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American Home Assurance Co. v. St. Paul Fire & Marine Insurance Co.

Decided: May 17, 1989.

AMERICAN HOME ASSURANCE COMPANY, PLAINTIFF-APPELLANT,
v.
ST. PAUL FIRE & MARINE INSURANCE COMPANY, DEFENDANT-RESPONDENT, AND GREENSTONE, GREENSTONE & NAISCHULER, P.C.; HAROLD A. SHERMAN; PETER PROCANIK, AN INFANT, BY HIS GUARDIAN AD LITEM, ROSEMARIE PROCANIK; ROSEMARIE PROCANIK AND MICHAEL PROCANIK; LEE S. GOLDSMITH; AND GREENSTONE, GREENSTONE, NAISCHULER AND GOLDSMITH, P.A., DEFENDANTS



On appeal from the Superior Court, Law Division, Union County.

Pressler, O'Brien and Stern. The opinion of the court was delivered by Pressler, P.J.A.D.

Pressler

[233 NJSuper Page 138] This is a dispute between two professional liability carriers over their respective obligations to provide a defense to the same insured covered by a policy issued by each. The trial judge dismissed the complaint of American Home Assurance Company (American Home), which sought contribution to its defense costs from defendant St. Paul Fire & Marine Insurance

Company (St. Paul). It was his conclusion that in the circumstances here, American Home provided primary coverage for their mutual insured and St. Paul provided only excess coverage. While we affirm the judgment from which American Home appeals, we do so on different grounds.

The critical underlying facts are not in dispute and arise out of a legal malpractice action commenced in April 1981 by the Procanik family against an attorney, Lee Goldsmith, and, on a respondeat superior theory, the New Jersey firm with which he was associated when he allegedly committed the act of malpractice. The facts of the malpractice action are detailed in our opinion in Procanik By Procanik v. Cillo, 226 N.J. Super. 132 (App.Div.1988), certif. den. 113 N.J. 357 (1988). Suffice it to say that we there reversed the substantial verdict which had been rendered against Goldsmith and the Greenstone firm in the Procaniks' favor, holding that based on the facts of record, Goldsmith's conduct of which the Procaniks complained did not constitute professional negligence. The Supreme Court's denial of the Procaniks' petition for certification finally resolved the issue in the attorneys' favor after more than seven years of litigation against them. Hence, there was in the end no question of indemnification for their conduct by their malpractice carriers but only the question of the carriers' respective responsibility for the not insubstantial defense costs which had been incurred during the course of that protracted and difficult litigation. That is the only issue here involved.

When the malpractice was alleged to have been committed, Goldsmith was practicing law both in his own name in New York and with the Greenstone firm in New Jersey. At the time the Procanik claim was made, Goldsmith had, on his own behalf, a malpractice policy written by plaintiff, American Home, and there is no question that the coverage was in full force and effect and entitled Goldsmith to both a defense and indemnity in respect of that claim. At the same time, the Greenstone firm was covered for malpractice by St. Paul by a policy expressly extending coverage to each of the attorneys

listed therein, including Goldsmith. When Goldsmith and the Greenstone firm were served with process in the Procanik action, Goldsmith sent a copy of the complaint to each of the two carriers by letters written on the letterhead of the Greenstone firm and signed by him in the name of the firm. The only variation in the text of the correspondence was that in the letter to American Home, Goldsmith asked for a defense on "my behalf" and in the letter to St. Paul, he asked for a defense on "our behalf."

Each of the carriers purported to comply with its contractual obligations. For the next seven years, St. Paul represented only the Greenstone firm. It chose and paid its own attorneys and remained in full control of the litigation in respect of that defendant. American Home did the same, and in the same manner, for Goldsmith. It does not appear from this record that at any time prior to December 1985, some four-and-a-half years after the commencement of the action, either carrier had suggested in any way that the St. Paul defense of the Greenstone firm and the American Home defense of Goldsmith was not an arrangement undertaken by the two carriers with their mutual knowledge and tacit approval. In December 1985 a letter was written to Goldsmith by a claims examiner of American Home, who advised him that although he was being defended by American Home and the Greenstone firm was being represented by St. Paul, he, Goldsmith, was also entitled to defense and indemnity under the St. Paul policy. The letter consequently advised him that

to protect your interest, please contact Greenstone, Greenstone and Naischuler and demand that they join in your defense and in any indemnity obligation through their coverage with St. Paul.

It does not, however, appear that Goldsmith followed that suggestion. Nor does it appear that American Home itself had ever made demand on St. Paul for St. Paul's participation in Goldsmith's, as opposed to the Greenstone firm's, defense prior to the events preceding the institution of this action.

American Home filed its complaint against St. Paul in December 1986 seeking, by way of ...


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