New Castle Co. DE v. Nat'l Union Fire Ins. Co.

• Decision Date: 31 October 2000
• Docket Number: No. 00-5157,00-5157
• Citation: 243 F.3d 744
• Parties: (3rd Cir. 2001) NEW CASTLE COUNTY DE, APPELLANT v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA Argued:
• Court: U.S. Court of Appeals — Third Circuit

Page 744

243 F.3d 744 (3rd Cir. 2001)

NEW CASTLE COUNTY DE, APPELLANT v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA

No. 00-5157

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Argued: October 31, 2000

Filed March 21, 2001

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE District Judge: The Honorable Roderick R. McKelvie

[Copyrighted Material Omitted]

Counsel for Appellant: Richard E. Poole, Esq. Peter J. Walsh, Jr., Esq. (Argued) Potter, Anderson & Corroon 1313 Market Street P.O. Box 951 Wilmington, DE 19899

Counsel for Appellee: Christopher J. Sipe, Esq. (Argued) Bailey & Wetzel 716 Tatnall Street P.O. Box 2034 Wilmington, DE 19801

Counsel for Amicus-appellee Ins Env Litigation: Daniel E. Troy, Esq. Wiley, Rein & Fielding 1776 K Street, N.W. Washington, DC 20006

Before: Scirica, Nygaard, and Barry, Circuit Judges.

OPINION OF THE COURT

Nygaard, Circuit Judge.

This appeal requires us to interpret the phrase, "invasion of the right of private occupancy," under Delaware law and determine whether it is ambiguous. The phrase is widely used in insurance policies and has been the subject of heated litigation throughout the entire country over the past thirty years. Because Delaware case law provides no clear precedent, both parties cite numerous decisions outside the state. Some authority suggests that we should apply the doctrine of ejusdem generis and construe the phrase in relation to the more specific terms ("wrongful eviction" and "wrongful entry") preceding it. Such a ruling, however, would fly in the face of commonsense and declare unambiguous a term that has generated hundreds of law suits and widely varying judicial interpretations. We refuse to do that, and instead hold that an "invasion of the right of private occupancy" is ambiguous and should be construed in favor of New Castle County. We therefore reverse the District Court's grant of summary judgment.

I.

New Castle County is a political subdivision of the State of Delaware. It is responsible for, among other things, the permitting and zoning of real property within its geographical borders. In order to protect itself, its officials, and its employees from legal liability, it is common practice for New Castle to purchase insurance. Between 1991 and 1993, New Castle purchased a number of policies from National Union Fire Insurance Company of Pittsburgh, Pennsylvania. The policies were of two general types: (1) Public Officials Liability ("POL") and (2) Commercial and General Liability ("CGL"). This appeal focuses on a CGL policy that New Castle purchased from National Union to cover the period from July 1, 1992 to July 1, 1993.

The parties disagree whether National Union has an obligation to defend and indemnify New Castle in a number of law suits arising from zoning and permitting decisions. In 1992, a Delaware real estate developer named Frank Acierno filed the first of three complaints, which eventually cost the County approximately one million dollars in legal expenses to defend.

Acierno owns two tracts of land within New Castle County. The first is located near a shopping mall and the second is referred to as Westhampton. In 1992, New Castle frustrated Acierno's plans to develop both tracts. First, it denied a building permit for the mall property, and second, it voided Acierno's record plan for the Westhampton property and instead rezoned it.

On July 1, 1992, Acierno filed his first suit, contesting the denial of the building permit for the mall property ("Acierno I"). He claimed, under 42 U.S.C. S 1983, that New Castle had deprived him of property without due process of law, and had violated the Equal Protection Clause of the Fourteenth Amendment by arbitrarily treating him differently than other developers. The District Court granted preliminary injunctive relief in favor of Acierno. See Acierno v. Mitchell, 1992 WL 694590 (D. Del. 1992). We reversed, holding that the case was not ripe because the County Board of Adjustment had yet to rule on the building permit. See Acierno v. Mitchell, 6 F.3d 970 (3d Cir. 1993).

One day after filing his first claim, Acierno filed a second suit, this time challenging New Castle's actions regarding the Westhampton property ("Acierno II"). He again claimed he had suffered due process and equal protection violations. A complicated series of rulings followed.¹ Eventually, the District Court granted summary judgment in favor of the County on most of Acierno's claims. A number of his claims, however, remain undecided.

Acierno filed his third suit on December 17, 1993 ("Acierno III"). In it, he argued that his claim in Acierno I (regarding the mall property) had become ripe, because the County Board of Adjustment had refused to issue a building permit. The District Court again granted a preliminary injunction in his favor. See Acierno v. New Castle County, 1994 LEXIS 1683 (D. Del. 1994). We reversed and remanded the case for further proceedings. See Acierno v. New Castle County, 40 F.3d 645 (3d Cir. 1994). On October 24, 1997, the parties settled Acierno III with an agreement requiring New Castle to issue a building permit for the mall property and pay Acierno's attorneys' fees up to $250,000.

Shortly after Acierno filed his claims, the County attempted to contact National Union to discuss the POL and CGL policies. After almost a year of unsuccessful inquiries by New Castle, National Union sent a letter on June 25, 1993 stating that Acierno's claims "would not be covered under the CGL policy." However, on July 9, 1993, National Union indicated that it would tentatively undertake New Castle's defense under the POL policy. Its letter noted, in some detail, that National Union was not waiving its rights to refuse coverage later. Over the following year, legal expenses mounted and in May 1994, National Union filed suit against the County, seeking a declaration that it was not obligated to continue coverage. New Castle contested the claim, but the parties eventually settled, agreeing to a buy-out of the POL policy. The agreement resolved the dispute over the POL policy, but expressly did not address the CGL policy.

On June 13, 1996, New Castle sent a letter to National Union renewing its request for coverage of its legal expenses and liability under the CGL policy. National Union denied coverage, and in response, the County filed this declaratory judgment action. On December 30, 1997, the District Court granted National Union's motion for summary judgment, holding that Acierno's suit, and its associated expenses and liabilities, were not covered by the CGL policy. Specifically, the court held that National Union was only obligated to defend New Castle in suits arising from one of the policy's enumerated "personal injuries." The only arguably applicable provision, Definition 10(c), defines "personal injury" as a harm resulting from:

c. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies by or on behalf of its owner, landlord or lessor;...

The District Court held that this definition was unambiguous and required the County to act as an "owner, landlord or lessor" of Acierno's property. Because it had not, the court granted summary judgment in favor of National Union. The District Court did not address whether Acierno's claims constituted an "invasion of the right of private occupancy."

New Castle appealed, and we reversed. See New Castle County v. National Union Fire Ins. Co., 174 F.3d 338, 342 (3d Cir. 1999). We held that the "by or on behalf of " language of Definition 10(c) was ambiguous and should not be construed to preclude coverage.² We therefore remanded the case to determine whether New Castle's alleged actions could constitute an "invasion of [Acierno's] right of private occupancy." Id. at 352. The District Court, on remand, again ruled against the County, granting summary judgment in favor of National Union. It held that the plain meaning of the "invasion" language was ambiguous, but that its context suggested it "should be construed to encompass only those actions of the same general type or class as `wrongful eviction' and `wrongful entry.' " Because Acierno failed to allege an eviction, wrongful entry, or similar injury, the District Court held that the CGL policy did not apply. New Castle appealed.

II.

Jurisdiction is premised upon diversity of citizenship. Therefore, we must apply the substantive law of Delaware. See Erie R.R. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). The sole issue for review is whether Acierno's claims, if true, constitute an "invasion of [his] right of private occupancy." If they do, the CGL policy requires National Union to cover the County's legal expenses and liability. This is a legal question of contractual interpretation. Because the Delaware Supreme Court has yet to address the issue directly, we must predict how it would rule. See New Castle County v. National Union Fire Ins. Co., 174 F.3d 338, 342 (3d Cir. 1999); Epstein Family P'ship v. Kmart Corp., 13 F.3d 762, 766 (3d Cir. 1994).

The District Court construed the CGL policy narrowly and granted summary judgment in favor of National Union. Our review of the District Court's grant of summary judgment is plenary. See New Castle County, 174 F.3d at 342; Pacific Indem. Co. v. Linn, 766 F.2d 754, 760 (3d Cir. 1985).

A. Delaware Insurance Law

This is the second time that we have reviewed allegedly ambiguous language in Definition 10(c) of the CGL policy. See New Castle County, 174 F.3d at 344-51. The previous panel's discussion of Delaware law pertaining to insurance policy interpretation is a good starting point for our analysis:

Before an insurer is obligated to defend or indemnify a policyholder, the insured must demonstrate that coverage is available under the policy. An insurer's duty to defend is broader than its duty to indemnify, but...