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Malicious prosecution is an intentional tort and defense is inaccessible



Regent Insurance Company ("Regent") appealed against the decision of the United States District Court Regent Insurance Company v. Strausser Enterprises, Inc .; Gary Strausser, No. 12-4135, United States Court of Appeals for the Third Circuit (August 7, 2020) The Regent asserted no obligation to defend an insured who filed a voluntary injunction to prevent the sale of real estate.

FACTS

November 5, 2007, Kenneth Segal, Karen and Kenneth Segal Descendants Trust ("Trust"), and Segal and Morel, Inc. ("S & M") (collectively " Segal [19459014"Complainant")suedSEIStrausserandLeonardMellonEsq(SEI'slawyer)SegalActionarosefromapurchaseagreementwhereSEIsoldseveralparcelsoflandtoS&M(whichthenassigneditsrightsandobligationstoseverallimitedcompanies("S&MLLCs”)ofwhichSegalandTrustaresolemembers)SegalandTrustsubsequentlyagreedtoselltheirinterestsinS&MLLCtoKHovnanianPennsylvaniaAcquisitionsLLC("Hovnanian")

According to the underlying complaint sabotaged the SEI, Strausser and Mellon Hovnanian affair by producing a frivolous court case as well as a frivolous arbitration.

Segal Complaints of action included four bills: future contractual relationships; (3) Harmful prosecution; 42 Pa. C.S.A. § 8351

ff ; and (4) abuse of process.

Appellees informed the Regent of the Segal Action and sought cover. The current insurance policy explicitly provides coverage for personal and advertising injuries. Regent provided a defense to Segal Action subject to rights and was sued for a declaration that it has no obligation to defend or replace Appellees. The district court, in what it hoped, was a Solomon-like decision, which was partly granted, partly denied and partly rejected both proposals for a brief judgment. It granted the Appellee's summary draft proposal "in so far as it seeks an explanation that [Regent] has an obligation to defend [Appellees] in [ Segal Action]" and "in so far as it seeks an explanation that [Regent] has an obligation to compensate [Appellees] for the harmful prosecution in the underlying action, with the exception of punitive damages. By initiating a partial judgment in favor of and against both Appellees and Regent, the district court declared that Regent has an obligation to indemnify Appellees for the damages prosecution (with the exception of any punitive damages granted on this claim) and to defend Appellees in the underlying action.

The District Court declared that the language of the policy is ambiguous because of the criminal prosecution under the Pennsylvania Act, codified as "Misuse of Civil Procedure" by the Dragonetti Act, 42 Pa. C.S.A. § 8351, et.seq. requires more than proof of gross negligence. Instead, evidence of actual malice or wrong motive is required, and damaging prosecution thus constitutes intentional damages under state law. The conclusion that the insurer has an obligation to defend, where there is a possibility that a claim against a defendant must be covered under the defendant's insurance.

ANALYSIS

In his brief in support of his draft summary judgment, Regent seems to argue that "exclusion of knowledge of crime" applies to all harmful prosecution claims because evil is a necessary element.

It is well established that the obligation to defend arises when the complaint submitted by the injured party may possibly come within the scope of the policy. The actual allegations concerning the underlying complaint must be regarded as true and be interpreted liberally in favor of the insured. In turn, the obligation is to defend "firmly" only of such accusations.

The four corners of the complaint rule are the correct statement of Pennsylvania law and that according to this method there is coverage for claims that potentially fall within the scope of coverage, but only to the extent that these potential claims are based on the complaint itself. The application of this standard, the third circuit, to enable defense and damages, must establish that the malicious prosecution claim set out in the underlying complaint in the Segal document "potentially falls" within the scope.

The underlying complaint clearly stated intentional and sentimental conduct – as opposed to negligence (or gross negligence) – on the part of Appellee. SEI was aware of an imminent transaction and desperately wanted to stop it, hoping that this would have that leverage effect to secure monetary concessions from Segal Sellers. SEI and Strausser, along with Mellon, their longtime lawyer, hatched an unfounded, playful and damaging plan to track the transaction by filing a frivolous lawsuit mentioned below. Strausser admitted that he knew that SEI lacked the necessary right of first refusal.

In fact, Appellee's lawyer "admitted to Segal Seller's lawyer [prior to the hearing before the state trial court] that Strausser had instructed him to submit everything he could to stop the transaction. Mellon also admitted that Strausser, who had verified the complaint to the State, had never actually In the end, the application for a state court and Lis Pendens had the desired effect: the Hovnanian refused to proceed with a closure.

SEI used the lis pendens mechanism as a procedural weapon, and it was The purpose of the voluntary applications was not lost in the trial: 'The plaintiff lodged his complaint to secure a lis pendens linked to the properties in question in the dispute … the practical effect of a recorded lis pendens is to make a defendant's property non-market. ”

The third circle therefore found that it had no choice but to bring the matter to court m ed instructions to grant Regent's summary judgment judgment and to deny Appellee's summary judgment decision and to adopt judgment in favor of Regent and against Appellees declaring that Regent has no obligation to defend or defend Appellee's in Segal Action.

It is always inappropriate to force an insurance company to defend an insured who acted intentionally and maliciously to cause damage to third parties. When the appeals instructed their lawyers to file a lawsuit that could lead to the sale of the property to the Hovnanian and cause damage to the property owners, they acted knowingly, intentionally and harmfully to cause damage to the property owners. There was therefore no successful behavior, no accident, no event that would require defense.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to employment as an insurance consultant specializing in insurance coverage, handling insurance claims, improper insurance and insurance fraud and insurance fraud. He also serves as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and attorney handling attorney and more than 52 years in the insurance industry. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine / ACE Legend Award.

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