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The Superior Court has declined to extend the “notice-prejudice” rule found in occurrence policies to claims-made insurance policies. In another ruling in the consolidated appeal, the court overturned a revocation of a prominent Atlanta attorney’s pro hac vice admission to the Philadelphia Common Pleas Court. In ACE American Insurance Co. v. Underwriters at Lloyds and Cos., a decision issued late last month, the court ruled that Lloyds and Columbia Casualty Co. did not have to indemnify ACE American for a bad faith claim of over $37 million because ACE American did not comply with the policy’s heightened notice requirements for claims over $4 million. ACE American argued that the 1977 Pennsylvania Supreme Court ruling in Brakeman v. Potomac Insurance Co., which ruled an insurance company had to prove it was prejudiced by the late notice in order to be relieved of its obligations, should apply to its claim. The company filed an appeal this week to the state Supreme Court. Trial Court Judge Howland W. Abramson of Philadelphia’s Commerce Court Program had ruled that Brakemanapplied to occurrence-based policies, not claims-made policies. The Superior Court agreed, relying on a 2002 Eastern District of Pennsylvania case, Pizzini v. American International Specialty Lines Insurance Co. The federal court found that since Brakemanwas issued, Pennsylvania courts have rejected the idea of extending the “notice-prejudice” rule to claims-made policies. The Superior Court panel, led by Judge Robert C. Daniels, followed the court’s lead. “Until such time as the Supreme Court of Pennsylvania rules on this issue, we agree with this reasoning and decline herein to extend the Brakemanrule to claims-made insurance policies,” Daniels said, adding later, “We conclude, however, that ACE’s compliance with only the policy’s general reporting requirement does not excuse its breach of the specific and heightened notice requirement of the E&O policy at issue here. “Thus, we hold, in agreement with Pizzini, that in the ‘claims-made’ context, if an insured has clearly breached the notice requirement, an insurer need not show prejudice to deny coverage.” On July 17, 2001, ACE American sued Columbia Casualty and Lloyds � its errors and omissions insurers � after they refused to pay ACE American’s claim for $37.2 million, which stemmed from a bad faith claim by Refuse Fuels, according to the Superior Court opinion. Columbia Casualty and Lloyds said ACE American failed to comply with the early-notice requirement when a claim is expected to be over $4 million. They said ACE American would have been timely if it notified them by June 30, 1999, but instead didn’t notify them until July 27, 2000, according to the opinion. ACE American said its compliance with the general reporting requirements should have been enough to effectuate coverage, Daniels said. C. Lawrence Holmes of Dilworth Paxson and Gale White of White & Williams represented Lloyds and ACE American, respectively. They both said they were unable to comment because of the pending litigation. Robert B. Bodzin of Kleinbard Bell & Brecker represented Columbia Casualty in the case. He said the most interesting thing about the case is that ACE American is trying to appeal. The company filed its appeal through a different law firm, Harkins Cunningham, according to attorneys involved with the case. Bodzin said ACE American is advocating a position that is not in the interest of insurers. White & Williams has historically represented insurers, and Bodzin said he found it interesting that the company is now using a different law firm to appeal the ruling. Neither White & Williams nor Harkins Cunningham would comment on anything related to the case while it is pending. Pro Hac Vice Reinstated Atlanta attorney J. Randolph Evans of McKenna Long & Aldridge was admitted in the case pro hac vice on behalf of ACE American at the trial level. The ethics counselor and former outside counsel to the past two GOP speakers of the U.S. House of Representatives was stripped of his admission by Abramson. The judge accused Evans of racially pandering to the predominantly African-American jury that ultimately found against his client. “A review of Evans’ closing remarks � as well as his conduct throughout the trial � demonstrates improper behavior which is not acceptable in this commonwealth,” Abramson wrote. “As evidenced by the record, such conduct included racial pandering, misstatements of the law, circumvention of the rulings of the court, attempts to unfairly portray the defendants’ actions as racially motivated, improper attempts to personalize the case and other unprofessional conduct.” Although Evans was already out of the case, he and his firm wanted his good name restored and appealed the revocation. “This is a lawyer whose practice focuses in significant part on ethics, which is another reason why we cannot and do not intend to let this order stand,” Evans’ partner, David Balser, said when the admission was revoked. He was not available for comment on the court’s latest ruling by the time of publication. The firm had argued on appeal that Abramson revoked the admission without any procedural due process, like a hearing. Abramson said in an opinion, however, that he didn’t need a hearing because he had observed Evans’ conduct firsthand. While the Superior Court recognized the significant authority given to a judge in policing his courtroom, it ruled Evans should have had a hearing. “[W]ith all due respect to the trial court’s observations (which we do not question at all), we are convinced that, in this particular instance, Mr. Evans should have been advised in advance that his pro hac vice admission was in peril of revocation and should also have been given an opportunity to be heard in advance of any such revocation,” Daniels said. “The trial transcript contains a number of exchanges between the trial judge and Mr. Evans, during any of which a proper warning could have been issued to Mr. Evans to the effect that his pro hac vice admission was in peril of revocation.” In reinstating the admission, the court relied on a Supreme Court rule that was not yet adopted at the time of Evans’ revocation. Pennsylvania Rule of Civil Procedure 1012.1(f) states that a court can revoke a pro hac vice admission “‘sua sponte or upon the motion of a party, if it determines, after a hearing or other meaningful opportunity to respond’” that the behavior is inappropriate, according to the opinion. Daniels said again that the court is aware the rule was not in effect at the pertinent time involving this case but said, “We adopt its spirit as an equitable consideration” in the facts of the case. Judges Jack A. Panella and John L. Musmanno joined Daniels on the panel. (Copies of the 28-page opinion inACE American Insurance Co. v. Underwriters at Lloyds and Cos. , PICS No. 07-2114, are available fromThe Legal Intelligencer . Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information. Some cases are not available until 1 p.m.) �

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