Levy & Dubovich et al v. Travelers Casualty and Surety Company of America
Filing
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OPINION AND ORDER: The Plaintiffs Motion for Summary Judgment is DENIED 7 . The Defendants Cross-Motion for Summary Judgment 11 is GRANTED. The Clerk is directed to enter judgment in favor of the Defendant. Signed by Judge William C Lee on 3/30/2016. (rmn)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
FORT WAYNE DIVISION
LEVY & DUBOVICH,
DEBRA LYNCH DUBOVICH, and
JUDY LEVY ADLER
Plaintiffs,
v.
TRAVELERS CASUALTY AND
SURETY COMPANY OF AMERICA
Defendant.
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CAUSE NO: 2:15-CV-278
OPINION AND ORDER
Plaintiffs, the law firm of Levy & Dubovich (“the Firm”) and individual attorneys, Debra
Lynch Dubovich, and Judy Levy Adler (collectively, “the Plaintiffs”) filed the present declaratory
judgment suit after their professional liability insurance carrier, Defendant Travelers Casualty and
Surety Company of America (“Travelers”), refused to defend and provide coverage for matters
the Plaintiffs contend fall within the professional liability policy provisions.
Before the Court are Cross-Motions for Summary Judgment by the parties. For the
following reasons, the Plaintiffs’ Motion for Summary Judgment [DE 7] will be DENIED.
Travelers’ Cross-Motion for Summary Judgment [DE 11] will be GRANTED.
FACTUAL BACKGROUND
The underlying facts leading to this action are largely undisputed. The Firm is a legal
partnership located in Lake County, Indiana. Judith Levy Adler (“Adler”) and Debra Lynch
Dubovich (“Dubovich”) were partners in the Firm. Travelers is an insurance company licensed to
do business in Indiana.
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Travelers issued a policy of insurance to the Plaintiffs that provided Professional Liability
Coverage (“the Policy”) to the Plaintiffs from February 1, 2014 through February 1, 2015. Subject
to all of its terms, conditions, and exclusions, the Policy’s Insuring Agreement states, in relevant
part, “[t]he Company will pay on behalf of the Insured. Damages and Defense Expenses for any
Claim first made during the Policy Period that is caused by a Wrongful Act committed on or
after any applicable Retroactive Date ...”1 (Policy at p. 1). The Policy defines Claim as “a civil
proceeding commenced by service of a complaint or similar pleading” against any Insured for a
Wrongful Act. A Claim is deemed made “on the earliest date such notice thereof is received by
any Principal Insured.” (Id. at 2).
The term Wrongful Act is defined in the Policy as follows:
DD. Wrongful Act means any:
1.
actual or alleged act, error, omission, or Personal Injury Offense in the
rendering of, or failure to render, Professional Services or Non-Profit
Services;
2.
actual or alleged act, error, omission, or Personal Injury Offense in
Publishing; or
3.
Network and Information Security Offense, by the Named Insured or
any Predecessor Firm, or by any other Insured while acting within the
scope of their duties on behalf of the Named Insured or any Predecessor
Firm.
(Policy at p. 5).
The Policy defines Professional Services to include various legal services performed by
or with the consent of the named insureds by lawyers, law clerks, paralegals, legal secretaries,
involving legal, arbitration, mediation, lobbying services, etc.
More specifically, the term
Professional Services means:
…only services in any of the following capacities, and pro-bono services in such
capacities, provided that such pro-bono services are performed with the knowledge and
consent of the Named Insured:
1
Terms appearing in bold are defined in the Policy and carry the same meaning in this Opinion and Order.
2
1.
2.
3.
4.
5.
6.
7.
Lawyer.
Law clerk, paralegal, legal secretary or other legal support staff.
Arbitrator or mediator.
Lobbyist.
Notary public, provided that the Insured Person witnessed and attested to the
authenticity of the signature notarized by such Insured Person.
Title Agent.
Administrator, conservator, receiver, executor, guardian, trustee or any similar
fiduciary capacity, directly connected
with the Insured's practice of law.
(Policy at p. 5).
The controverted issue in this case, involves the portion of the Policy that provides for an
Automatic Extended Reporting Period (“AERP”) to take effect, in certain circumstances, at the
termination of the Policy Period. The Policy states as follows, in relevant part, with respect to the
AERP:
If this policy is cancelled or not renewed, the [AERP] applies without additional
premium effective the date such policy is cancelled or not renewed. The [AERP]
applies to Claims made and reported to the Company during the [AERP], but only
for Wrongful Acts committed wholly prior to the effective date this policy is
cancelled or not renewed, and which otherwise would be covered. A Claim made
during the [AERP] will be deemed to have been made on the last day of the Policy
Period.
(Policy at p. 5). AERP is defined to mean “the period of time beginning with the effective date
[the Policy] is cancelled or not renewed” and ending the earlier of “(1) 60 days after such
cancellation or nonrenewal takes effect; or (2) the date any other policy obtained by the Named
Insured that provides similar coverage for Professional Services takes effect.” (Policy at p. 5)
On January 16, 2015, the Firm filed a collection action in Indiana state court against Cathy
M. Djuric (“Djuric”), seeking to recover attorney fees and costs Djuric allegedly owed it. Shortly
thereafter, on January 19, 2015, Travelers advised the Plaintiffs that the Policy would not be
renewed due to “excessive fee suit activity.” (Complaint, Exh. B).
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Following that notice, the Plaintiffs sought and obtained professional liability insurance
from Hanover Insurance Group, under policy no. LHC A54081600 (the “Hanover Policy”). The
Hanover Policy was effective for the policy period of February 1, 2015 to February 1, 2016, and
insured the Firm for wrongful acts in the rendering of or failure to render professional services.
There is no dispute that the definition of “professional services” in the Hanover Policy and the
Policy issued by Travelers is similar. However, the Hanover Policy, contained an exclusion
endorsement for any suits arising out of or related to claims for fees brought by the Firm. This
exclusion did not exist in the Travelers’ Policy. It is this exclusion that creates the central issue
presented in this case, that is, whether the Hanover Policy can be considered “similar coverage”
for purposes of the AERP when it contains such an exclusion.
On February 24, 2015, after the effective date of the Hanover Policy, but before the AERP
would have expired under the Policy, Djuric filed a counterclaim (“the Djuric Counterclaim”)
against the Firm alleging, among other things, that the Firm committed legal malpractice.
On March 4, 2015, the Firm first reported the Djuric Counterclaim to Travelers and
requested coverage under the Policy. On March 13, 2015, Travelers advised the Firm by letter
that the Policy does not provide coverage for the Djuric Counterclaim because the claim was not
made during the policy period or made and reported to Travelers during any applicable AERP.
Traveler’s position is that the acquisition of the Hanover Policy was similar coverage sufficient to
terminate the AERP.
APPLICABLE STANDARD
Rule 56(a) authorizes the court to grant summary judgment when there is “no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). The court is required to enter summary judgment “after adequate time for
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discovery and upon motion, against a party who fails to make a showing sufficient to establish the
existence of an element essential to that party's case, and on which that party will bear the burden
of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265
(1986). A genuine issue of material fact exists “if the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106
S.Ct. 2505, 91 L.Ed.2d 202 (1986).
The above notions apply equally where, as here, opposing parties each move for summary
judgment in their favor pursuant to Rule 56. I.A.E., Inc. v. Shaver, 74 F.3d 768, 774 (7th Cir.1996).
Indeed, the existence of cross-motions for summary judgment does not necessarily mean that there
are no genuine issues of material fact. R.J. Corman Derailment Serv., Inc. v. Int'l Union of
Operating Eng'rs., 335 F.3d 643, 647 (7th Cir.2003). Rather, the process of taking the facts in the
light most favorable to the non-movant, first for one side and then for the other, may reveal that
neither side has enough to prevail without a trial. Id. at 648. “With cross-motions, [the court's]
review of the record requires that [the court] construe all inferences in favor of the party against
whom the motion under consideration is made.” O'Regan v. Arbitration Forums, Ins., 246 F.3d
975, 983 (7th Cir.2001) (quoting Hendricks–Robinson v. Excel Corp., 154 F.3d 685, 692 (7th
Cir.1998)). The court may not make credibility determinations, weigh the evidence, or decide
which inferences to draw from the facts. Payne v. Pauley, 337 F.3d 767, 770 (7th Cir.2003) (“these
are jobs for a factfinder”); Hemsworth, 476 F.3d at 490. Instead, when ruling on a summary
judgment motion, a court's responsibility is to decide, based on the evidence of record, whether
there is any material dispute of fact that requires a trial. Id.
DISCUSSION
A. General Principles
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Insurance policies typically impose dual obligations on the insurer: the duty to indemnify
the insured against damages or losses, and the duty to defend against claims for damages. Because
an insurance policy is a contract for insurance, it is governed by the same rules of construction as
other contracts. Briles v. Wausau Ins. Cos., 858 N.E.2d 208, 213 (Ind.Ct.App.2006) (citing Gregg
v. Cooper, 812 N.E.2d 210, 215 (Ind.Ct.App.2004).2 As with other contracts, their interpretation
is a question of law. Briles, 858 N.E.2d at 213.
When interpreting an insurance policy, the goal is to ascertain and enforce the parties' intent
as manifested in the insurance contract. Id. In reviewing policy terms, the court construes them
from the perspective of an ordinary policyholder of average intelligence. Allgood v. Meridian
Sec.Ins.Co., 836 N.E.2d 243, 246-47 (quoting Burkett v. Am. Family Ins. Group, 737 N.E.2d 447,
452 (Ind.Ct.App.2000)). Where an ambiguity exists, that is, where reasonably intelligent people
may interpret the policy's language differently, courts construe insurance policies strictly against
the insurer. See Fidelity and Deposit Co. of Md. v. Pettis Dry Goods Co., 207 Ind. 38, 42 (1934) (
Aany doubts or ambiguities must be resolved most strongly against the insurer).3 This is particularly
the case where a policy excludes coverage. Am. States Ins. Co. v. Kiger, 662 N.E.2d 945
(Ind.1996). At the same time, interpretation should harmonize the policy's provisions rather than
place its provisions in conflict. Allgood, 836 N.E.2d at 247.
An insurer's duty to defend its insureds against suit is broader than its coverage liability or
2
The parties are in agreement that Indiana law controls this dispute under the principles of Erie doctrine.
See Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938).
3
Strict construction against the insurer derives from the disparity in bargaining power characteristic of
parties to insurance contracts. Wagner v. Yates, 912 N.E.2d 805, 810 (Ind. 2009). The insurance
companies write the policies; we buy their forms or we do not buy insurance. Id. at 811 (quoting Kiger,
662 N.E.2d at 947). Nevertheless, we enforce limits on coverage where the policy unambiguously favors
the insurer's interpretation.
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duty to indemnify. Trisler v. Indiana Ins. Co. 575 N.E.2d 1021, 1023 (Ind.Ct.App. 1991). The
insurer's duty to defend is determined from the allegations of the complaint and from those facts
known to or ascertainable by the insurer after reasonable investigation. Id. If the pleadings disclose
that a claim is clearly excluded under the policy, no defense is required. Id.
B. Application
As noted at the outset, Travelers denied coverage for the Djuric Counterclaim and refused
to defend the Plaintiffs in that suit, which, in turn, spawned the present suit. According to
Travelers, it denied coverage because the claim was not made during the policy period or made
and reported during the AERP, as required in order to trigger the Policy’s coverage.4
In response, the Plaintiffs contend that denial of coverage was erroneous because the AERP
was in effect when the claim was made. Under their scenario, the AERP was in effect despite the
Plaintiffs’ purchase of replacement professional liability insurance coverage from another insurer
because the AERP only terminates after 60 days or when “similar coverage” is obtained. Plaintiffs
contend that the exclusion for fee disputes in the Hanover Policy renders the professional liability
insurance coverage dissimilar from the Traveler’s Policy and therefore, Travelers erroneously
denied coverage.
From the outset, the Court begins with what is and is not in dispute as well as the relevant
Policy language. First, there is no question that the Policy was not renewed and there exists no
dispute that Travelers had a non-renewal right with respect to the Policy. Second, there is no
dispute that the Djuric Counterclaim was made outside the initial Policy Period (not considering
the AERP) since the Plaintiffs did not report the Djuric Counterclaim until March 4, 2015 and the
Policy expired on February 1, 2015. Third, there is also no dispute that IF the Hanover Policy is
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The Policy is written as a “claims-made” policy meaning that a claim must be asserted against the insured during
the policy period before coverage is applicable.
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not considered “similar coverage,” Travelers has an obligation to defend the Djuric Counterclaim
as it was reported during the 60 days of the AERP. This leaves the Court with the sole legal issue
in this case: whether the Hanover Policy which excludes any claims arising out of or related to
claims for fees brought by the Firm provides “similar” professional liability coverage under the
terms of the Travelers’ Policy.
To that end, the Court looks first at the terms of the Policy. The Policy states that the
coverage extends for 60 days or until “the date any other policy obtained by the Named Insured
that provides similar coverage for Professional Services takes effect.” The Policy does not further
define the term “similar coverage for Professional Services.” Thus, the dispute in this case turns
entirely on the meaning of the phrase “similar coverage for Professional Services.” As noted
above, if the Hanover Policy constitutes “similar coverage for Professional Services” then the
AERP in the Travelers’ Policy terminated on the date the Hanover Policy coverage commenced
and Travelers is under no obligation to defend the Djuric Counterclaim. On the other hand, if the
two policies do not provide “similar coverage for Professional Services,” the Court must consider
whether Travelers owes a duty to defend the Plaintiffs in the Djuric Counterclaim.
The Plaintiffs urge the Court to determine that use of the phrase “similar coverage” is
ambiguous, that is, reasonably susceptible of more than one interpretation. As the logic follows,
because, in their view, the phrase is ambiguous, the Court should construe the language against
the insured and determine the Hanover Policy does not provide “similar coverage.” In response,
Travelers reasons that the plain, ordinary meaning of the word “similar” is unambiguous and the
Hanover Policy clearly constitutes “similar coverage.”
The parties have not pointed to any binding authority interpreting the clause “similar
coverage” in an insurance dispute such as this and this Court has found none, so it is left to interpret
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the clause. As a court sitting in diversity, this is accomplished by ascertaining the substantive
content of state law as it has been determined by the Indiana Supreme Court, or as it would be by
that court if the present case were before it. See Craig v. FedEx Ground Package Sys., Inc., 686
F.3d 423, 426 (7th Cir.2012).
Under Indiana law, when as here, the parties leave contract terms undefined, Indiana
common law is used to determine their meaning. Jones v. Western Reserve Group/Lighting Rod
Mut. Ins. Co., 699 N.E.2d 711, 714 (Ind.Ct.App.1998). The fact that an insurance policy does not
define each term within it does not somehow make an undefined term ambiguous. Wagner v.
Yates, 912 N.E.2d 805, 810 (Ind. 2009). In this case, the Policy utilizes the word “similar” as the
modifier for the phrase “similar coverage.” According to Merriam Webster’s online dictionary,
the
definition
of
“similar”
is
“having
characteristics
in
common”
or
“alike
in
substance.” http://www.merriam-webster.com/dictionary/similar. Thus, it follows that “similar
coverage” implies coverage that has like characteristics.
Here, Travelers asserts that the two policies insure the same type of risk, that is, they both
provide coverage for claims arising from wrongful acts in the rendering of professional services
and thus, they are generally alike in substance. The sole difference in the two professional liability
policies set forth by the parties is the exclusion endorsement in the Hanover Policy for a discrete
set of professional liability claims relating to fee disputes. It is this very difference, however, that
the Plaintiffs assert makes the two policies dissimilar.
Courts in other jurisdictions have considered the phrase “similar coverage” and determined
that use of the word “similar” is akin to the phrase “bearing a resemblance to.” Thus, where a
policy’s coverage bears a resemblance to that of another policy, even if not identical, the policies
are similar. See Pacific Indemnity Co. v. Imperial, 176 Cal.App.3d 622 (Ca. Ct.App.1986).
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In Pacific Indemnity, like in this case, the court interpreted a clause that extended coverage
under an expired policy unless the insured “obtained similar insurance issued after the termination
of the policy.” There, the new insurance obtained covered the same risk for the insured, but rather
than a claims-made policy, an occurrence policy was issued. The Court, in examining the word
“similar” concluded the two policies were similar since they were “nearly corresponding;
resembling in many respects; somewhat like.” Id. at 627.
Other jurisdictions have likewise concluded that the term “similar” is not ambiguous on its
face. See, e.g., Cal. Dairies Inc. v. RSUI Indem. Co., 617 F.Supp.2d 1023, 1037–38 (E.D.Cal.2009)
(noting that if the court were to define the term “similar” as the “same” or “identical,” that
definition would defeat the exclusionary provision's purpose of avoiding the moral hazard of
employers insuring against labor law violations); Gangi v. Sears, Roebuck & Co., 33 Conn.Supp.
81, 360 A.2d 907, 908 (1976) (explaining that the word “similar” as ordinarily used means “general
likeness although allowing for some degree of difference”); Newman v. Raleigh Internal Med.
Assocs., P.A., 88 N.C.App. 95, 362 S.E.2d 623, 626 (1987) (finding that “similar” is a commonly
used word, with an easily ascertainable definition in an employment contract dispute).
In this case, with the exception of the exclusion in the Hanover Policy for legal action
arising out of fee disputes, the risk insured and undertaken by the Hanover Policy is the same
general risk undertaken by the Travelers’ Policy. Both policies provide coverage for professional
liabilities undertaken by the Plaintiffs in the course of their legal practice. That said, the Travelers’
Policy chose the word “similar” as the modifier for coverage; it did not choose the words “same”
or “identical” to precede “coverage.” Thus, the Court construes the word “similar” to mean just
that – a Policy obtained by the named insured that has characteristics in common with the original
Policy but that may not be “identical” in terms of its coverage or exclusions. To hold otherwise,
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would render the use of the term “similar” in the Policy meaningless. And, Indiana courts clearly
disapprove of such a result.
FLM, LLC v. Cincinnati Ins. Co., 973 N.E.2d 1167, 1174
(Ind.Ct.App.2012) (holding that a court should construe the language of an insurance policy so as
not to render any words, phrases, or terms ineffective or meaningless); See Peoples Bank & Trust
Co. v. Price, 714 N.E.2d 712, 716 (Ind.Ct.App.1999) (noting that we “make all attempts to
construe the language” so as not to “render any words, phrases, or terms ineffective or
meaningless.”). Here, both policies insure the same pool of risk and offer professional liability
coverage for the Plaintiffs for professional acts undertaken by them. Accordingly, the Court
concludes that the Hanover Policy offers “similar coverage” as that term is used in the Travelers’
Policy.
In light of this conclusion, the Court further concludes that the AERP terminated when
Plaintiffs obtained the Hanover Policy; Travelers owes no duty to defend or indemnify the
Plaintiffs for the Djuric Counterclaim as notice of the claim was provided by the Plaintiffs outside
the Policy Period set forth in the Policy. For the same reason, the Plaintiffs’ claims for breach of
contract and breach of the duty of good faith and fair dealing are likewise foreclosed as is the claim
for punitive damages.
CONCLUSION
Based on the foregoing, the Plaintiffs’ Motion for Summary Judgment is DENIED. The
Defendant’s Cross-Motion for Summary Judgment is GRANTED. The Clerk is directed to enter
judgment in favor of the Defendant.
Entered: This 30th day of March, 2016
s/ William C. Lee
United States District Court
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