Beasley Estate Can't Collect Malpractice Deductible of $75K

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Debt collection
Debt collection

The Pennsylvania Superior Court has ruled that the estate of James E. Beasley Sr. is not entitled to a reimbursement of $75,000 that Beasley and three former Beasley Firm lawyers had paid to settle a legal malpractice case.

In an unreported opinion in Pennsylvania Property and Casualty Insurance Guaranty Association v. National Union Fire Insurance, a three-judge panel unanimously ruled that the estate's claim for the $75,000, which represented the difference between the $25,000 deductible it paid to one insurer that eventually became insolvent and the $100,000 deductible it paid to another solvent insurer, did not constitute a "'covered claim'" under the Pennsylvania Property and Casualty Insurance Guaranty Association Act.

President Judge John T. Bender said the Pennsylvania Property and Casualty Insurance Guaranty Association was created by the legislature to pay claims in situations where an insurer becomes insolvent and therefore was not obligated to reimburse the attorneys for a deductible they paid to a solvent insurer.

"Appellants' effort to recover a portion of the deductible paid to a solvent insurance company is unlike the situation where no recovery is possible due to an insurance company's insolvency," Bender said. "Our review of the act and the relevant case law reveals no obligation on the guaranty association to put appellants 'in the same position [they] would have been in had the insurance company remained solvent.'"

Bender was joined by Judge Anne E. Lazarus and Senior Judge James J. Fitzgerald III.

In PPCIGA, Bender said, Beasley and former Beasley Firm attorneys William C. Hewson, William D. Hobson and Thomas A. Sprague, who were not involved in the appeal, were sued for legal malpractice in 1992.

At the time, according to Bender, all four attorneys were insured by a professional liability policy issued by National Union Fire Insurance Co. of Pittsburgh, while Hewson was also covered by the tail coverage option of a Home Insurance Co. professional liability policy.

NUF accepted the defense of Beasley, Hobson and Sprague, but denied coverage to Hewson because he was covered by the Home tail policy, Bender said.

In 2003, however, Home was declared insolvent and the defense of Hewson was tendered to PPCIGA, which in turn tendered the defense to NUF after determining that Hewson was still entitled to coverage under the NUF policy and that Home's insolvency did not require PPCIGA to provide Hewson with a defense, according to Bender.

In 2004, NUF refused to provide a defense to Hewson, finding that he was not covered under its policy, and, in 2007, PPCIGA filed a declaratory judgment action to determine whether it had a duty to defend and indemnify Hewson, Bender said.

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