“Reasonable Expectations” Doctrine Inapplicable Due to Unambiguous Effective and Retroactive Dates

The United States District Court for the Eastern District of Pennsylvania has held that a lawyer was not entitled to insurance coverage because he could not reasonably expect that his malpractice policy would provide coverage for acts occurring three months prior to the effective and retroactive date of the policy.  Downey v. First Indemnity Ins., 2016 WL 6033426 (E.D. Pa. Oct. 14, 2016).

After starting his own firm, the insured submitted an application for a new professional liability policy.  The insured’s policy with his prior carrier expired on August 18, 2007.  Although the insured allegedly requested malpractice coverage that did not leave any gaps between his prior policy and the start date of his new policy, his application requested that coverage be effective as of October 1, 2007.  The insurer issued a claims-made policy with an effective date and retroactive date of October 1, 2007.  A complaint was later filed against the insured alleging that he had committed malpractice on July 5, 2007.  The insurer denied coverage and the insured sued, alleging that he had been orally promised that there would be no gaps in coverage.

The court held that the insured was not entitled to coverage for the claim because the policy afforded coverage only for claims for wrongful acts occurring on or after October 1, 2007.  The court also held that the “reasonable expectations” doctrine did not apply.  The court noted that the insured, a lawyer, was not the type of unsophisticated consumer whom the reasonable expectations doctrine was designed to protect.  The court also concluded that the insured had received precisely the coverage that he had requested, highlighting the insured’s application and the insurer’s quote, and thus determined that no reasonable fact finder could conclude that the insured possessed a reasonable expectation of coverage for acts occurring prior to October 1, 2007.