September 9, 2010
WILLIAM V. CONNELLY, MARYAM CONNELLY, HIS WIFE, AND KATHLEEN CONNELLY, A MINOR BY HER GUARDIAN AD LITEM WILLIAM V. CONNELLY, PLAINTIFFS,
FROHLING HUDAK & MCCARTHY, P.C., FROHLING AND HUDAK, L.L.C., JOHN B. FROHLING, AND LINDA PELLEGRINO-MCCARTHY, DEFENDANTS, AND LINDA PELLEGRINO, DEFENDANT/THIRD-PARTY PLAINTIFF,
REDLANDS INSURANCE COMPANY AND AMERICAN SAFETY CASUALTY INSURANCE COMPANY, THIRD-PARTY DEFENDANTS, AND JOHN G. HUDAK, DEFENDANT/THIRD-PARTY PLAINTIFF-APPELLANT,
AMERICAN SAFETY CASUALTY INSURANCE COMPANY, THIRD-PARTY DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Law Division, Civil Part, Morris County, Docket No. L-002988-03.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted: February 3, 2010
Before Judges Stern, Graves and J. N. Harris.
Plaintiff, John Hudak, appeals from an order of September 5, 2007, after a bench trial, on a third party declaratory judgment complaint, which denied coverage to him in the legal malpractice action which we addressed today in A-5798-07.*fn1 With respect to Hudak's third-party complaint seeking declaratory relief from American Safety Casualty Insurance Company (ASCIC), Judge John J. Harper wrote a letter opinion embodying findings of fact and conclusions of law. Linda Pellegrino (McCarthy) abandoned her third-party complaint for coverage and John Frohling defaulted. The judge found that Hudak knew or should have known of a potential claim against the firm by plaintiffs William and Maryam Connelly and there was a misrepresentation in the application for the claims made malpractice insurance policy, which justified the denial of coverage.
The judge expressly found "the attorneys [Frohling, Pellegrino, and Hudak] to be less forthcoming with the Court than [p]laintiffs." He noted that the reference to the prior proceedings and statute of limitations in the engagement letter sent to plaintiffs, the fact the engagement letter was not signed by Mrs. Connelly, which suggested that Mrs. Connelly thought it was worded to incorrectly suggest the firm had not previously agreed to the representation, and a recorded call to Frohling in which Frohling raised the possibility that he might have negligently failed to file plaintiffs' suit, should have put the firm on notice of a potential law suit. Further, a letter of June 1998 written by William Connelly expressly referred to the firm's negligence and a potential malpractice claim,*fn2 but the matter was never referred to in the subsequent applications for coverage. Accordingly, the judge found that "[t]he failure to disclose the potential claims to ASCIC amounted to material misrepresentations that ASCIC reasonably relied upon" in issuing the policy.
Relying on First American Title Insurance Co. v. Lawson, 177 N.J. 125 (2003), Judge Harper held that Hudak was not entitled to coverage as an innocent partner because he met with Connelly twice, knew of the matter, and knew of Frohling's complaints about difficult clients such as William and Maryam Connelly. The judge also found Pellegrino credible in denying that Hudak asked about potential claims when applying for an extension of coverage. Hence, Hudak did not make an innocent, as opposed to a material, misrepresentation.
Given the record's support for Judge Harper's fact finding noted above and the additional findings with respect to Hudak's meeting with Connelly and associate Brian Kaiser and the "chance" meeting in the Roseland office, when William Connelly complained to Hudak and Hudak's lack of credibility concerning inquiries about the possibility of claims, we are required to affirm the judgment. See Rova Farms Resort & Invs. Ins. Co., 65 N.J. 474, 483-84 (1974).