[lg policy] Pennsylvania: The Predictable Result of Policy Language Ambiguity: Coverage!

Harold Schiffman hfsclpp at GMAIL.COM
Sat May 8 15:56:57 UTC 2010

[All:  not exactly "language policy"; more like "policy language", but
I decided to forward it anyway. (HS)]

PA: The Predictable Result of Policy Language Ambiguity: Coverage!
Posted on May 7, 2010 by Claudia A. Costa

 Westport Ins. Corp. v. Bayer, 284 F.3d 489 (2002)

PA :Underlying Negligent Misrepresentation Action

Student Contributor: Natalie Resto

Facts: Lakens filed suit against Bayer, an attorney, to recover money
in a Ponzi-type scheme. Bayer filed for bankruptcy before the Lakens’
action against him reached trial. The Lakens eventually obtained an
order lifting the stay when they agreed to limit any damages they
might receive to those available under Bayer’s professional liability
insurance policy with Westport. The insurance company then brought
this declaratory judgment action against the attorney. They argued
that the attorney’s professional liability policy provided no coverage
for the investors’ claims against the insured, the attorney. The lower
court found that even though the Lakens never retained Bayer to act as
their attorney, he created the impression that he was “looking out
for” their interests, and he had also claimed to have performed a due
diligence investigation, which provided a basis for Bayer’s liability.

Issue: Does a professional liability insurance cover only those claims
that arise out from acts or omissions unique to the practice of law?

Ruling: No, not when the policy does not define what it means for an
injury to “arise out of the conduct of the insured’s profession as a
The insuring agreement stated that the policy covers claims “arising
out of services rendered or which should have been rendered by any
insured…and arising out of the conduct of the insured’s profession as
a Lawyer.” Id. at 496.
Here the court broadly construed the coverage afforded by the insuring
agreement of Bayer’s policy, and held that the policy’s insuring
agreement provides coverage to Bayer for the Lakens’ negligent
misrepresentation claims against him.

Lesson: When a policy provision is ambiguous, the court construes the
provision in favor of the insured in a manner consistent with the
reasonable expectations the insured had when obtaining coverage. Id.
at 497; Standard Venetian Blind Co. v. American Empire Ins. Co., 503
Pa. 300, 469 A.2d 563 (Pa. 1983).


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