Markel Int'l Ins. Co. v. Western PA Child Care, LLC

• Decision Date: 28 March 2011
• Docket Number: Civil Action No. 3:10–CV–1156.
• Citation: 805 F.Supp.2d 88
• Parties: MARKEL INTERNATIONAL INSURANCE COMPANY, Plaintiff, v. WESTERN PA CHILD CARE, LLC, et al., Defendants.
• Court: U.S. District Court — Middle District of Pennsylvania

805 F.Supp.2d 88

MARKEL INTERNATIONAL INSURANCE COMPANY, Plaintiff,

v.WESTERN PA CHILD CARE, LLC, et al., Defendants.

Civil Action No. 3:10–CV–1156.

United States District Court, M.D. Pennsylvania.

March 28, 2011.

Richard W. Yost, Yost & Tretta, LLP, Philadelphia, PA, for Plaintiff.

Bernard M. Schneider, Brucker Schneider & Porter, Pittsburgh, PA, for Defendants.

Robert J. Powell, The Powell Law Group PC, Drums, PA, pro se.

MEMORANDUM

A. RICHARD CAPUTO, District Judge.

Presently before the Court is Defendants' Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons discussed below, Defendants' Motion will be denied.

BACKGROUND

In the instant case, Plaintiff Markel International Insurance Company (“Markel”) has filed a Complaint seeking a Declaration that it has no duty to defend or indemnify the Defendants for any claims asserted in the Luzerne County Litigation in which the Defendants are involved.

A. The Underlying Case

The instant suit arises out of the following cases filed in the Middle District of Pennsylvania: Wallace v. Powell, No. 3:09–cv–0286, Conway v. Conahan, No. 3:09–cv–0291, H.T. v. Ciavarella, No. 3:09–cv–0357, Humanik v. Ciavarella, No. 3:09–cv–0630, Clark v. Conahan, et al., No. 3:09–cv–2535, and Dawn v. Ciaverella, et al., No. 3:09–cv–797. These suits have all been consolidated under civil action number 3:09–cv–0286. The factual background of the underlying consolidated case can be found in Wallace v. Powell, No. 3:09–cv–0286, 2009 WL 4051974 (M.D.Pa. Nov. 20, 2009). This opinion will only relate the facts necessary for an understanding of the current declaratory judgment suit.

There are two complaints in the underlying suit, the Master Individual Complaint (“MIC”) and the Master Class Action Complaint (“MCAC”). The MIC includes the following allegations.

Defendants Western PA Childcare and PA Childcare are entities responsible for operating juvenile detention facilities and Defendant Powell is “an owner, officer, shareholder, and operator” of these facilities. Western PA Childcare, PA Childcare, and Powell were part of a conspiracy in which two Luzerne County judges received kickbacks for maintaining a high rate of occupancy in the juvenile detention facilities run by Powell and managed by Western PA Childcare and PA Childcare. As part of this conspiracy, the judges would often violate the civil rights of the juveniles appearing before them by denying them right to counsel and ensuring disproportionately large sentences, among other things. The MIC charges all Defendants with Violation of the RICO Act (Count I), Conspiracy to Violate the RICO Act (Count II), Deprivation of Substantive and Procedural Due Process pursuant to 42 U.S.C. § 1983 (Count III), Deprivation of Rights Pursuant to 42 U.S.C. § 1983 (Count IV), Deprivation of Substantive Due Process pursuant to 42 U.S.C. § 1983 (Count V), Civil Conspiracy (Count VIII), and False Imprisonment (Count IX).

The MCAC alleges that Powell was an owner and operator of Western PA Childcare and PA Childcare. The factual allegations that make up the MCAC are, for the purposes of this Motion, very similar to those in the MIC. The claims against the Defendants in the MCAC are Conspiracy to Violate Plaintiffs' Right to an Impartial Tribunal Guaranteed by the Fifth, Sixth and Fourteenth Amendments, pursuant to 42 U.S.C. § 1983 (Count II), Conspiracy to Deprive Youth of Their Right to Counsel an/or Knowing, Intelligent, and Voluntary Guilty Plea in violation of the Fifth, Sixth and Fourteenth Amendments, pursuant to 42 U.S.C. § 1983 (Count IV), Civil RICO Act violations pursuant to 18 U.S.C. § 1962(c) (Count V), Civil RICO Act violations pursuant to 18 U.S.C. § 1962(b) (Count VI), Civil RICO Act violations pursuant to 18 U.S.C. § 1962(d) (Count VII), and Wrongful Imprisonment (Count IX).

B. The Markel Policies

Western PA Childcare, LLC, is the named insured on four Markel policies that were in effect from July 1, 2005 to July 1, 2009. There are two policy sections that are pertinent to the motion at bar. Coverage A of the Markel policies provides coverage for “sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies....” The bodily injury or property damage must be caused by an “occurrence.” Exclusion (a) (“Expected or Intended Injury”) of Coverage A states that the insurance does not apply to “ ‘bodily injury’ or ‘property damage’ expected or intended from the standpoint of the insured.” Coverage B of the Markel Policies provides coverage for “sums that the insured becomes legally obligated to pay as damages because of ‘personal injury or advertising injury’ to which this insurance applies.” The Markel Policies define “personal or advertising injury” to mean specifically enumerated offenses, including false arrest, detention or imprisonment and malicious prosecution. Exclusion (a) of Coverage B states that the insurance does not apply to “ ‘personal injury and advertising injury’ caused by or at the direction of the insured with knowledge that the act would violate the rights of another and would inflict ‘personal injury and advertising injury’.”

C. Procedural History

Pursuant to the insurance policies, Defendants Western PA Childcare, LLC, Zappala and Powell tendered defense of the underlying complaints to Markel, which denied the defense and indemnity. Markel filed a Complaint for a Declaratory Judgment that it does not owe Defendants Western PA Childcare, PA Childcare, LLC, Powell, Zappala, Mid–Atlantic Youth Services Corp. or Vision Holdings, LLC a defense or indemnity. Defendants Western PA Childcare, PA Childcare, and Zappala filed a Motion to Dismiss the Complaint. The motion has been fully briefed and is ripe for review.

LEGAL STANDARD

Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint, in whole or in part, for failure to state a claim upon which relief can be granted. Dismissal is appropriate only if, accepting as true all the facts alleged in the complaint, a plaintiff has not pleaded “enough facts to state a claim to relief that is plausible on its face,” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), meaning enough factual allegations “ ‘to raise a reasonable expectation that discovery will reveal evidence of’ ” each necessary element, Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir.2008) (quoting Twombly, 550 U.S. at 556, 127 S.Ct. 1955); see also Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir.1993) (requiring a complaint to set forth information from which each element of a claim may be inferred). In light of Federal Rule of Civil Procedure 8(a)(2), the statement need only “ ‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.’ ” Erickson v. Pardus, 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (per curiam) (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). “[T]he factual detail in a complaint [must not be] so undeveloped that it does not provide a defendant [with] the type of notice of claim which is contemplated by Rule 8.” Phillips, 515 F.3d at 232; see also Airborne Beepers & Video, Inc. v. AT & T Mobility LLC, 499 F.3d 663, 667 (7th Cir.2007).

In deciding a motion to dismiss, the Court should consider the allegations in the complaint, exhibits attached to the complaint, and matters of public record. See Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir.1993). The Court may also consider “undisputedly authentic” documents when the plaintiff's claims are based on the documents and the defendant has attached copies of the documents to the motion to dismiss. Id. The Court need not assume the plaintiff can prove facts that were not alleged in the complaint, see City of Pittsburgh v. W. Penn Power Co., 147 F.3d 256, 263 & n. 13 (3d Cir.1998), or credit a complaint's “ ‘bald assertions' ” or “ ‘legal conclusions,’ ” Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir.1997) (quoting In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1429–30 (3d Cir.1997)). “While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009).

When considering a Rule 12(b)(6) motion, the Court's role is limited to determining if a plaintiff is entitled to offer evidence in support of her claims. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). The Court does not consider whether a plaintiff will ultimately prevail. See id. A defendant bears the burden of establishing that a plaintiff's complaint fails to state a claim. See Gould Elecs. v. United States, 220 F.3d 169, 178 (3d Cir.2000).

DISCUSSION

I. Failure to State a ClaimA. General Principles

Defendants argue that Plaintiff has failed to state a claim for declaratory judgment because Plaintiff has a duty to defend and indemnify under Coverages A and B of the policies. To determine if the Plaintiff states a claim for which relief may be granted, it is necessary to examine the language of each type of coverage and to compare it to the allegations of the underlying complaint. The interpretation of an insurance contract is a question of law for the court to decide. Reliance Ins. Co. v. Moessner, 121 F.3d 895, 900 (3d Cir.1997) (citation omitted). The insured has the initial burden of establishing coverage under the policy. Butterfield v. Giuntoli, 448 Pa.Super. 1, 670 A.2d 646 (1995). A court must give effect to the plain language of the insurance contract read in its entirety. Reliance, 121 F.3d at 901. On the other hand, when the insurer relies on a policy exclusion as the basis for denying coverage, it bears the burden of proving that the exclusion applies. Mistick, Inc. v. Northwestern Nat. Cas. Co., 806 A.2d 39, 42 (Pa.Super.2002)....