In a case that raises the question of what constitutes adequate notice of a potential claim to a legal malpractice insurer, a Philadelphia attorney has sued his former insurance carrier in federal court, alleging it improperly denied him coverage for failure to report a claim even though he had notified it by phone nearly two years earlier that he might be sued by a client who was hit with a default judgment.
According to correspondence from the insurer attached as exhibits to the complaint, it denied coverage because plaintiff Harry J. Giacometti Jr. never followed up his phone call with a written report providing more details about the potential claim.
On May 8, Giacometti, who is now a bankruptcy shareholder in Flaster Greenberg’s Philadelphia office, filed suit, along with his former firm, Smith Giacometti, against Minnesota Lawyers Mutual Insurance in the U.S. District Court for the Eastern District of Pennsylvania.
According to the complaint, Giacometti had defended Pasquale Peronance and his company, Peronance Financial Exchange, against a suit brought by Bruce Davidson and his company, Wyoming Check Cashing, in the Philadelphia Court of Common Pleas over a loan that was allegedly not repaid.
In February 2010, according to the complaint, a default judgment was entered against Peronance.
On March 5, 2010, Giacometti notified his insurer that one of his clients might bring a malpractice suit against him as a result of the judgment, according to the complaint.
Soon after, however, Giacometti successfully got the judgment vacated.
Nevertheless, in January 2012, Peronance filed suit against Giacometti in the Philadelphia Court of Common Pleas, according to court documents.
In his complaint in that case, Peronance alleged that, while he had a viable defense in the Davidson case, Giacometti failed to respond to Davidson’s motion for judgment on the pleadings, thus resulting in the entry of a nearly $50,000 default judgment in February 2010.
“Thereafter, instead of filing an immediate appeal and requesting that plaintiff obtain a supersedeas bond, defendant allowed a writ of execution and garnishment to issue against funds of the plaintiff in banks, thereby causing plaintiff to cease operation of his business as he was unable to operate without such funds,” Peronance alleged in his complaint.
Peronance alleged in his complaint that, while Giacometti was eventually able to get the judgment vacated in March 2010, it took him until June 2010 to obtain an order setting aside the writ of execution.
Giacometti said in his complaint against MLM that he immediately notified the insurer after Peronance filed his suit in January 2012.
By that point, Giacometti’s policy with MLM—which ran from Nov. 1, 2009, to Nov. 1, 2010—had long since expired, but he argued in his complaint that, because the alleged malpractice occurred and he reported the potential claim during the policy period, he was entitled to coverage.
Instead, the insurer denied coverage in February 2012, citing Giacometti’s failure to “‘adequately report’” the claim, Giacometti said in his complaint.
In an April 2011 letter attached as an exhibit to Giacometti’s complaint, MLM claims attorney Anne W. Hill informed Giacometti that the insurer was closing his file as “‘coverage denied’” because, while Giacometti had contacted the insurer by phone in March 2012 to inform it of a potential claim, he never followed up with a written summary of the details of the Peronance case and therefore failed to adequately report the claim.
In the letter, Hill said an MLM employee in its claims department told Giacometti during that phone call that he would need to provide a written summary detailing what happened, the name of the client, relevant dates and any supporting documents that might be helpful in defending the claim.
Hill said in the letter that, while Giacometti agreed to send the summary, he never did so and subsequently failed to respond to seven phone messages Hill left between March 23, 2010, and Dec. 17, 2010, asking for the summary.
“As the policy terms require such a written report, as well as a duty to cooperate with the carrier, we can only assume that you did not want coverage for this claim or potential claim,” Hill wrote in the letter, adding, “Hopefully the situation resolved favorably for yourself and/or your client, which is why you did not feel the need to report it.”
In February 2012, after Giacometti notified MLM that Peronance had filed suit, Hill told Giacometti in an email also attached as an exhibit to the complaint that, while she understood Giacometti never sent a written summary of the claim because the judgment against Peronance was eventually vacated—a point Giacometti apparently made in a February 2012 letter to Hill that is not part of the record—”the fact remains that it wasn’t ever actually reported to us.”
“And of course, the Smith & Giacometti policy has long since expired (in November 2010), so nothing can be reported under it now, as it is a ‘claims made and reported policy,’ which requires the report to be [made] during the policy year,” Hill wrote in the email.
But Giacometti argued in his complaint against MLM that the insurer has a duty to defend and indemnify him against Peronance’s suit and that it has breached its contract by refusing to do so.
“As a direct and proximate result of MLM’s breach, the plaintiffs have been deprived of the benefits of insurance coverage which they expected to receive and for which substantial premiums were paid, and are in danger of sustaining substantial damages in the future,” Giacometti said in the complaint.
Counsel for Giacometti, Lee M. Epstein of Flaster Greenberg in Philadelphia, could not be reached for comment at press time.
A spokesman for MLM declined to comment on the suit.