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Jeffer v. National Union Fire Ins. Co. of Pittsburgh

December 10, 1997

HERMAN JEFFER, REGINALD F. HOPKINSON, AND JEROME A. VOGEL, INDIVIDUALLY, AND JEFFER, HOPKINSON, VOGEL, COOMBER & PEIFFER, ESQS. (FORMERLY JEFFER, HARTMAN, HOPKINSON, VOGEL, COOMBER & PEIFFER, ESQS.), PLAINTIFFS-APPELLANTS/CROSS-RESPONDENTS,
v.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, DEFENDANT-THIRD PARTY PLAINTIFF-RESPONDENT/CROSS-APPELLANT, V. ANTONIO PACELLI AND VINCENT VECCHIOTTI, THIRD-PARTY DEFENDANTS.



On appeal from the Superior Court of New Jersey, Law Division, Passaic County.

Approved for Publication December 10, 1997.

Before Judges Shebell, A.a. Rodriguez and Coburn. The opinion of the court was delivered by Shebell, P.j.a.d.

The opinion of the court was delivered by: Shebell

The opinion of the court was delivered by SHEBELL, P.J.A.D.

This appeal involves the interpretation and application of an exclusion clause in a professional liability insurance policy and also application of the entire controversy doctrine.

On February 6, 1995, plaintiffs, Herman Jeffer, Reginald F. Hopkinson, and Jerome A. Vogel, individually, and Jeffer, Hopkinson, Vogel, Coomber & Peiffer, Esqs. ("plaintiffs" or "the Law Firm"), filed a complaint for declaratory judgment in the Law Division against defendant, National Union Fire Insurance Company of Pittsburgh, P.A. ("National Union"). Defendant filed an answer, counterclaim and third-party complaint for declaratory judgment, naming Antonio Pacelli and Vincent Vecchiotti as third-party defendants. It does not appear that Pacelli or Vecchiotti answered or participated in the proceedings.

On December 21, 1995, defendant moved for summary judgment on the grounds that the plaintiffs violated the entire controversy doctrine by failing to join defendant in the earlier malpractice action brought against plaintiffs by Pacelli and Vecchiotti. Summary judgment on this grounds was denied on February 16, 1996. Defendant sought leave to appeal, which was denied. On July 31, 1996, defendant moved for summary judgment on the coverage issue, and plaintiffs cross-moved for summary judgment. On October 11, 1996, the motion Judge, in a letter opinion, granted summary judgment to defendant and denied plaintiffs' cross-motion.

Plaintiffs appeal and defendant cross-appeals from the denial of summary judgment on the entire controversy doctrine.

The Law Firm and its predecessor maintained a professional liability insurance policy with defendant for the calendar years 1987, 1988, and 1989. The policy bound defendant:

To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of any claim or claims, including claim(s) for personal injury, first made against the insured and reported to the Company during the policy period or extended reporting period, arising out of any act, error or omission of the insured in rendering or failing to render professional services for others in the insured's capacity as a lawyer, fiduciary or Notary Public, and caused by the insured or any other person for whose acts, errors or omissions the insured is legally responsible, except as excluded or limited by the terms, conditions and exclusions of this policy.

However, exclusion (g) of the policy in pertinent part states: "This policy does not apply ... to any claim made by or against or in connection with any business enterprise ... which is owned by any insured or in which any insured is a partner...."

In 1986, a general partnership known as West Paterson Associates (West Paterson) was formed. It was comprised of eight individuals, three of whom, Herman Jeffer, Reginald F. Hopkinson, and Jerome A. Vogel, were members of the Law Firm. Antonio Pacelli, a client of the Law Firm, was also a partner in West Paterson.

West Paterson became the contract purchasers of approximately 15.5 acres of property. In 1987, it assigned the contract to Garrett Mountain Associates (Garrett Mountain), a limited partnership with two partners, Pacelli and Vincent Vecchiotti. Vecchiotti was also a client of the Law Firm. In the contract of purchase and closing of title, Garrett Mountain was represented by Charles M. Kotick, of Robinson, Silverman, Pearce, Aronsohn & Berman. Garrett Mountain later defaulted on the purchase money mortgage. West Paterson retained another law firm and commenced a foreclosure suit in August 1988. Judgment of foreclosure was entered and the property was reacquired by West Paterson.

On February 6, 1989, Pacelli and Vecchiotti brought an action in the Law Division against Jeffer, Hopkinson, and Vogel, individually, and against the Law Firm. Notice of this claim was given to defendant by a former partner of the Law Firm, who had been served. The Law Firm was contacted by defense counsel assigned by the insurance carrier. The Law Firm, by letter dated May 16, 1989, requested that defendant not become involved in the suit as it did not view the claims as sounding in malpractice. Defendant then advised ...


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