Westport Ins. Corp. v. Hippo Fleming & Pertile Law Offices
| Decision Date | 01 October 2018 |
| Docket Number | CIVIL ACTION NO. 3:15-cv-251 |
| Citation | 349 F.Supp.3d 468 |
| Parties | WESTPORT INSURANCE CORPORATION, Plaintiff, v. HIPPO FLEMING & PERTILE LAW OFFICES and Charles Wayne Hippo, Jr., Defendants. |
| Court | U.S. District Court — Western District of Pennsylvania |
Robert P. Conlon, Scott T. Stirling, Walker, Wilcox & Matousek, LLP, Chicago, IL, Rodger L. Puz, Gregory C. Michaels, Dickie McCamey & Chilcote, P.C., Pittsburgh, PA, for Plaintiff.
Warren L. Siegfried, Richard S. Canciello, Wayman, Irvin & McAuley, Pittsburgh, PA, for Defendants.
Before the Court are the Motion for Summary Judgment (ECF No. 80) filed by Plaintiff Westport Insurance Corp. ("Westport") and the Cross-Motion for Summary Judgment (ECF No. 87) filed by Defendants Hippo Fleming & Pertile Law Offices ("HFP") and Attorney Charles Wayne Hippo, Jr. ("Hippo") (collectively the "Defendants"). These motions have been fully briefed (ECF Nos. 81-82, 86-88, 91-92) and are ripe for disposition.
This action arises from a dispute involving a professional liability insurance policy that Westport issued to Defendants (the "Policy"). The action in front of this Court is a consolidation of two actions involving the same parties and insurance-coverage issues. Both actions involved Westport's refusal to defend or indemnify HFP and one of its attorneys, Hippo, in an action brought against them by Gregory S. Morris and Morris Development, Inc. (collectively "Morris") in the Court of Common Pleas of Blair County, Pennsylvania (the "Underlying Suit"). The Underlying Suit arises from legal services that Defendants provided Morris in real-estate development matters. Morris alleges that Defendants used information derived from their attorney-client relationship with Morris to benefit their own real-estate development projects, thereby harming Morris.
For the reasons that follow, the Court will GRANT Westport's Motion for Summary Judgment on Count I for declaratory judgment and DENY it with respect to Counts II and III for rescission and voidance. The Court further DENIES Defendants' Cross-Motion for Summary Judgment.
The Court has subject-matter jurisdiction over the claims and counterclaims in this case under 28 U.S.C. § 1332(a)(1) because it involves citizens of different states and the amount in controversy exceeds $75,000. (See ECF No. 1; ECF No. 42 ¶¶ 4-5.)
Because a substantial part of the events giving rise to Westport's claims occurred in the Western District of Pennsylvania, venue is proper in this district under 28 U.S.C. § 1391(b)(2). (See ECF No. 1; ECF No. 42 ¶ 7.)
The following facts are undisputed unless otherwise noted.1 The Court includes additional material facts in Part VI where necessary.
HFP applied for professional-liability insurance from Westport in early 2007. (ECF No. 81 ¶ 26; ECF No. 86 ¶ 26.) The application for the Policy included an "Outside Interest Supplement" that broadly required HFP to disclose all outside interests of its attorneys, including all instances where an attorney acts as director, officer, partner, trustee, manager, fiduciary, or otherwise exercises control over a for-profit business other than HFP. (ECF No. 81 ¶ 29; ECF No. 86 ¶ 29.) HFP disclosed the involvement of Hippo and Jeff Fleming ("Fleming"), another HFP attorney, in an outside entity named VIP Ventures, LLC ("VIP Ventures"), but did not disclose the pair's involvement in two other entities — Templar Development, LLC and Templar Elmerton, LLC (collectively the "Templar Entities"). (ECF No. 81 ¶ 33; ECF No. 86 ¶ 33.) VIP Ventures held ownership shares in both of the Templar Entities. (ECF No. 81 ¶ 36; ECF No. 86 ¶ 36.)
Westport issued the Policy — Lawyers Professional Liability Insurance Policy No. WLW305008391200—to HFP in March 2007. (ECF No. 81 ¶ 21; ECF No. 86 ¶ 21.) The Policy covered HFP and its attorneys for certain professional liability claims from March 1, 2007, until March 1, 2008. (ECF No. 81 ¶¶ 21-23; ECF No. 86 ¶¶ 21-23.)
Section VII(C) of the Policy specifically excludes coverage for lawsuits arising from the outside business interests of the insured attorneys (the "Outside Business Exclusion"). The Outside Business Exclusion provides that the Policy does not apply to claims related to "any INSURED'S activities as an officer, director, partner, manager, or employee of any company, corporation, operation, organization, partnership, or association other than the NAMED INSURED or PRIOR firm." (ECF No. 81-1 at A106-07; ECF No. 81 ¶ 22; ECF No. 86 ¶ 22.)
Defendants had a "long-standing" attorney-client relationship with Morris and his business entities. (ECF No. 81-1 at A134.) Morris retained HFP and Hippo to assist Morris with various real-estate development projects. (ECF No. 81-1 at A129; ECF No. 81 ¶ 1; ECF No. 86 ¶ 2.) In early 2008, Morris threatened Defendants with litigation after a dispute arose in the development of a shopping center in Blair County, Pennsylvania. (ECF No. 81-1 at A135; ECF No. 81 ¶ 1; ECF No. 86 ¶ 4.) Morris alleged that Defendants used information from their representation of Morris to benefit real estate development projects that Defendants undertook through the Templar Entities, thereby harming Morris. (ECF No. 81 ¶¶ 11, 16-18; ECF No. 86 ¶ 11.)
Hippo notified Westport of the threatened litigation via letter on January 9, 2008. (ECF No. 81 ¶ 2; ECF No. 86 ¶ 2.) Westport responded with a letter acknowledging the potential claim and noting that it was not aware of any potential coverage issues. (ECF No. 81-1 at A130.) Then, in October of 2009, Morris sent an unfiled draft complaint to an attorney for Hippo, which Hippo forwarded to Westport. (ECF No. 81 ¶ 4; ECF No. 86 ¶ 4.) Westport sent Hippo a letter on October 30, 2009, where Westport "reserved its rights" and noted that several exclusions in the Policy may bar coverage of Morris's claim. (ECF No. 81-1 at A133.)
The Underlying Suit was officially initiated on December 8, 2009, when the Clerk of Courts for the Court of Common Pleas of Blair County, Pennsylvania issued a Writ of Summons in a case that Morris brought against Defendants. (See ECF No. 81-1 at A141-42.) But due to unrelated bankruptcy proceedings, Morris took no action in the Underlying Suit until they first filed a complaint on July 24, 2015. (ECF No. 81-1 at A002; ECF No. 81 ¶ 9; ECF No. 86 ¶ 9.) In the period between the filing of the Writ of Summons and Complaint in the Underlying Suit, Westport retained Attorney Edwin Schwartz of Harrisburg, Pennsylvania to represent Defendants in the Underlying Suit.2 (ECF No. 86 at 21 ¶ 8; ECF No. 92 ¶¶ 22-23, 25-27.)
Morris's Complaint against Defendants contains eleven counts: (1) negligence (i.e., legal malpractice); (2) breach of contract; (3) breach of fiduciary duties; (4) interference with contractual relationship; (5) constructive trust; (6) unjust enrichment; (7) a violation of the Unfair Trade Practices and Consumer Protection Act; (8) civil conspiracy; (9) conversion; (10) defamation; and (11) vicarious liability. (ECF No. 81-1 at A002-070; ECF No. 81 ¶ 10; ECF No. 86 ¶ 10.)
Westport evaluated coverage for the Underlying Suit after Morris filed the Complaint against Defendants in 2015. (ECF No. 81 ¶ 25; ECF No. 86 ¶ 25.) On August 11, 2015, Westport sent Defendants a letter stating that Westport was denying coverage for the Underlying Suit based on the Policy's Outside Business Exclusion. (ECF No. 81-1 at A410; ECF No. 81 ¶ 25; ECF No. 86 ¶ 25.) Westport's denial of coverage triggered this litigation. Section IV addresses the procedural history of the action pending in this Court.
The action pending in this Court is the consolidation of two separately filed cases relating to the Policy that Westport issued to Defendants. In the first action, Westport brought a declaratory judgment action against Defendants in this Court on September 29, 2015. (ECF No. 1.) Westport seeks a declaratory judgment that it has no duty or obligation to defend or indemnify Defendants in the Underlying Suit.
In the second action, HFP and Hippo filed a Complaint against Westport in the Court of Common Pleas of Blair County, Pennsylvania on November 30, 2015. (See 3:15-cv-0322, ECF No. 1-A1.) HFP and Hippo brought claims against Westport for declaratory judgment, breach of contract, and bad faith stemming from Westport's refusal to defend and indemnify Defendants in the Underlying Suit. (Id. ) Westport removed this action to this Court on December 11, 2015. (See 3:15-cv-0322, ECF No. 1.) The Court denied Defendants' Motion to Remand the case to state court (3:15-cv-0322, ECF No. 17) and denied Defendants' Motion to Dismiss for lack of jurisdiction (ECF No. 36).
In May of 2016, the Court entered an Order (ECF No. 39; 3:15-cv-0322, ECF No. 19) granting the parties' Joint Motion to Consolidate (ECF No. 38), thereby combining the two ongoing actions between Westport and Defendants into the instant action.
After consolidation, the parties litigated a discovery dispute. (ECF Nos. 47-56, 65-66.) Additionally, Westport filed its First Amended Complaint (ECF No. 67) in March of 2017. Westport added claims to rescind the policy (Count II) and for voidance (Count III) based on Defendants' failure to disclose their outside business interests in their application for the Policy. (Id. )
The case reached its current posture in early 2018 when the Court entered Orders (ECF Nos. 74, 77, 79) setting a briefing schedule. Westport filed its Motion for Summary Judgment, Brief in Support, and Concise Statement of Material Facts on May 18, 2018. (ECF Nos. 80-82.) Defendants filed a Response to Westport's Motion for Summary Judgment and ...
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