The opinion of the court was delivered by: Hillman, District Judge
This matter comes before the Court upon the Motion of Plaintiff, Westport Insurance Corp. ("Westport"), for Partial Summary Judgment and the Cross-Motion of Defendants, Jacobs & Barbone, PA and Louis M. Barbone (collectively, "Barbone"), for Partial Summary Judgment. For the reasons set forth below, Plaintiff's Motion is granted and Defendants' Motion is denied.
I. BACKGROUND AND PROCEDURAL HISTORY
This matter involves a dispute between the parties over whether Barbone has coverage under a professional liability insurance policy issued by Westport for a legal malpractice claim that was brought against Barbone.
On November 18, 2003, Kerry L. Beese-Munoz ("Beese-Munoz") retained Barbone as legal counsel to file a lawsuit on her behalf against her former employer for sexual harassment. Accordingly, on March 15, 2004, Barbone filed a complaint against BeeseMunoz's former employer in the United States District Court for the District of New Jersey. The action was captioned Beese-Munoz v. Johnson, No. 04-cv-1224-JEI-AMD. On October 21, 2004, however, the district court dismissed Beese-Munoz's action without prejudice, because of Barbone's failure to serve a proper summons on the defendant pursuant to Fed. R. Civ. P. 4(a).
Following the dismissal of Beese-Munoz's action, Barbone asserts that extensive research was done by one of his associates, Erika A. Appenzeller ("Appenzeller"), on the issue of whether Beese-Munoz had exhausted her administrative remedies. Barbone asserts that the validity of Beese-Munoz's action had been called into question on this issue by new documents submitted by her former employer along with its Motion to Dismiss.*fn1 Based upon these documents and Appenzeller's research, Barbone alleges that he came to the conclusion that Beese-Munoz's failure to file an administrative complaint with her employer sooner was an "incurable defect," and that her "complaint could not be reinstated as [Barbone] could not allege a good faith basis for relief knowing that the relief was barred as a matter of law."
In November 2005, approximately one year after her Complaint was dismissed for failure to serve a proper summons, Appenzeller contacted Beese-Munoz and informed her for the first time that her action had been dismissed. At that time, Appenzeller allegedly advised Beese-Munoz that Barbone would not reinstate her action in federal court because of the perceived administrative exhaustion issue, but that she would continue to explore whether an action could be brought in state court. During January and February of 2006, Barbone wrote to Beese-Munoz on two occasions in response to her inquiries about the status of her case and why it was not being pursued. In these letters, Barbone again advised Beese-Munoz that her lawsuit had been dismissed on a "technical insufficiency," and that the defect "could have been fixed and the matter reinstated," but that ultimately her alleged "failure to file a timely EEO Complaint and the failure to exhaust administrative remedies . . . is an absolute bar to filing a Complaint in the District Court." Barbone also wrote, "I do not believe that we would be successful in pursuing this case given the mandates of administrative exhaustion." Following this exchange there was no further contact between Barbone and Beese-Munoz.
On June 25, 2007, Beese-Munoz filed a legal malpractice complaint against Barbone in the Superior Court of New Jersey -Law Division, Ocean County, captioned Beese-Munoz v. Barbone, No. OCN-L-2183-07. In her Complaint, Beese-Munoz alleged that Barbone failed to exercise reasonable care in the legal services he provided to her in connection with her prior sexual harassment and gender discrimination lawsuit.
B. Insurance Policy and Claim for Coverage
In December 2004, approximately two months after BeeseMunoz's action was dismissed and nearly one year before BeeseMunoz was informed of the fate of her lawsuit, Barbone applied for a professional liability insurance policy from Westport ("the Policy"). The application inquired whether Barbone was "aware of any fact or circumstance, act, error, omission or personal injury which might be expected to be the basis of a claim or suit for lawyers professional liability." Although Barbone disclosed the existence of one prior claim and one potential claim in response to this inquiry, he did not identify the Beese-Munoz matter on the application as a potential source of liability. The application made clear that "any policy issued will provide coverage on a claims-made and reported basis for only those claims that are made against the Insured and reported while the policy is in force and that coverage ceases upon termination of the policy." It further explained that "[a]ll claims will be excluded that result from any acts, circumstances or situations known prior to the inception of coverage being applied for, that could reasonably be expected to result in a claim."
Based upon its consideration of Barbone's application, Westport issued him a professional liability insurance policy for the period from December 15, 2004 to December 15, 2005. This policy provided, in Insuring Agreement I.A., that Westport agreed to pay on behalf of any INSURED all LOSS in excess of the deductible which any INSURED becomes legally obligated to pay as a result of CLAIMS first made against any INSURED during the POLICY PERIOD and reported to [Westport] in writing during the POLICY PERIOD or within sixty (60) days thereafter, by reason of a WRONGFUL ACT occurring on or after the RETROACTIVE DATE.
The Policy further provided that Westport "shall . . . have the right and duty to select counsel . . . and to defend any CLAIM for LOSS against any INSURED covered by Insuring Agreement I.A., even if such CLAIM is groundless, false or fraudulent." Exclusion B of the Policy, however, excluded coverage for any CLAIM based upon, arising out of, attributable to, or directly or indirectly resulting from . . . any act, error, omission, circumstance or PERSONAL INJURY occurring prior to the effective date of the POLICY if any INSURED at the effective date knew or could have reasonably foreseen that such act, error, omission, circumstance or PERSONAL INJURY might be the basis of a CLAIM.
In the ensuing years, Barbone applied for and received renewal policies covering the periods from December 15, 2005 to December 15, 2006, and December 15, 2006 to December 15, 2007. Both the applications completed by Barbone and the policies ultimately issued by Westport contained language ...