The opinion of the court was delivered by: Sweet, District Judge.
Defendant Robert P. Borsody ("Borsody") has moved for summary
judgment pursuant to Rule 56, Fed.R.Civ.P., to declare that the
plaintiff Chicago Insurance Company ("CIC") has an obligation
under a lawyer's professional liability insurance policy to
defend and indemnify him arising out of an action Allstate
Insurance Company, et ano. v. Northfield Medical Center, P.C.,
et al., Docket No. MRL-L-3228-99, pending in the Superior Court
of New Jersey, Morris County (the "Allstate Action") and in
connection with a cross-claim against him asserted by defendant
Scott Neuner ("Neuner") in that action. CIC has also moved for
summary judgment declaring the absence of any duty to defend and
indemnify and for reimbursement of expenses incurred in
connection with its defense of the Neuner cross-claim. For the
reasons set forth below, the CIC motion is granted, and the
Borsody motion is denied.
This action was commenced by CIC on June 29, 2000, seeking a
declaration that it had no duty to defend and indemnify Borsody
as a result of the Allstate Action and that it was entitled to
the cost of its defense of the counterclaim asserted by Neuner
in that action. On September 11, 2000, Borsody counterclaimed
seeking coverage for both the Allstate Action and the Neuner
The instant motions for summary judgment were heard and marked
fully submitted on June 13, 2001.
The underlying facts relative to this coverage action are not
in dispute, and are set forth in the parties' respective Local
Rule 56.1 Statements.
CIC is a corporation organized and existing under the laws of
Illinois, with a principal place of business in the State of
Illinois, and is authorized to issue insurance policies in the
State of New York.
Borsody is an attorney duly licensed to practice law in the
State of New York and currently maintains an office for such
purpose at 909 Third Avenue, New York, New York. His practice
has focused on business and financial issues involving health
care law. He has written articles for various publications
concerning the legal requirements of the formation of
"multidisciplinary" medical practices, and has spoken to health
care practitioners and their professional advisors, i.e.
physicians, chiropractors, physical therapists, attorneys,
accountants, businessmen, etc., at numerous seminars.
CIC issued a lawyer's professional liability insurance policy
to Borsody, No. LWB3007967-1, effective for the claims-made
period from October 1, 1998 to October 1, 2000 (the "Policy").
In the fall of 1999, CIC proposed revisions of its lawyer's
professional liability insurance policy form to the New York
State Department of Insurance. Those revisions were approved by
the Department of Insurance on February 29, 2000. CIC adopted
those revisions effective February 29, 2000.
In December 1999, Borsody was served with a summons and
complaint in the Allstate Action. The 64-page complaint ("the
Complaint") alleged among other things that Borsody is a New
York attorney, and that certain of the defendants, including
Borsody, colluded to defraud Allstate, the insurance industry
and the ratepayers of New Jersey by creating a sham medical
corporation and entering into agreements for the purpose of
circumventing New Jersey statutes and the Administrative Code
regulating the providing of health care in New Jersey. It
alleged that Borsody participated in this conspiracy, by
speaking at a seminar and by assisting the defendants.
On December 1, 1999, Borsody sent a copy of the Allstate
Action complaint to Bertholon-Rowland, the managing general
agent of CIC, with a cover letter requesting that CIC defend the
Allstate Action claim, stating therein that while the plaintiff
Allstate was not a client of his "the action certainly seems to
arise out of my legal practice."
Following receipt of CIC's disclaimer, Borsody retained
counsel to represent his interests in the Allstate Action.
Borsody's counsel became aware of the possible existence of two
criminal investigations of Borsody involving the same or similar
issues as alleged in the Allstate complaint.
On or about February 1, 2000, counsel for Borsody filed a
motion to dismiss the Allstate action on behalf of Borsody,
sought an order dismissing the First, Second and Third Counts
due to the misconduct of Allstate's counsel, or in the
alternative, an order staying the Allstate Action or compelling
discovery into Allstate's role in encouraging a parallel and
related criminal investigation or in the alternative severing
the First, Second and Third Counts of the complaint.
As a result of a pretrial conference, an agreement was reached
with Allstate that the portion of Borsody's motion to stay the
proceedings would be withdrawn in exchange for an agreement that
discovery would be stayed until such time as Borsody's counsel
could consult with the appropriate law enforcement authorities
to determine Borsody's status in any pending criminal
investigations. It was eventually confirmed that an
investigation was being conducted by the Attorney General of the
State of New Jersey and that the United States Attorney's Office
was not conducting an investigation of matters related to the
On or about March 8, 2000, counsel to Borsody's office was
served with an answer and cross-claim of Neuner in the Allstate
Action. Neuner was a former client of Borsody. The cross-claim
asserted causes of action against Borsody, including ...