Lawyers: Common pleas decision expands legal malpractice coverage
Judge "Carrier must cover multiple claimants in similar case"

Tuesday, June 9, 1998
By Michael A. Riccardi

Insurance policy language imposing a per claim coverage limit does not refer to a single lawsuit, but to each claimant in a lawsuit. Philadelphia Common Pleas Court Judge Gene D. Cohen ruled in a declaratory judgment Friday.

Cohen's ruling, which came on a declaratory judgment action stemming out of coverage for legal malpractice, means that the insurers of the defendants may be required to tender the aggregate policy limit of $1 million, rather than the per claim limit of $500,000, in coverage.

"The coverage available today is different from what was available yesterday," said Alan M. Feldman of Feldman Shepherd & Wohlgelernter, the firm that handled the case for the plaintiffs seeking to determine coverage. "We believe that this is an important case, given that Coregis insures most of the lawyers in Pennsylvania."

The policy issued by Coregis Insurance co. to two law partners carried a limit of $500,000 per claim, and included language defining multiple claims arising out of "A single act, error, omission or PERSONAL INJURY, or a series of related acts, error, omissions of PERSONAL INJURIES" as "a single claim."

The carrier wanted to limit its coverage to a grand total of $500,000 stemming from the insured lawyers' handling of the case, and not $500,000 per claimant.

"This is a win-win," said Thomas More Marrone of Feldman Shepherd & Wohlgelernter, who argued the case before Cohen. "Lawyers should be pleased to get the coverage they expect. And the victims of legal malpractice will be able to be better compensated for their injuries."

Two plaintiffs raised legal malpractice claims against their former lawyers over allegations that they did not properly represent them in litigation arising from a gas explosion.

The plaintiffs, Kevin H. Scott and Maryanne Sage, retained the law firm of Greenspan & Gaber to handle their case. The partners in Greenspan & Gaber were insured by Coregis with an aggregate coverage limit of $1 million and a per-event cap of $500,000.

When Scott and Sage sustained damages as a result of the gas explosion, they were married and living in the same house. All the same, the two claimants presented differing damage claims, Marrone explained.

Even though the gas explosion claim was filed by Scott and Sage in the same complaint, and the alleged legal mistakes were committed in the same lawsuit, they pressed separate damage claims in both the injury case and the legal malpractice case.

"These were separate claims, separate injuries and separate damages," Marrone said.

Cohen pointed out that nowhere did the Coregis policy make it clear that "separate lawsuits filed by multiple malpractice victims based on the same set of underlying facts (would) be subject to the 'per claim' limit."

Therefore, he said, the policy was ambiguous on the issue of whether the per claim limit would come into play where there were multiple claimants in the same lawsuit.

The judge observed that the law firm and attorneys had an obligation to each of the claimants.

"G & G had separate legal duty to each client, both clients had individual injuries which were not recoverable by another," Cohen wrote. "In other words, Scott and Sage's causes of action were separate, distinct and severable. Each could have gone to a separate attorney to pursue their separate causes of action. It would be absurd (to) consider that if the two claimants went to separate law firms, both represented by Coregis, there would be a 'per claim' limit applied to the two claims for coverage."

The parties disagreed over whether the policy language used by Coregis, which according to Feldman, a former president of the Philadelphia Trial Lawyers' Association, provides legal malpractice coverage to most Pennsylvania lawyers, is standard in the industry.

"It is not as standard as Coregis would lead one to believe," Marrone said. "Coregis had considered and rejected policy language that would have been much clearer."

Marrone also argued before Cohen that the terms of the policy should be construed against its drafter, Coregis.

"These are not manuscript policies," where each term is negotiated by the parties at arms' length, Marrone said.

St. Paul Insurance Co. was cited by Marrone as a legal malpractice insurance carrier which uses simpler language and achieves of effect of limiting coverage to one event, without regard to how many claimants are involved, Marrone said.

The St. Paul's policy was cited by Cohen as one of the models used by Coregis in drafting its form policy.

Local counsel for Coregis, Carl II Delacato Jr. of Hecker Brown Sherry & Johnson, did not return a telephone message yesterday seeking comment on the case.

According to the opinion, the Coregis policy was purchased through the professional insurance brokerage company Colburn Berholon Rowland.

Marrone said that Scott has resolved his claim in the gas explosion litigation for an undisclosed sum, but that Sage has not settled her case in the explosion lawsuit. To date, there has been no court verdict that the attorneys who formerly represented Scott and Sage committed legal malpractice.

Marrone said he is expecting and appeal to the Superior Court, and he mentioned that there is still federal litigation in the case that has been placed on hold pending the resolution of the declaratory judgment.

The case decided by Cohen Friday was first filed in federal court, but Eastern District Judge Edmund V. Ludwig declined to exercise discretionary jurisdiction and sent the case back to Philadelphia Common Pleas Court, Marrone said.

Some lawyers may be surprised at the effect of Cohen's ruling, to effectively increase their legal malpractice coverage, Marrone said.

"I think lawyers are like most people," he said. "They don't read their insurance policy until there's a claim."