well the next case post the st paul travelers insurance co numbers ten days thirty eight eighty eight and thirty three hundred this is one where we switched counsel and have m represent st paul travelers this case involves the scope of an insurance duty to defend its insured with respect to a sanctions petition under a legal malpractise policy that expressly excludes sanctions from coverage under the plain language approach that the pennsylvania courts in this court follows with respect to the interpretation of an insurance policy you have mr september twenty five o clarify for me why the court went back and focused on the third letter was letter as opposed to the first and second letters i think it was the october twelfth letter that that actually missed your post to notify his insurance carrier i believe was the october twenty two thousand and five letter from mr williams there was definitely a claim with respect to malpractise liability and there's no dispute with respect to that and whether the weather travel to travelers was put on notice that earlier on the telephone conversation which your honor mentioned or the one of the quote unquote other relief which is important here are we talking about that's mercy in february of zero six they're asking they're making both of those claims right that's correct and we're talking about are we talking at the same conduct the very same conduct of lawyers  in the context of this school who sanctions petition or in the malpractise quite possibly your honor i'll i'll just mention that there was not a complaint filed at that point for a legal malpractise so we're not sure precisely what the contours would be of any malpractise suit which was not filed until two thousand and seven you don't need a filing do you know you you need to claim it's a claim or suit but in terms of the sanctions petition and this is claim the sanctions petition is that answer could possibly request covered loss under this policy and i would suggest that the answer to that is no for a couple of reasons first as a matter of pennsylvania civil  procedure it would have been impossible for that answer to substitute as a complaint in a medical malpractise claim there would not have been any opportunity for the for mr posts or the other potential defendants to have a trial by jury there simply are no pleading spiled at that point also the certificate of merit requirement of the rules of civil procedure would not have to be complied with furthermore and i think perhaps even more importantly mercy hospital itself disclaimed any think that that's part of it mostly wanted to participate in the discovery because its own witnesses were being deposed and these are witnesses by the way who previously had been cautioned by judge cesky that they could be subject to criminal liability criminal defense counsel was brought in as part of the original proceeding during the medical malpractise trial so mercy is concerned about its witnesses also mercy is being subpoenaed it's having discovery taken of its people as part of seeking its costs in the sanctions proceeding not the images based the point at settlement to the prophets there was an even more succinct statement of mercy's petition with respect to the sanctions proceeding on page eight thirty eight the claim by post that most he hopes to obtain malpractise damages in the sanction proceedings is false most his request for damages is limited to fees and costs that it has incurred in the sanction whether mr post is defending the claim or defending the sanctions petition why isn't it the trial judge say well it's sort of the trial judge found that they were related by agreeing to conflate the sanctions petition with the  legal malpractise claim which had not been reduced to a lawsuit at that point the policy is very expressed in terms of what there is a duty to defend there is a duty to defend against a covered l sanctions would not be a covered loss now if we say that because there are potential and i hate to use this word because the first argument we just heard collateral consequences of the sa toppel potential is not a basis for saying that there is a duty to defend there is simply no case that goes that far under pennsylvania law there is no case that any party cites in this briefing to the trial judge in reaching that conclusion cited to a publication in which lawyers said that this is problematic and frankly a couple pages before the reference that she makes they indicate that these collateral proceedings probably would not be covered once we have the problem starts at the at the outset when mr spinelli gives to his counsel mr and ash information regarding the claims that mercy made he didn't tell him about the claims of mercy made in september october november of zero five but he only sent a nash the physician for sanctions and asked for a coverage opinion with respect to that almost like it was putting the rabbit in a hat wasn't well mr nash became aware of the malpractise claim he said that it is to be precise in terms of his deposition testimony he did not recall whether definitely or not he had seen these letters but and this is where there's a conflict between  post's opening brief and the record in this case in the opening brief for example on page three without any citations of the record there was a statement that the coverage counsel acknowledged that his opinion would have been different had he known of the claims letters the record is completely to the contrary mr nash testified in his deposition in this is a page fourteen seventy of the appendix the if he but the point the point that i think the right question that is a question and but mr nash testified that it would not have made any difference to his coverage of the interpretation because the sections petition could not have given rise to any possibility of a covered loss because of the law states that if there's an ambiguity basically if there's a tie goes to the runner who would be the who would be the insured if there's an ambiguity in the policy language it is construed against the insurance carrier and in favor of the insured i would suggest that there is no ambiguity in this policy language the policy is very clear in terms of what is covered it is very clear in terms of what is not covered the confusion results from the attempts to conflate the  that they're trying to avoid the exclusion well we have a factual conflation though don't we i mean we we have claimed it recedes the sanctions we have covered claim right yes and you haven't excluded sanctions proceeding and we've equitable under the unique and serious circumstances presented before under the four corners rule that pennsylvania applies and that this court has applied sitting in diversity the where for clause with that type of broad boilerplate language is not considered you look at the factual allegations that are pleaded and you look at whether that could be a covered claim based upon who's making that assertion and here it's the it's the bob it swim with with the hospital joining in it for the purpose of recovering its own expenses what about the scope of damages under a claim is that in inform the analysis we have to go through here because i'm a little bit confused as to what exactly that covers  specific claim or sue in terms of the defense expenses yes your honor but so there's a lot of costs and fees incurred in connection with the claim made and then you put yourself in the other side's position once you file that lie upon subsequent discovery to expand the case in order to see that there's a duty to defense but this is the opposite of heffernan the discovery that was taken right after the filing of that answer shows that there was no possibility of a covered claim being involved there was no secret that point the claim has been asserted but you have a sanctions petition being filed by the bop it's and then the hospital trying to recover its own expenses the fact that there is some relationship this is like the criminal cases that we cite in our priest the fact that there is a potential of collateral stoffel arising from those cases has never been helped to create a duty on the part of the insurance carrier to defend those cases where do we draw the lines in terms of this carrier trying to limit it exposure by bargaining for this exclusion for which the premiums are reduced from what it would have been otherwise if if you mr catoe good morning your honor  george pitt on behalf of the insured and here on ars please the court i was very gratified to hear mr buyer say that there's no question but that there was a covered claim here because that really is the starting point of this case and once you have a covered claim then if you have if you have just see if we got this correct if you have a covered claim for malpractise that's one thing if you have the bob it's bringing a claim or sanctions let's say mercy did not enter into this and so it didn't muddy the waters you're not saying that that sanctions claim is covered under this policy i'm not and then that's not this case stance of what happened was that they the bobbins filed a claim they travellers wanted to be involved in a deposition they were and the court probably made the wise decision ok look you can be involved in this but you got a phony answer like you're a party and they file an answer and they put at the end they said we want sanctions and then they put the boilerplate that you and i in private when i was in private practice put in two hundred times three hundred times two thousand test we don't even think about it we just do it and you're saying ok that makes the sanctions proceeding  changes color it now becomes one that's covered under this policy because it's a claimer suit and it's not just sanctions it's a toughie here's here's your avail so far well but here's here's where i think it gets a little easier judge all of the reasons that mr buyer suggests why the sanctions proceedings couldn't give relief to mercy in the form of malpractise claims or that it's just boilerplate as we've all seen it or it was just a routine thing with the judge asked them to file a pleading that may be true i'll accept it for purposes of this argument the fact is though that if you are the defense counsel on the preexisting malpractise claim earlier played or not you still have to show up and say preliminarily object to mercy's pleading in the sanctions proceeding and say there's no certificate of merit there's no statements that mostly made in its answer in the sanctions persisted sue it's lawyer it's just not caught we don't need to make more complicated than it is if you mercy believe it's counsel committed malpractise  garden variety legal malplaquet practice and this insurance company has to answer the bell from the moment that filed and cover all and i think the point is judge that when they filed that answer to the sanctions proceedings defense malpractise action that the client filed against the lawyer rather than this action because that's not the only kind of suit that could be filed against this where i'm not practice case is one kind of suit and that's and i want my damages my attorney's fees and every other form of relief but the court beings just yes it may not be good but if the sanctions proceeding is such a yes then you run n the difference if this is different because you know that example your client is not a party to those proceedings the commonwealth with the united states government is bringing those criminal proceedings and you're right the policies don't cover it p now what i'm talking about is the specific pleading that they filed in february in feb eighth right now there's a ask you what time does the duty to defend a rise in europe in your in your view in my view th advise you were making malpractise claims it might have been as early as when they told barton post about it weeks earlier but certainly not later then yeah they did tell him september twenty five for your carry on notice but if i may just follow up on that answer your honor and that's why that's significant because if if the duty to defend arises that and i think we're all agreed that it does and i'm a lawyer for ben post and then i see mercy file  county court asking for death for some kinds of damages i'm committing malpractise is been post lawyer if i'm not defending that requests and that i do very basis is why st paul's had to do is defend it as a duty to defend then maybe maybe it arises when that when when mercy files that response or joins it well i did i think it does judge but here's what the lower court found in these are specific findings of fact which i must point out some of the factual advances in this argument by mr buyer contradict the specific findings of fact of the lower court but here was the lower court specific findings of fact that mercy was involved in the proceedings before it actually filed its pleading in february of two thousand and six how were they involved they were involved in seeking discovery taking depositions they were obviously working with bob its counsel to advance this stock in morse let's go back to after february eighth yes before we go to the over two thousand and seven summons they what did you do post february eight that made it clear that this was a malpractise claim you were in effect defending as opposed to just a sanctions court well the first thing your honor is we need to exclude mercy from filing those pleadings were making those requests for relief in the sanctions proceedings we said it's inappropriate for them to be involved in that but it turns out that's what you're hanging your hat on for the purpose of getting the verdict from the district court yes that's true judge but i had to be there to make those arguments someone has to be there on post behalf to say most eat get out of these proceedings this is not the way you advance of malpractise claims and to do that you are defending and that's the duty to defend that st paul's head now the loser what did you file post february eighth two thousand and six that related to malpractise where they depositions concerning malpractise or were they concerning sanctions there would be they were identical judge because what happened was mercy said mine really or fail to make proper discovery disclosures contrary to the rules of civil procedure and that's what forced me to proffer six policy minutes and settlement and it's the very exact same conduct that the bob bits were saying entitle them to sanctions so that if i'm in a deposition and the nurse who was involved in the actual production of the of the discovery says and mr post told me to do this and mr post said i didn't have to do that that directly relates to the allegations that mercy had made in its events or that post acted improperly just like in a criminal prosecution when the person is accused of something that's going to subject  civil liability i see the record parallel i do too but there's a there's a very important distinction your honor and that is in that criminal context your client is this policies of not practice insurance are not protect me against anything that could happen in the practice of law it's simply protect me against my clients saying i did something wrong in the criminal context my client sent saying i did anything wrong criminal case by saying i didn't steal the money my partner did it right i mean but in that context your honor his client is not making allegations against him the commonwealth of pennsylvania is  clients but it's still not allegations being made by his client the client may be a witness in those proceedings if mercy never joined these sanctions proceedings same pay would have a lot stronger of an argument here what i'm i'm struggling with your argument about collateral consequences is it not the case that there is though precedent to support the notion that the sanction proceeding absolutely just weeks if not it means a certain whether that that we are for cause that prayer for damages was insufficient to trigger full coverage and it was right and your honor we have not advanced that purely as a as a matter the carriers bound we did not advance that argument now there happens to be a collateral estoppel of fact and that's why for example once the malpractise claim is made that malpractise lawyer me who should be being paid by st paul at that point but who isn't i have to be concerned with what the client doing in other fora as to collateral stuff but that's not the reason the reason is because the client is  form making a claim against me for damages i could clear thank you let me just go to the policy the policy identifies the quote cost of the proceedings close quote involved in the suit so it's going to be in the suit as court reporters arbitrators and mediators fees that's very i mean that's qualitatively different from attorney's fees i agree judge however and attorney's fees are under a separate bullet point so i'm not quite sure how the court here can necessarily talk about conflating that there's your conflation well if i may just say so though you around there are other provisions of this policy that once the duty to defend arises even if under only a clean forget the suit only under a claim  carrier has the responsibility to pay counsel to defend and to investigate judge now that's the work the carriers work that's not i work they say investigate now if i'm the defense lawyer and have my client receives the letter from mercy setting forth the malpractise claim and i go about starting to investigate that's my tummy that's my effort i charge legal fees for that that  clearly count them played out but let's just say the policy of head then when you file the post case versus mercy right that's a separate suit that's not something that's involved in the proceeding brought against you at separate where you are the party ruling party you're not claiming are you claiming fees for that yes or why because the law in this circuit and most other circuits has refined itself  the following proposition if you are a defense lawyer defending against amount practice claim and you are being paid by the carrier you have a responsibility not only to defend the affirmative i mean the reasoning that makes more sense to me is that by judge savage in the case if courts as quote of course were to consider the cost of a short incurred by instituting its own action for the purpose of bringing pressure on the other party under the guise of litigation defense it would encourage an indoor smoke with city of litigation and i agree with that i agree that that case says that judge but i'll give you two reasons why it doesn't have to be a first there's either case law that says it doesn't have to be a kind of claim as long as it's intimately wrapped into another to one of the facts secondly the judge and i was there so i can tell you personally the reason we did not want to assert is because that kind of claim would have been in rooms or in county loser in county was not the county we wanted to be in we wanted to be in any county except lucerne county so as a defense lawyer choosing not to make a counter claim that could easily have been a kind of claim for for other reasons is absolutely in my client's best interest is absolutely  compelling to a defense lawyer in protecting his client and doing everything ken to see his client put this thing and that's why i believe judge the case law doesn't have a bright line rule or talismanic if it's not a counter claim it automatically can't be involved if it did they could be accounted client and there's a rational reason which of the policies talks about involved in the proceeding yes and you wait involved in this proceeding i mean just on the four corners i think the mount if if i mean you're relying on four corners you're saying for one proposition but not the other well here's what i'm saying to a judg address this very carefully if i quit when i bring them the separate action in another county i think the two are involved with each other because they deal with the same nucleus of facts in the same exact not in the same proceeding strategic ladder a little bit in terms of what a carrier is responsible to do with a duty to defend but i think under these circumstances and that's one of the things that goes back to the very beginning of this charge under these circumstances st paul's conduct was characterized by putting their head in the sand in one another this they didn't want to hear about it didn't want to deal with it they just said you know a lot i'm going to look at the babbitt petition as sanctions were blinders on let me ask this final question on this before we get to the bad faith the quote isn't the magic date that the sanctions and the malpractise claims were accorded you conflated was fed your eight zero six that is that is the latest date yes because that for the court to say what november twenty first when the doesn't seem to make any sense i mean at the at the first time as he came in was what ten were twenty fifth or so when they want to be in the deposition now that matter for those specific findings of fact judge by the district court that mercy was intricately involved although it had not yet filed its pleading with intricately involved in advancing that sanctions proceeding by participating in discovery making discovery requests insisting on taking dept deposing ben post and other witnesses in that proceeding it was obvious it was it was plain as the nose on my face judge that the pet mercy catholic was working on this sanctions model as a stocking voice for the preexisting not practice mind and i as a defense where judge would have to be deaf dumb and blind having been hired by ben post to be the malpractise lawyer to not recognize what m agreed earlier that what happened that recall for mercy's point of view there are at liberty to do that absolutely and nothing in my position says that they shouldn't have somehow done all this all i'm saying is for goodness penney two prong test is the only basis upon which a bad faith ruling can be sustained and that's just not the case because there are third circuit cases travelers you're saying that they reflexively denied coverage but they assigned this to a senior claim specialist who ignored it well he reviewed the file he hired outside counsel to provide a coverage opinion maybe didn't give him all the information for his counsel and also his counsel's accounts of dialogue with you throughout the course of this matter i mean and i've said to you at the outset of this this is a toughie how in the world can that be bad faith here's how the judge if i may and with all their office i send them a series of letters look things are happening this is taking place come on what's going on over there the first thing he does judge is he makes a decision and there's no coverage and this is a specific finding by the district that the district court acted correctly in entering summary judgment on the duty to defend because it's so plain that once that malpractise claim comes in that they had to deal with the sanctions proceeding when mercy started planning in it point if this is just reasonable reason they can be unreasonable with you know it with well intention the point is it has to be egregious conduct with the bad intention in order i mean that's why i clear i mean honey in an insurance context how do you get more intentionally bad intentions beyond that how do you get more bad intentions by saying we don't know the i mean that's a finding  fact that's just a bad word that's something that allegation you can make but based on the record we have it looks like there was a significant amount of involvement judged contect they had with my office and you can scour the record was  a three telephone call to one of my colleagues in my office that is no resolution response charge no request for more information no appointment of a pennsylvania  not that's not carrying out your duty to investigate or thank you very much i thank you judge here for m and instead of three minutes real let's make it five i think your honor let me begin with the court's permission with the bad faith issue and i think we can dispose of that quickly because the briefing was so far in advance of the o course there's been recent decision since then i believe that a case that is completely dispositive of the bad faith issues is this court's opinion authored by your honor judge ambrose in the a make a mutual insurance company vs focal case which is really opinion which is six fifty three f third one susan myself in my mind now you're going to tell of what he said about you maybe i'm i'm going to just even my mother wouldn't agree i'm going to refer the the court to the language of page one seventy nine of that opinion in the in the f third version because it is completely dispositive of every issue we've just heard about on on bad faith including the fact that this is a tough case  reasonable minds can differ and that was involved in that case as well and the summary judgment in that case on bad faith was affirmed even though the coverage decision was reversed coverage issue was clear your client offered thirty six say it was offering that as a compromise without prejudice to its position and it made that very clear that this that this letter does not you know relates to the sanctions proceeding this is an accommodation we're will as a matter of their own business prudence decide well maybe we will get involved in one of these collateral proceedings even though it's not technically within our duty to defend but it could affect us we might have to pay out a large judgment so if the potential claim has enough money in it and the policy women are large in that's a business decision on the part of the carrier it's not required by the policy even if we agree with you or disagree with mr big cat it was you that the prayer f at least in the answer followed by mercy is enough to trigger full blown coverage on policy don't we still have to give his clients some money for that an existing claim i mean isn't aren't they entitled to something if work was done with respect to the claim and first of all that there's an important distinction here also under the policy the policy does not reserved to the insured the right to select counsel there's nothing in this policy that gave mr post the right but let me let me add on that's that's that really is that the crux of what the problem is you've got a claim here and i guess the court believing it as well trial court that counsel didn't disclose items under the rules that had to be disclosed that can result in a malpractise claim and in fact that was claims being made as far back as september two thousand and five and would that could possibly result in a sanctions cla that as your co counsel noted there the facts are the same for each of them and your client started by saying you better let your mouth practice carrier know because we're coming after you and then he says what happened was in the interim there was this sanctions proceeding and they even joined the sanctions proceeding your client for the purpose of whatever and he's saying it's because the sanctions action was a his coverage throughout because we're violating the four corners rule with that point your honor even extending it as heffernan did to the proceedings in the discovery mercy itself disclaimed that it was seeking violating the four corners rule with respect to the post the mersey separate actions you may be violating the four corners rule with regard to the timing of when you kick in for the coverage maybe february  november twenty first or five but you can still stay within the four corners if you do what i just said but there's no proceeding based on that claim there is an identity of facts which can come up in any number of hypothetical situation or in the clear on this aspect of the policy you're not even clear on the claim that if there were actions that were taken in defense of the claim as distinct if you could separate the claim from the sanctions was involved in the sanctions the district court could find i would suggest that's a conclusion and not a finding in that under this court's the novo review with respect to summary judgment because that's where that was made this court can see that  interpret in the policy it does not extend that far that just because there's a commonality of facts and there is no case that i did the district court or any party has cited that supports that conclusion