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Alps Property & Casualty Insurance Co. v. Turkaly

United States District Court, S.D. West Virginia, Charleston Division

January 11, 2018

ALPS PROPERTY & CASUALTY INSURANCE COMPANY, Plaintiff,
v.
MICHAEL A. TURKALY, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          JOSEPH R. GOODWIN UNITED STATES DISTRICT JUDGE

         Pending before the court is the plaintiff's Motion for Summary Judgment [ECF No. 30]. The intervening defendant, David M. Turkaly, filed a response in opposition [ECF No. 33], and the plaintiff filed a reply [ECF No. 33]. The matter is ripe for adjudication. For the reasons stated below, the plaintiff's Motion is GRANTED in part and DENIED in part.

         I. Factual and Procedural Background

         The plaintiff, ALPS Property & Casualty Insurance Company (“ALPS”), is a professional liability insurance carrier that provides malpractice insurance coverage for lawyers. The defendants are Michael A. Turkaly, individually, and Michael A. Turkaly, Attorney at Law, LC. Michael A. Turkaly, Attorney at Law, LC purchased ALPS' professional liability malpractice insurance for the coverage periods September 1, 2015 to August 31, 2016 (“2015 Policy”) and September 1, 2016 to August 31, 2017 (“2016 Policy”). Michael Turkaly, individually, is the only practicing attorney at Michael A. Turkaly, Attorney at Law, LC. The intervening defendant, David M. Turkaly, is Michael Turkaly's brother and is the plaintiff in the underlying lawsuit against Michael Turkaly.

         A. The Underlying Lawsuit

         On July 10, 2016, David Turkaly filed a lawsuit against Michael Turkaly, and twenty-three other parties, in the Circuit Court of Jackson County, West Virginia regarding Michael Turkaly's administration of the Declaration of Revocable Living Trust of Wanda S. LeFebvre (“the Trust”) as the successor trustee. Compl. Ex. 2, at 2-3 [ECF No. 1-2]. Michael Turkaly is a named beneficiary under the terms of the Trust. See Id. at 3; Mot. Intervene Ex. 2, at 4 [ECF No. 14-2]; Compl. ¶ 19 [ECF No. 1]; Ans. ¶ 19 [ECF No. 10].

         On July 15, 2016, David Turkaly mailed a letter to a P.O. Box address in Evans, West Virginia, notifying Michael Turkaly of the underlying lawsuit and telling him to expect to receive a copy of the complaint and waiver of service form from the Jackson County Clerk of Court. Mot. Intervene Ex. 2, at 21. On July 18, 2016, those materials were mailed by the Clerk of Court to the same P.O. Box address. Id. at 10. Michael Turkaly never responded to either communication and was personally served with the complaint for the underlying lawsuit on September 6, 2016. Compl. Ex. 6, at 3 [ECF No. 1-6].

         B. The Current Lawsuit

         Michael Turkaly had professional liability insurance through ALPS during the 2015 Policy period, which ran from September 1, 2015 to August 31, 2016. On August 31, 2016, ALPS sent Michael Turkaly an online application to renew his professional liability insurance for the 2016 Policy period. Compl. ¶ 23; Ans. ¶ 23. The online application asked “[a]re you aware of or do you have knowledge of any fact, circumstance, act, error or omission that could reasonably be expected to be the basis of the claim against you, regardless of the merit of such claim, that has not been previously reported to ALPS?” Compl. ¶ 26; Ans. ¶ 26. Michael Turkaly answered the question in the negative, although he has since admitted to having knowledge of the underlying lawsuit at the time by claiming “he believes he informed ALPS by telephone of the underlying [lawsuit].” Compl. ¶¶ 24-25; Ans. ¶¶ 24-25.

         On September 15, 2016, Michael Turkaly signed an “Acceptance Page” as Owner, Partner or Corporate Officer of Michael A. Turkaly, Attorney at Law, LC. Compl. Ex. 5, at 2 [ECF No. 1-5]. The bottom of the Acceptance Page contains three Representations and Assurances, one of which states “[e]xcept as otherwise disclosed in writing or electronically to ALPS there exists no changes to the answers and information set forth in the most recent Application the firm has submitted to ALPS, including all supplements and attachments thereto.”[1] Id.

         After making representations on his online application and the Acceptance Page, on August 31, 2016 and on September 15, 2016, respectively, that he was unaware of any facts that could form the basis of a claim against him, Michael Turkaly reported the underlying lawsuit to ALPS by email on September 16, 2016. Compl. Ex. 6, at 2. ALPS is currently defending Michael Turkaly in the underlying lawsuit pursuant to a reservation of rights under the 2016 Policy. Compl. ¶¶ 36-37.

         Consequently, on October 14, 2016, ALPS mailed a Letter of Rescission and returned the premium for the 2016 Policy to Michael Turkaly. Compl. ¶ 47. ALPS based its rescission on the assertion that Michael Turkaly made a “[m]isrepresentation, omission, concealment of facts, and incorrect statements . . . in the application for insurance which were fraudulent and material to the acceptance of the risk and the hazard assumed by [ALPS].” Compl. Ex. 7, at 2 [ECF No. 1-7].

         On October 26, 2016, ALPS filed the instant declaratory action against Michael Turkaly, individually, and Michael A. Turkaly, Attorney at Law, LC seeking three declarations: (1) that the 2016 Policy does not provide coverage for the underlying lawsuit, (2) that the 2016 Policy has been rescinded by ALPS, and (3) that ALPS is entitled to reimbursement from Michael Turkaly for costs incurred in providing Michael Turkaly with a legal defense in the underlying lawsuit under the 2016 Policy.

         Michael Turkaly failed to answer, or otherwise respond to, the complaint in this case in a timely manner, as evidenced by the entry of default against Michael Turkaly on January 13, 2017. Clerk's Entry of Default [ECF No. 9]. Michael Turkaly answered the complaint two weeks later, and David Turkaly motioned the court to intervene under Rule 24 on March 10, 2017. Mot. Intervene 1. The court granted David Turkaly's Motion to Intervene, Mem. Op. & Order [ECF No. 19], and it is David Turkaly who has been litigating ALPS' Motion for Summary Judgment. Michael Turkaly has not responded or otherwise participated in the litigation of this case since answering the complaint.

         II. Legal Standard

         To obtain summary judgment, the moving party must show that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). In considering a motion for summary judgment, the court will not “weigh the evidence and determine the truth of the matter.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). Instead, the court will draw any permissible inference from the underlying ...


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