Bensalem Tp. v. Western World Ins. Co.

• Decision Date: 15 April 1985
• Docket Number: Civ. A. No. 84-2068.
• Citation: 609 F. Supp. 1343
• Parties: BENSALEM TOWNSHIP v. WESTERN WORLD INSURANCE COMPANY.
• Court: U.S. District Court — Eastern District of Pennsylvania

609 F. Supp. 1343

BENSALEM TOWNSHIP v. WESTERN WORLD INSURANCE COMPANY.

Civ. A. No. 84-2068.

United States District Court, E.D. Pennsylvania.

April 15, 1985.

Emil F. Toften, Emil F. Toften & Associates, Chalfont, Pa., for plaintiff.

Richard S. March, Galfand, Berger, Senesky, Lurie & March, Philadelphia, Pa., for defendant.

MEMORANDUM

LOUIS H. POLLAK, District Judge.

Plaintiff Bensalem Township seeks a declaration that defendant Western World is contractually bound to cover any liability which plaintiff may incur in Johnson v. Township of Bensalem, Civil Action No. 83-0449 (E.D.Pa.), an age discrimination action brought by the widow of a former Bensalem Township police officer. See 609 F.Supp. 1340. Defendant has counterclaimed for a declaration of non-coverage, arguing that the insurance policy in question excludes coverage for (1) claims made before February 21, 1982, and (2) claims arising out of willful violations of federal or state statutes. The parties have stipulated to the relevant facts,¹ and have filed cross-motions for summary judgment.

I. Statement of Facts

A. The Johnson Litigation

The facts are uncomplicated. On January 31, 1981, Sergeant William L. Johnson retired from the Bensalem Township Police Department. Sergeant Johnson, then fifty-four years old, was required to retire under the township's mandatory retirement policy for police officers. Sergeant Johnson died on May 11, 1981. Four months later, on September 18, 1981, Harriet Johnson, the Sergeant's widow, filed an age discrimination charge with the Equal Employment Opportunity Commission. On September 24, 1981, the township received a letter from the EEOC notifying the township that a discrimination charge had been filed against it. The EEOC letter stated in full:

This is to notify you that the above captioned "charge" has been filed under the provisions of the Age Discrimination in Employment Act of 1967, as amended in 1978, alleging an unlawful discriminatory practice. Charge is defined as a written statement identifying the prospective defendant and generally describing the alleged discrimination. A statement summarizing the particulars of the charge is enclosed.

The law provides that after receiving such a charge, the Equal Employment Opportunity Commission (EEOC) is required to notify the prospective defendant and try to eliminate any alleged unlawful practice by informal conciliation, conference, and persuasion.

An Equal Opportunity Specialist will contact you in the near future to review the circumstance involved in this case and, if possible, to work out some solution consistent with the statute and agreeable to the parties.

Letter from Marvin Meyers, ADEA Supervisor, to Director of Personnel, Township of Bensalem (Sept. 22, 1981) (attached as Exhibit B to the Stipulation of Facts). The enclosure to which Mr. Meyers' letter refers was a copy of the charge itself. That document contained the following two-sentence explanation of Mrs. Johnson's age discrimination claim:

On January 31, 1981, my husband, William L. Johnson (deceased), was forced to retire at age 54, after 25 years of service as a Police Officer.

Respondent's policy stated that employees with 25 years of service and were sic 50 or more years of age had to retire.

Charge of Discrimination (attached as Exhibit A to the Stipulation of Facts).

Six months later, on March 22, 1982, the township received a letter from one Kevin J. Berry, who was identified as the "Equal Opportunity Specialist" to whom the Johnson matter had been assigned. Mr. Berry's letter briefly discussed the EEOC's procedure of seeking voluntary settlement of discrimination charges, and requested some general information concerning the township's retirement policy for police department personnel. Letter from Kevin J. Berry to Natalie A. Strange, Township Manager (March 19, 1982) (attached as Exhibit C to the Stipulation of Facts).

On June 9, 1982, the township received the EEOC's determination that the township had violated section 4(a)(1) of the ADEA, 29 U.S.C. § 623(a)(1). Letter from Johnny J. Butler to Natalie A. Strange (June 7, 1982) (attached as Exhibit E to the Stipulation of Facts). Pursuant to section 7 of the ADEA, 29 U.S.C. § 626(d), the EEOC sought to achieve a voluntary settlement of the charge, but to no avail. On December 22, 1982, the township's attorney was informed that Mrs. Johnson would bring suit in federal court on her age discrimination claim; that suit was filed on January 27, 1983. Mrs. Johnson's complaint sought damages for wrongful discharge and willful violation of the ADEA.

Plaintiff notified its insurance carrier of the potential claim against it by a letter dated June 23, 1982—shortly after the EEOC determination but well before suit was instituted. Letter from Henry F. Huhn to Marie Bader (attached as Exhibit F to the Stipulation of Facts). Western World and the township exchanged several letters over the course of the next few months, and on April 7, 1983, Western World notified the township that, while it would defend the township against Mrs. Johnson's claim, it reserved the right to disclaim coverage at any time. Letter from Michael P. Sotland to Bensalem Township (April 7, 1983) (attached as Exhibit I to the Stipulation of Facts). This letter cited a number of policy exclusions, including the provision excluding from coverage losses arising out of "the willful violation of statute or ordinance committed by or with the knowledge of the insured." Id.

As the Johnson litigation moved forward, the parties filed cross-motions for summary judgment on a number of issues. In a Memorandum and Order entered May 22, 1984, I granted Mrs. Johnson's motion for summary judgment on the liability portion of her ADEA claim against the township. Johnson v. Township of Bensalem, Civil Action No. 83-0449, Memorandum/Order (E.D.Pa. May 22, 1984). Included in this determination was the express finding that defendant willfully violated the ADEA within the meaning of Wehr v. Burroughs Corp., 619 F.2d 276 (3d Cir.1980). Id. at ¶ 5.

B. The Parties' Contentions

Plaintiff seeks coverage under a "claims made" policy,² covering "any claim or claims which are first made against the insureds" during the policy period. The policy period runs from February 21, 1982 to February 21, 1983. Defendant argues that the "claim" in the Johnson case was "first made" on September 24, 1981, when the township received its notification of the EEOC charge which Mrs. Johnson had filed against it. In addition, defendant maintains that the Johnson litigation arises out of "the willful violation" of the ADEA — citing the Memorandum/Order granting Mrs. Johnson's summary judgment motion on that issue — and is therefore excluded from insurance protection under the policy provision quoted in its reservation of rights letter. Plaintiff contends that (1) defendant is estopped from denying coverage on the basis of the date the claim was first made, because defendant failed to invoke that theory when reserving its right to disclaim coverage in April 1983; (2) in any event, no "claim" was made against plaintiff until December 1982, when plaintiff was first notified that suit would be brought against it; and (3) the "willful violations" exclusion does not apply because the term "willful" carries different meanings in ADEA litigation and in the insurance policy.³

II. Estoppel

Plaintiff argues that defendant may deny coverage only on those grounds specifically raised by defendant's letter of April 7, 1983. In that letter, defendant promised to defend plaintiff in the Johnson litigation, but reserved the right to disclaim coverage for any liability that litigation might generate. The letter does not explain the reasons why plaintiff's insurance policy might not cover Mrs. Johnson's lawsuit, but simply quotes several policy provisions which exclude certain categories of injuries or conduct from insurance coverage. Nowhere does the letter refer to the "claims first made" provision of plaintiff's insurance policy. Plaintiff contends that defendant is therefore estopped from invoking that provision now.

The Pennsylvania Supreme Court has stated that "the essential elements of estoppel are an inducement by the party sought to be estopped ... to the party who asserts the estoppel ... to believe certain facts to exist — and the party asserting the estoppel acts in reliance on that belief." Sabino v. Junio, 441 Pa. 222, 272 A.2d 508, 510 (1971) (emphasis in original). Thus, in Slater v. General Cas. Co. of America, 344 Pa. 410, 25 A.2d 697 (1942), the insurer initially denied coverage because the policy had been cancelled. The policyholder subsequently failed to forward copies of the summons and complaint to the insurer, as required by the policy. The court found that, due to the insurer's insistence that the policy had been cancelled, "the insured properly thought it useless to comply further with the requirements of the policy." 25 A.2d at 699. Having in effect caused the policyholder to violate the policy, the insurer could not rely on the violation to withhold coverage. See id. at 699-700. See also Beck v. Pennsylvania National Mut. Cas. Ins. Co., 429 F.2d 813, 818 (5th Cir.1970) (applying Pennsylvania law) (where insurer denied coverage and refused to defend action against policyholder, insurer could not invoke policyholder's subsequent failure—in violation of the policy— to tell insurer of any settlement offers).

The converse of this principle is of course that where the party asserting estoppel has not changed its position in reliance on its opponent's representation, estoppel will not be found. See, e.g., Guardian Life Ins. Co. v. Zerance, 505 Pa. 345, 479 A.2d 949, 954 (1984); Blofsen v. Cutaiar, 460 Pa. 411, 333 A.2d 841, 844 (1975); Pfeiffer v. Grocers Mut. Cas. Ins. Co., 251 Pa.Super. 1, 379 A.2d 118 (1977). In Pfeiffer, recovery was sought for the mistaken demolition of two buildings. The insurer...