City of Erie v. GUARANTY NAT. INS. CO., Civil Action No. 95-90 Erie.

• Citation: 935 F. Supp. 610
• Decision Date: 19 January 1996
• Docket Number: Civil Action No. 95-90 Erie.
• Parties: CITY OF ERIE, Plaintiff, v. GUARANTY NATIONAL INSURANCE COMPANY, Imperial Casualty and Indemnity Company, and Western World Insurance Company, Defendants.
• Court: United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)

935 F. Supp. 610

CITY OF ERIE, Plaintiff, v. GUARANTY NATIONAL INSURANCE COMPANY, Imperial Casualty and Indemnity Company, and Western World Insurance Company, Defendants.

Civil Action No. 95-90 Erie.

United States District Court, W.D. Pennsylvania.

January 19, 1996.

Gregory A. Karle, Dailey, Restifo & Dailey, Erie, PA, for City of Erie, Pennsylvania.

Marcia H. Haller, Steven C. Beckman, MacDonald, Illig, Jones & Britton, Erie, PA, for Guaranty National Insurance Company.

Mary K. Conturo, Kutak Rock, Pittsburgh, PA, Robert M. Slovek, Kutak Rock, Omaha, NE, for Imperial Casualty and Indemnity Company.

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

MEMORANDUM

McLAUGHLIN, District Judge.

This Court's jurisdiction over this action is by reason of diversity of citizenship under 28 U.S.C. § 1332. The Plaintiff is the City of Erie, Pennsylvania (the "City," "Erie"). The Defendants are several companies that provided insurance coverage to Erie between 1980 and 1995. Guaranty National Insurance Company and Western World Insurance Company have moved to dismiss this action pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons that follow, these motions will be granted.

I. BACKGROUND

Each of the Defendants has entered into one or more contracts with the City to tender a defense to certain categories of civil actions and to indemnify the City for its losses as a result of claims within those categories. The City and several of its employees are currently defendants in DiNicola v. DiPaolo, Civil Action 94-323 Erie (W.D.Pa.), which is pending before this Court. The City alleges that each of the insurance companies has breached its contract by refusing to tender a defense or agree to indemnify it in connection with this action.

A. The Insurance Policies

With its Complaint, Erie filed copies of the General Municipal Liability, Law Enforcement Professional Liability, and General Liability policies under which it was insured from July 1, 1980 to January 1, 1995. Only the policies issued by Guaranty National and Western World are relevant to these motions.

1. The Guaranty National policies

Guaranty National issued four "Municipal Liability" policies to Erie. These policies were in effect from July 1, 1980 to January 1, 1984. See Exs. A-D to Complaint. Each policy stated in the first paragraph of its Municipal Liability Coverage Form:¹

The Company will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay by reason of liability imposed by law, or liability assumed under contract, insofar as the Named Insured may legally do so, for damages because of:

A. Personal Injury Liability

B. Property Damage Liability, or

C. Errors and Omissions Liability

to which this insurance applies, caused by an occurrence within the policy period....

Each policy defined "Personal Injury" to include malicious prosecution. "Occurrence" was defined in the earlier policies as "an accident including continuous or repeated exposure to conditions, which results in personal injury ... neither expected nor intended from the standpoint of the Insured," see Exs. A-B, and in the later policies as "an accident or event, including continuous or repeated exposure to conditions, which results during the policy term in personal injury ... neither expected nor intended from the standpoint of the Insured," see Exs. C-D.

2. The Western World policies

Western World issued six "Law Enforcement Officers Liability" policies to the Erie Police Department. These policies were in effect from November 1, 1988 to January 1, 1995. See Exs. I-O to Complaint. The "Insuring Agreement" in the policies in effect after November 1, 1992 stated, "We will pay those sums that the insured becomes legally obligated to pay as damages because of ... `personal injury' to which this insurance applies occurring during the policy period as a result of a `law enforcement incident' that takes place in the coverage territory." Exs. M-O. The earlier Western World policies also provided "Personal Injury" coverage and stated, "This policy applies only to acts committed or alleged to have been committed within the legal jurisdiction of the named insured during the policy period stated in the declarations, including mutual law enforcement agreements between political subdivisions." Exs. I-L. Both sets of Western World policies defined "personal injury" to include malicious prosecution. None of the Western World policies defined "occurrence."

B. The Underlying Action — DiNicola v. DiPaolo

On November 23, 1994, Louis P. DiNicola filed a civil complaint in this Court. He named as defendants the City, the Erie Police Department, two former members of the Erie Police Department, and two other individuals.

DiNicola's action arose out of his having been charged with three counts of second-degree murder and his eventual acquittal on these charges. These charges were related to a house fire in Erie on August 30-31, 1979 in which three people died. The two individual police defendants investigated the fire and, on March 25, 1980, executed an affidavit in support of a criminal complaint against DiNicola. DiNicola was convicted on October 20, 1980. His conviction was overturned by the Pennsylvania Supreme Court on December 6, 1983. DiNicola was retried in May 1994 and acquitted of all charges against him.

In his civil complaint, DiNicola alleged that the affidavit and criminal complaint against him were false and not adequately supported. He alleged that the police concealed witness statements favorable to him, destroyed other material evidence, improperly used hypnosis to obtain testimony against him, employed a jailhouse informant, and knowingly used perjured testimony from that informant. DiNicola alleged that the City and the Erie Police Department were deliberately indifferent in their failure to train, discipline, and supervise their agents.

DiNicola identified two causes of action. First, he claimed that the defendants' actions and omissions had deprived him of rights under the Fourth, Fifth, and Fourteenth Amendments of the U.S. Constitution. Second, he asserted rights of action under Pennsylvania law for "false arrest and imprisonment, malicious prosecution, spoliation of evidence, intentional infliction of emotional distress, defamation, abuse of process, willful misconduct, prima facie tort, conspiracy tort, negligence, and gross negligence." He prayed for compensatory and punitive damages and attorney's fees.

II. STANDARD OF REVIEW

On a motion to dismiss under Rule 12(b)(6), this Court accepts as true all factual allegations in the complaint. Leatherman v. Tarrant County Narcotics Intelligence and Coordination Unit, 507 U.S. 163, 163-64, 113 S.Ct. 1160, 1161, 122 L.Ed.2d 517 (1993). The proper inquiry is "whether relief could be granted ... `under any set of facts that could be proved consistent with the allegations.'" Gasoline Sales, Inc. v. Aero Oil Co., 39 F.3d 70, 71 (3d Cir.1994) (quoting National Organization for Women, Inc. v. Scheidler, 510 U.S. 249, ____, 114 S.Ct. 798, 803, 127 L.Ed.2d 99 (1994)). If no cause of action can be identified, dismissal is proper.

III. DISCUSSION

Guaranty National and Western World (collectively, "Defendants") argue that the policies that they issued to the City are "occurrence" policies, in which they agreed to insure the City and the Erie Police Department against liability arising from conduct occurring during the policy period. They submit that any duty to defend arises only from DiNicola's malicious prosecution claim and that, for these purposes, this claim is alleged to have "occurred" with the March 25, 1980 execution of the criminal complaint. Because that date was prior to the period of coverage provided by any policy issued to the City by either company, Defendants assert, the City has no cause of action against them.

An insurer's duty to defend is broader than its duty to indemnify:

In analyzing whether the insurer has a duty to defend, we must first look to the complaint filed against the insured. "It is not the actual details of the injury, but the nature of the claim which determines whether the insurer is required to defend." Springfield Tp. et al. v. Indemnity Ins. Co. of North America, 361 Pa. 461, 64 A.2d 761 (1949). After discerning the facts alleged in the complaint, we then must decide whether, if those facts were found to be true, the policy would provide coverage. If it would, then there is a duty to defend.

D'Auria v. Zurich Insurance Co., 352 Pa.Super. 231, 507 A.2d 857, 859 (1986) (citations omitted); Antrim Mining, Inc. v. Pennsylvania Insurance Guaranty Ass'n, 436 Pa.Super. 522, 648 A.2d 532, 534-35 (1994), alloc. denied, 540 Pa. 616, 657 A.2d 487 (1995). This duty continues until the insurer can "confine the claim to a recovery that the policy does not cover." Lee v. Aetna Casualty & Surety Co., 178 F.2d 750, 752 (2d Cir.1949) (quoted in D'Auria, 507 A.2d at 859).

Defendants are correct that these policies are occurrence policies. "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 Insurance Co. v. Barry, 438 U.S. 531, 535 n. 3, 98 S.Ct. 2923, 2927 n. 3, 57 L.Ed.2d 932 (1978).

The City alleges that the language of the policies is ambiguous on this point and cites the rule that ambiguities in an insurance policy are to be construed against the insurer. See United Services Automobile Ass'n v. Elitzky, 358 Pa.Super. 362, 517 A.2d 982, 986 (1986), alloc. denied, 515 Pa. 600, 528 A.2d 957 (1987). The City submits that the policies are ambiguous because they do not expressly speak to coverage for personal injury "occurring within the policy year." Thus, the City concludes, Defe...