City of Erie, Pa. v. Guaranty Nat. Ins. Co.

Decision Date21 March 1997
Docket NumberNos. 96-3117,s. 96-3117
Citation109 F.3d 156
PartiesCITY OF ERIE, PENNSYLVANIA, v. GUARANTY NATIONAL INSURANCE COMPANY; Imperial Casualty and Indemnity Company; Western World Insurance Company, City of Erie, Appellant. & 96-3163.
CourtU.S. Court of Appeals — Third Circuit

Gregory A. Karle (argued), Office of the City Solicitor, Erie, PA, for Appellant.

Gerald J. Stubenhofer, Jr. (argued), Marcia H. Haller, MacDonald, Illig, Jones & Britton, Erie, PA, for Appellee, Guaranty National Insurance Company.

Richard P. Jeffries (argued), Robert M. Slovek, Kutak Rock, Omaha, NE, for Appellee, Imperial Casualty and Indemnity Company.

Pamela G. Cochenour (argued), Nora Barry Fischer, Pietragallo, Bosick & Gordon, Pittsburgh, PA, for Appellee, Western World Insurance Company.

Before: SCIRICA and COWEN, Circuit Judges and POLLAK, District Judge. *

OPINION OF THE COURT

SCIRICA, Circuit Judge.

The issue on appeal involves the interpretation of an "occurrence" insurance policy under Pennsylvania law, specifically whether the tort of malicious prosecution "occurs" when the criminal charges are filed or when the prosecution is resolved in the plaintiff's favor.

I.

Louis DiNicola was arrested and charged on March 25, 1980, for arson and three counts of second degree murder. He was convicted on all counts. On December 6, 1983, the Pennsylvania Supreme Court overturned his conviction and remanded for a new trial. Commonwealth v. DiNicola, 503 Pa. 90, 468 A.2d 1078 (1983). More than ten years later, on May 23, 1994, a jury acquitted DiNicola of all charges.

On December 15, 1994, DiNicola filed a complaint in federal court charging the City of Erie with, inter alia, malicious prosecution. He sought damages under federal and state law. 1 In order to assert a claim of malicious prosecution, a plaintiff must allege "the defendants instituted proceedings without probable cause, with malice, and that the proceedings were terminated in favor of the plaintiff." Cosmas v. Bloomingdales Bros., Inc., 442 Pa.Super. 476, 660 A.2d 83, 85 (1995) (quoting Amicone v. Shoaf, 423 Pa.Super. 281, 620 A.2d 1222, 1224 (1993)). It is undisputed that a plaintiff has no cause of action for malicious prosecution in Pennsylvania until dismissal or acquittal of the underlying criminal charges. The statute of limitations in Pennsylvania for malicious prosecution claims is two years. 42 Pa.Cons.Stat.Ann. § 5524; Seto v. Willits, 432 Pa.Super. 346, 638 A.2d 258 (1994). It begins to run on the date when the underlying proceedings are terminated in the plaintiff's favor. Cap v. K-Mart Discount Stores, Inc., 357 Pa.Super. 9, 515 A.2d 52 (1986).

The City of Erie requested a defense and indemnification from its insurers, appellees Guaranty National Insurance Company, Imperial & Indemnity Company and Western World Insurance Company. Each insurance company declined coverage on the ground that the alleged tort had not occurred during the periods covered by their respective policies with the city. 2 The City of Erie then sought a declaratory judgment in the United States District Court for the Western District of Pennsylvania that the insurers were obligated to defend and indemnify it against DiNicola's action. 3

The parties agree the insurance policies provide coverage for malicious prosecution suits and are "occurrence" policies, not "claims made" policies. 4 "An 'occurrence' policy protects the policy holder from liability for any act done while the policy is in effect, whereas a 'claims made' policy protects the holder only against claims made during the life of the policy." St. Paul Fire & Marine Ins. Co. v. Barry, 438 U.S. 531, 535 n. 3, 98 S.Ct. 2923, 2927 n. 3, 57 L.Ed.2d 932 (1978). Nor are the time periods covered by the policies in dispute. But the parties disagree whether the tort of malicious prosecution occurred, for insurance coverage purposes, during the periods covered by these policies.

Guaranty National and Western World moved to dismiss the case under Fed.R.Civ.P. 12(b)(6), asserting the tort did not occur during the periods covered by their policies. They argued the tort of malicious prosecution "occurs" for insurance coverage purposes at the time the underlying criminal charges are filed against the plaintiff. Because the murder and arson charges against DiNicola were filed on March 25, 1980, when none of their policies was in effect, they claimed there was no coverage. In response, the City of Erie contended the tort of malicious prosecution "occurs" when the claim arises--in this case, in 1994, when DiNicola was acquitted and when he was first able to bring suit under Pennsylvania law. In the alternative, the City argued for application of a "multiple trigger" analysis similar to that employed by Pennsylvania courts in asbestosis cases. Under a multiple trigger theory, all three insurers could be responsible to some degree to defend and indemnify the City of Erie against DiNicola's suit.

The district court held the insurance contracts were "occurrence policies" and that the tort of malicious prosecution "occurs" when the underlying charges are filed. Erie v. Guaranty Nat'l Ins. Co., 935 F.Supp. 610 (W.D.Pa.1996). Because the underlying charges were filed against DiNicola on March 25, 1980 and none of the insurance policies were in force on that date, the court dismissed the claims against Western World and Guaranty National. Subsequently, Imperial was granted summary judgment on the same grounds. The City of Erie now appeals.

II.

The district court had diversity jurisdiction over this declaratory judgment action under 28 U.S.C. § 1332. We have jurisdiction under 28 U.S.C. § 1291.

Our review of the district court's dismissal of the complaint under Fed.R.Civ.P. 12(b)(6) is plenary. We must determine whether, under any reasonable reading of the pleadings, the plaintiff may be entitled to relief. We must accept as true the factual allegations in the complaint and all reasonable inferences that can be drawn therefrom. Nami v. Fauver, 82 F.3d 63 (3d Cir.1996). Our review of the district court's grant of summary judgment is plenary. United States v. Capital Blue Cross, 992 F.2d 1270 (3d Cir.1993). We apply the same test the district court should have used originally. Summary judgment should be sustained only if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.

III.
A.

Under Pennsylvania law, the general rule is that a tort "occurs" for insurance coverage purposes when the injuries caused by the tort first become apparent or manifest themselves. In the case of malicious prosecution, it is undisputed that the injuries caused by the tort first manifest themselves at the time the underlying criminal charges are filed.

Had the City of Erie purchased an occurrence policy in effect on March 25, 1980, when the charges against DiNicola were filed, the City would be covered. Likewise, had the City of Erie obtained a "claims made" insurance policy in effect on December 15, 1994, it would be covered. But as we have noted, all of the insurance policies here were occurrence policies, and none were in effect at the time DiNicola's injury first manifested itself.

B.

The Pennsylvania Supreme Court has not decided when, for insurance coverage purposes, the tort of malicious prosecution occurs. As a federal court sitting in diversity, we must predict what the Pennsylvania Supreme Court would do. In making this determination, we give proper regard to the opinions of Pennsylvania's intermediate courts. The policies underlying applicable legal doctrine, current trends in the law and decisions of other courts also inform our decision. Wassall v. DeCaro, 91 F.3d 443, 445 (3d Cir.1996).

Even though the Pennsylvania courts have not addressed this precise question, other courts have done so. Although there is no agreement on when the tort of malicious prosecution occurs for insurance coverage purposes, the clear majority of courts have held the tort occurs when the underlying criminal charges are filed. Royal Indemnity Co. v. Werner, 979 F.2d 1299 (8th Cir.1992) (applying Missouri law); Southern Maryland Agric. Ass'n, Inc. v. Bituminous Cas. Corp., 539 F.Supp. 1295 (D.Md.1982) (applying Maryland law); Ethicon, Inc. v. Aetna Cas. and Sur. Co., 688 F.Supp. 119 (S.D.N.Y.1988) (applying New Jersey law); S. Freedman & Sons, Inc. v. Hartford Fire Ins. Co., 396 A.2d 195 (D.C.1978); American Family Mut. Ins. Co. v. McMullin, 869 S.W.2d 862 (Mo.Ct.App.1994); Paterson Tallow Co., Inc. v. Royal Globe Ins. Companies, 89 N.J. 24, 444 A.2d 579 (1982); Muller Fuel Oil Co. v. Ins. Co. of North America, 95 N.J.Super. 564, 232 A.2d 168 (App.Div.1967); Harbor Ins. Co. v. Cent. Nat'l Ins. Co., 165 Cal.App.3d 1029, 211 Cal.Rptr. 902 (1985); Zurich Ins. Co. v. Peterson, 188 Cal.App.3d 438, 232 Cal.Rptr. 807 (1986). But two courts have held the tort of malicious prosecution occurs on the date when the plaintiff receives a favorable termination of the underlying proceeding and his claim for malicious prosecution arises. Roess v. St. Paul Fire and Marine Ins. Co., 383 F.Supp. 1231 (M.D.Fla.1974) (applying Florida law); Security Mut. Cas. Co. v. Harbor Ins. Co., 65 Ill.App.3d 198, 21 Ill.Dec. 707, 382 N.E.2d 1 (1978), rev'd on other grounds, 77 Ill.2d 446, 34 Ill.Dec. 167, 397 N.E.2d 839 (1979).

1.

Courts adopting the majority rule have cited two major principles to explain why the tort of malicious prosecution occurs at the time the criminal charges are filed. 5 One common theme is that the "essence", "gist", or "focus" of malicious prosecution is the filing of the underlying charges. Favorable termination of the criminal action is merely a "condition precedent" to bringing the action. See, e.g., Muller, 232 A.2d at 174-75 ("essence of tort" is making of criminal charge; favorable termination is "condition precedent"); Freedman, 396 A.2d at 199 (filing of charges is "gist" and "crucial...

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