR CLAIMS AGAINST THE INSURED (Philadelphia Federal)

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The insured initiated suit against the insurer based upon a dispute regarding the applicability of an insurance policy issued by the insurer,  to claims in a lawsuit brought against the insured.

The insured law firm had a Lawyers Professional Liability Insurance policy with the insurer.  A civil action was brought against the insured and an employee of the insured. The  civil action involved the alleged certification or acknowledgement by the insured, as a notary public, of a signature on a document that the insured did not witness.

Specifically the claims in the action were against both the insured and an employee of the insured who certified , as a notary, that someone signed something when she did not actually witness him do so.  The insured sent a copy of the complaint to their insurer seeking both defense and indemnity. The insurer informed the insured that it would provide a defense under  reservation of rights and also suggested they consider getting a personal attorney as well.

The insured engaged in settlement discussions of the suit but before final settlement was reached advised the insurer of the settlement negotiations and asked the insurer to contribute to the settlement and/or assume the claim without reservation of rights.  The insurer refused both requests.

The insured filed suit against the insurer alleging breach of contract, bad faith, and breach of fiduciary duty.  The insurer filed a motion to dismiss the breach of contract claim or in the alternative summary judgment. The insurer argues that this should be dismissed because the Notary Exclusion in the policy precludes coverage for the claims asserted against the insured and the employee of the insured in the civil action. The insured claims that their employee was not an “insured” within the meaning of that term as defined in the policy.  The insured further argues that their employee was not acting within the scope of her employment when she notarized the Guaranty.

The court found that there was a potential for the claims against the insured in the complaint to come within the Policy’s coverage despite the existence of the Notary Exclusion.

The court also found that the insured stated a claim that the insurer breached the duty to indemnify since whether the insured’s employee was actually working within the scope of her employment when she notarized the Guaranty is still in dispute and is critical to the determination of whether the insurer had a duty to indemnify.

Therefore the court denied the insurer’s motion to dismiss in its entirety.

Date of Decision: March 14, 2008

Silberman & Difilippo, P.C. v. Westport Ins. Co., U.S. District Court Eastern District of Pennsylvania No. 07-5035, 2008 U.S. Dist. LEXIS 20381 (E.D. Pa. Mar. 13, 2008)( Padova, J.)

J.M.A.

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INSURER’S MOTION TO DISMISS DENIED WHERE POTENTIAL FOR POLICY COVERAGE EXISTED FOR CLAIMS AGAINST THE INSURED (Philadelphia Federal)”


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