Peerless Ins. Co. v. Pa. Cyber Charter Sch., Civil Action No. 2:12–cv–1700.

Citation19 F.Supp.3d 635
Decision Date29 August 2014
Docket NumberCivil Action No. 2:12–cv–1700.
PartiesPEERLESS INSURANCE COMPANY, Plaintiffs, v. The PENNSYLVANIA CYBER CHARTER SCHOOL, Defendant.
CourtUnited States District Courts. 3th Circuit. United States District Courts. 3th Circuit. Western District of Pennsylvania

19 F.Supp.3d 635

PEERLESS INSURANCE COMPANY, Plaintiffs,
v.
The PENNSYLVANIA CYBER CHARTER SCHOOL, Defendant.

Civil Action No. 2:12–cv–1700.

United States District Court, W.D. Pennsylvania.

Signed May 13, 2014
Opinion Denying Reconsideration Aug. 29, 2014


Insured's motion granted in part and denied in part, and insurer's motion denied.

[19 F.Supp.3d 639]

Michael J. Kurtis, Nelson, Levine, De Luca & Hamilton, LLC, Blue Bell, PA, for Plaintiffs.

Jennifer McLoughlin, Maria C. Ramola, Mark G. Morford, Latsha Davis & McKenna, Exton, PA, for Defendant.


OPINION

MARK R. HORNAK, District Judge.

This is a declaratory judgment action brought pursuant to 28 U.S.C. § 2201 1 to resolve whether Plaintiff Peerless Insurance Company (“Peerless”) has a duty to defend and indemnify Defendant The Pennsylvania Cyber Charter School (“PA Cyber”) under the terms of a policy of liability insurance and a commercial umbrella policy (collectively “Policy”) PA Cyber purchased from Peerless against a lawsuit filed by four Pennsylvania school districts in the Fayette County Court of Common Pleas.

Pending before the Court are the parties' cross-motions for summary judgment. ECF Nos. 25 and 26, The Court has considered

[19 F.Supp.3d 640]

the Motions, the parties' briefs in support, ECF Nos. 28 and 30, responses, ECF Nos. 31 and 33, and replies, ECF Nos. 34 and 35, and their respective statements of material facts. ECF Nos. 27 and 32. For the reasons that follow, the Court will grant summary judgment for the Defendant to the extent that it concludes as a matter of law that Peerless has a duty to defend PA Cyber under the policies at issue.

I. BACKGROUND

This insurance coverage dispute originates in the language of the Pennsylvania Charter School Law (“the Charter School Law”), 24 Pa. Stat. § 17–1701–A et seq. That law established charter schools—“independent public schools” funded by payments from the school district where each charter school student resides. 24 Pa. Stat. §§ 17–1703–A, 17–1725–A(a)(2)–(3), (5). PA Cyber is a charter school. Defendant's Concise Statement of Material Facts (“DSOF”), ECF No. 27, ¶ 6. For its kindergarten program, PA Cyber has accepted children as young as four years of age. Id.

In 2006, the Slippery Rock Area School District (“Slippery Rock”) objected to PA Cyber's request of payments for students who enrolled in its kindergarten program but were too young to be eligible for Slippery Rock's own kindergarten program, which began at age five. Id. Pursuant to the procedure established in the Charter School Law, the Pennsylvania Department of Education (“PDE”) held a hearing to determine whether Slippery Rock should pay those funds to PA Cyber. See 24 Pa. Stat. § 17–1725–A(a)(5)–(6). The PDE decided that PA Cyber was indeed entitled to payments for such students. DSOF ¶ 6. Slippery Rock challenged the PDE's decision in Pennsylvania Commonwealth Court, but in 2009, the Commonwealth Court upheld it. Slippery Rock Area Sch. Dist. v. Pa. Cyber Charter Sch., 975 A.2d 1221 (Pa.Commw.Ct.2009). Slippery Rock then appealed to the Pennsylvania Supreme Court, which in 2011 reversed the Commonwealth Court and held that while the Charter School Law gave PA Cyber the authority to set its own minimum admission age, school districts only had a duty to fund the education of students who were age-eligible to enroll in their own kindergarten programs. Slippery Rock Area Sch. Dist. v. Pa. Cyber Charter Sch., 612 Pa. 486, 31 A.3d 657, 667 (2011).2

In response to the Pennsylvania Supreme Court's decision in Slippery Rock, the PDE released a statement which adopted new policies regarding the submission of invoices by charter schools for payments for four-year-old students. ECF No. 26–5 at 8–9. That statement included the following declaration concerning the Slippery Rock holding:

Because the Court did not explicitly state that its decision was retroactive, the Department will process subsidy deductions from school districts and make payment to charter schools for any 4–year–old kindergarten students enrolled in charter schools for any time period prior to November 23, 2011. In addition, the Department will not provide refunds to school districts for deductions made from school districts and subsequent payments to charter schools for 4–year–old kindergarten students enrolled in charter schools for any time period prior to November 23, 2011.

[19 F.Supp.3d 641]

Id. In March 2012, four western Pennsylvania school districts sued PA Cyber in the Fayette County Court of Common Pleas (“the Underlying Lawsuit”). ECF No. 1 at ¶ 31. The plaintiffs later filed an amended complaint (“the Underlying Complaint”) asserting causes of action for conversion, restitution, and “mistake of law” 3 and requesting class action certification. ECF No. 26–5. That Complaint alleges that from the 2002–03 school year through the 2010–11 school year, PA Cyber requested and received certain payments from school districts who believed such payments were required under the Charter School Law, but to which PA Cyber was not entitled (the Complaint does not explicitly mention the Slippery Rock decision, but the plaintiffs attached the PDE's statement concerning the effect of Slippery Rock ), Id. at 4–5. According to that Complaint, the plaintiffs filed suit as a result of the PDE's declaration that it would not provide refunds for any payments for four-year old students issued prior to November 23, 2011, Id. at 5.4

At the time the Underlying Lawsuit was filed, PA Cyber was insured by Peerless under a School Leaders Errors and Omissions Liability Insurance Policy, No. CBP 8890270 (“the liability policy”), and a Commercial Umbrella Liability Coverage Policy, No. CU 8890470 (“the umbrella policy”). DSOF, ¶¶ 1–2. Both policies covered the period of February 20, 2012 through February 20, 2013. Id. Under the terms of the liability policy, Peerless has a duty to defend and indemnify PA Cyber against any lawsuit involving a “loss” because of a “wrongful act” committed by PA Cyber. ECF No. 25–4 at 7. The umbrella policy covers any sums in excess of the retained limit on the underlying insurance (the liability policy) up to the limits of the umbrella coverage. Id. at 34–35. Pursuant to those policies, Peerless agreed to defend PA Cyber in the Underlying Lawsuit subject to a reservation of rights. ECF No. 30–7. Peerless then launched this action seeking a declaration of its rights and obligations under the policies. ECF No. 1 at ¶¶ 1–2.

II. LEGAL STANDARD

The standard for summary judgment in a declaratory judgment action is the same as for any other type of relief. Pellegrino Food Products Co., Inc. v. Am. Auto. Ins. Co., 655 F.Supp.2d 569, 574–75 (W.D.Pa.2008) (citing Transguard Ins., Co. of America, Inc. v. Hinchey, 464 F.Supp.2d 425 (M.D.Pa.2006) (citing Cloverland–Green Spring Dairies, Inc. v. Pa. Milk Marketing Board, 298 F.3d 201, 210 n. 12 (3d Cir.2002))). Summary judgment is appropriate when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a);

[19 F.Supp.3d 642]

Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The parties must support their position by “citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials.” Fed.R.Civ.P. 56(c)(1)(A).

Once that burden has been met, the non-moving party must set forth “specific facts showing that there is a genuine issue for trial, or the factual record will be taken as presented by the moving party and judgment will be entered as a matter of law. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quoting Fed.R.Civ.P. 56(a), (e)) (emphasis in original). In meeting its burden of proof, the “opponent must do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita, 475 U.S. at 586, 106 S.Ct. 1348. The non-moving party “must present affirmative evidence in order to defeat a properly supported motion” and cannot “simply reassert factually unsupported allegations.” Williams v. Borough of West Chester, 891 F.2d 458, 460 (3d Cir.1989). If the non-moving party's evidence merely is colorable or lacks sufficient probative force, summary judgment must be granted. Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 249–50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

In other words, summary judgment may be granted only if there exists no genuine issue of material fact that would permit a reasonable jury to find for the nonmoving party. See id. at 250, 106 S.Ct. 2505. “Where the record taken as a whole could not lead a reasonable trier of fact to find for the nonmoving party, there is no ‘genuine issue for trial.’ ” Matsushita, 475 U.S. at 587, 106 S.Ct. 1348; Huston v. Procter & Gamble Paper Prods. Corp., 568 F.3d 100, 104 (3d Cir.2009).

In reviewing the record evidence, the court draws all reasonable inferences in favor of the non-moving party. See Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000); Matsushita, 475 U.S. at 587–88, 106 S.Ct. 1348; Huston, 568 F.3d at 104 (citations omitted). It is not the court's role to weigh the disputed evidence and decide which is more probative, or to make credibility determinations. See Anderson, 477 U.S. at 255, 106 S.Ct. 2505; Marino v. Indus. Crating Co., 358 F.3d 241, 247 (3d Cir.2004); Boyle v. Cnty. of Allegheny, 139 F.3d 386, 393 (3d Cir.1998). “Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson, 477 U.S. at 247–48, 106 S.Ct. 2505. “Where the defendant is the moving party, the initial burden is on the defendant to show that the...

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