Benjamin Post v. St Paul Travelers Ins Co
2012 U.S. App. LEXIS 15767
| 3rd Cir. | 2012Background
- Post, a defense attorney, sued Travelers, his legal malpractice insurer, for bad faith and breach of contract after Travelers denied coverage.
- The Bobbett medical malpractice case against Mercy involved discovery misconduct allegedly by Post and Reid, leading Mercy to settle for policy limits in 2005.
- Travelers issued Policy GL09000524 with a $10 million limit, covering protected persons for claims arising from legal services; the policy excluded sanctions and fines from damages.
- Mercy threatened to sue Post for malpractice in October 2005, triggering Mercy’s right to seek damages and informing Post to report the claim to Travelers.
- Mercy joined the sanctions petition in November 2005 and later sought damages in February 2006, which affected Travelers’ defense obligations.
- Travelers initially denied coverage for the sanctions petition, later negotiated a partial defense-fee reimbursement under a letter agreement, while reserving rights on coverage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to defend triggered by Mercy claim | Post asserts Travelers owed defense from Mercy's claim and sanctions. | Travelers contends sanctions exclusion and lack of covered claim defeated duty to defend. | Travelers owed a defense for Mercy's claim from Oct 12, 2005; sanctions not excluded after Mercy joined. |
| Scope of defense obligation for sanctions | Defense extended to all sanctions-related costs due to intertwined malpractice claim. | Defense costs limited to post-Feb 8, 2006 proceedings where Mercy sought damages. | Duty to defend sanctions limited to defense costs incurred after Mercy's answer (Feb 8, 2006). |
| Insurance bad faith standard | Mishandling and aggressive defense show lack of reasonable basis for denial. | There was a reasonable basis to deny coverage due to sanctions exclusion. | District Court correctly granted summary judgment for Travelers; no clear and convincing bad faith. |
| Damages on breach of contract | Travelers breached the contract by denying coverage and later paying some defense costs. | Policy exclusions bar coverage for sanctions; damages should mirror covered costs. | Remanded to recalculate recoverable defense costs; Travelers liable for most but not all sanctions-related expenses. |
Key Cases Cited
- Frog, Switch & Mfg. Co. v. Travelers Ins. Co., 193 F.3d 742 (3d Cir. 1999) (bad faith requires a lack of a reasonable basis to deny coverage; mere aggressive defense not enough)
- UPMC Health Sys. v. Metro. Life Ins. Co., 391 F.3d 497 (3d Cir. 2004) (bad faith standard—unreasonable or reckless denial with no reasonable basis)
- Am. & Foreign Ins. Co. v. Jerry’s Sport Ctr., Inc., 2 A.3d 526 (Pa. 2010) (duty to defend broader than duty to indemnify; insurer must defend if any claim potentially covered)
- Caplan v. Fellheimer Eichen Braverman & Kaskey, 68 F.3d 828 (3d Cir. 1995) (when multiple claims are tendered, insurer must defend where at least one is potentially covered)
- Meth v. Meth, not provided in text (Pa. 1949) (prayer for general relief; damages may be awarded in appropriate contexts)
- Bailey v. Tucker, 621 A.2d 108 (Pa. 1993) (damages in legal malpractice recovered as part of the claim)