Southmont council hires independent legal counsel as insurance company denies coverage

JOHNSTOWN, Pa. – The Southmont Borough Council has hired defense attorneys as it is among dozens of defendants subject to a class-action lawsuit seeking damages for all residents who’ve paid out-of-pocket expenses to repair sewer lines in the Johnstown area.

The council voted to hire independent legal counsel during a special meeting Tuesday because its insurance carrier, Selective Insurance, is denying the borough coverage in the class action, borough Solicitor Eric Hochfeld said.

After a series of recent correspondence with Selective Insurance, the company has denied providing the borough with legal defense in the class action, Hochfeld said.

Hochfeld advised the council to hire a law firm from Pittsburgh to handle the borough’s defense in the class action while he explores taking Selective Insurance to court over breach of contract under the borough’s insurance policy.

Hochfeld said he would file a declaratory judgment action against Selective Insurance, asking the court to determine whether the insurance company has a duty to defend Southmont in the class action.

“Based on initial review, I think we have a viable claim,” he said.

If the borough makes a claim against Selective Insurance and is successful, then the insurance company would have to provide defense on behalf of Southmont in the class action and also cover monetary damages that may result from the class action, Hochfeld said.

But while the borough plans to file a declaratory judgment against Selective Insurance, Hochfeld stressed that “we still have to address the class action lawsuit, so the borough would need representation.”

The council voted unanimously to hire Levicoff Law Firm, of Pittsburgh, to defend the borough in the class-action lawsuit at a rate of $335 an hour for partner work; $265 an hour for associate work; and a $5,000 retainer.

Hochfeld said that any fees paid to Levicoff could be recovered if Selective Insurance is found to be liable for damages.

Council members Doug Beri, Richard Burkert, Eugene Kupchella, Matthew McVicker, Bob Morgan and Sheree Speicher approved hiring Levicoff Law Firm to defend the borough in the class-action.

Council member Kurt Wolford was absent from the meeting Tuesday.

The class-action, filed early this year by Scanlon & Wojton Injury Lawyers at the Cambria County Courthouse in Ebensburg, names 26 defendants – all governmental agencies that have had a part in planning the Johnstown region’s sewer system overhaul in 2008 and seeing it through its completion around 2021.

The defendant named first in the case is the Johnstown Redevelopment Authority or JRA, which owns the Wastewater Treatment Plant. The Pennsylvania Department of Environmental Protection or DEP, required the JRA to stop stormwater infiltration from causing sewage overflows at the plant during heavy rains.

The lawsuit alleges that the cost of a solution to an environmental problem was shifted from the JRA to private property owners.

According to the lawsuit, the JRA could have expanded the treatment plant’s capacity to eliminate sewage overflows. Instead, the lawsuit alleges that the DEP and the JRA acted jointly to coerce and compel all of the 21 municipalities served by the JRA-administered sanitary sewer system to sign consent agreements with the DEP and amend municipal ordinances to compel residential compliance with a plan to replace all sewer lines in the system.

The municipalities that signed consent orders and enforced residents’ compliance, including Southmont, are also defendants in the class-action.

Selective Insurance denied the borough’s claim for defense coverage in the lawsuit on the basis that its policy with the borough – which started in 2022 – wasn’t in place when the claims outlined in the class-action were made, Hochfeld said.

“My position is they are looking at the wrong time period,” Hochfeld said.

He said the claims really begin when individual residents suffered a loss, and paid money to have work done to renovate their private sewer lines.

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