Petition for Writ of Certiorari — First Mercury Syndicate, Inc. v. Township of Buffalo

Y 97 668 OCT 16 1997

No

* ——OFFICE-OF-THE- CLERK

IN THE

Supreme Court of the United States

October Term, 1997

FIRST MERCURY SYNDICATE, INC.,

Petitioner,

vs.

TOWNSHIP OF BUFFALO; ALBERT T. ROED ‘7K;

‘ CECIL D. FURER; TERRY L. BEGBIGLER;

HERMAN J. STEPPLING; JOHN J. MORGAN,

Respondents.

On PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES

CourRT OF APPEALS FOR THE THIRD CIRCUIT.

PETITION FOR WRIT OF CERTIORARI

JOHN W. JORDAN IV

Counsel of Record

GACA MATIS & BAUM

A PROFESSIONAL CORPORATION

300 Four PPG Place

Pittsburgh, Pennsylvania 15222-5404

Telephone: (412) 338-4750

Facsimile: (412) 338-4742

Attorneys for Petitioner

First Mercury Syndicate, Inc.

TIMES APPELLATE PRINTING, INC.

Harold L. Berkobes

Pittsburgh, Pa. (412) 881-7463

i.

QUESTION PRESENTED FOR REVIEW

When a declaratory judgment action requests

declarations of rights on two issues and the district court

dismisses the request for a declaration on one of the

issues, is a summary judgment declaring the parties’

rights with respect to the other issue appealable as a

final decision under 28 U.S.C. §1291?

ii.

PARTIES

The caption of the case contains the names of all

parties to this proceeding.

First Mercury Financial Corporation is the parent

corporation of petitioner, First Mercury Syndicate, Inc.

First Mercury Syndicate, Inc., has no nonwholly owned

subsidiaries.

TABLE OF CONTENTS.

Page

QUESTION PRESENTED FOR REVIEW ........ i

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STATEMENT OF JURISDICTION.............. 1

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STATEMENT OF THE CASE .................. 3

REASONS FOR GRANTING THE WRIT........ 5

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APPENDIX:

Order of the United States Court of Appeals

for the Third Circuit, Dated June 12, 1997..... Al

Memorandum Order of the United States District

Court of the Western District of Pennsylvania,

Rs PER OT, PE ous oo bcd buss oa knaes A2

Memorandum Order of the United States District

Court of the Western District of Pennsylvania,

REGS PIU SU, ROE Es vin vn cn accccvésnreece A6

Motion to Dismiss Appeal for Lack of

Jurisdiction, Dated May 14, 1997............ Al7

Sur Petition for Panel Rehearing of the

United States Court of Appeals for the

Third Circuit, Dated July 23, 1997 ........... Alg9

iv.

TABLE OF AUTHORITIES.

Page

CASES:

Brillhart v. Excess Insurance Co. of America,

S26 TG. G1 CGR 6k so a SS 7

Butterfield v. Giuntoli, 448 Pa. Super. 1,

670 A2d. 646 (1995), appeal denied, 546 Pa.

CNG, SEP ADE. Bie Lee 6 oo kee hb estaba scseesaes 7

Helms v. Chandler, 423 Pa. 77, 223 A.2d 30 (1966).. 7

Jones, et al. v. Township of Buffalo, et al,

No. A.D. 94-10907 (District court opinion

GE FOROS Bis STi sw boo eek ead tees 4

Mitchell v. Forsyth, 472 U.S. 511 (1985)........... 8

Nationwide Insurance v. Board of Trustees of

the University of Illinois, 116 F.3d 1154 (7th

Cir, SO oie ck cn ew 6 ce os a 5

Nationwide Insurance v. Zavalis, 52 F.3d 689

CTs Tile WO. bas Sa sSk coin dase 26 RR 5,6,8

Terra Nova Insurance Co. Ltd. v. 900 Bar,

Ine:, 867 F.2d 1918 (8d Cir. 1088). 6c. 6 as ek ccc i 6

The Fidelity & Casualty Co. of New York v.

Carl & Ramagosa, Inc., 365 F.2d 303 (3d Cir.

Wilton v. Seven Falls, Co., 515 U.S. 227

STATUTES:

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SR Ek aac ekce kbaaeeiucc cubes cous 2,4

‘de Sa 4a s 6600 he SK OR 06S RRS eR OER 3

ee SEs SR on 6s uh i wae weds bas (ok ewaw eas 2,5,8

RULE:

POC E ss POURRAIT Ci Sov cccvaeeecddeanawe 8

OTHER AUTHORITY:

12 JAMES W. Moore, ET AL., MOoRE’Ss FEDERAL

PRACTICE §57.02(1] (8d ed. 1997)................ 7

OPINIONS BELOW

The court of appeals did not write an opinion in this

case. Neither the orders of the court of appeals nor the

opinions and orders of the district court have been

reported.

STATEMENT OF JURISDICTION

The judgment of the court of appeals was entered on

June 12, 1997 (App. A1).

An order denying rehearing was entered by the court

of appeals on July 23, 1997 (App. A19).

It is believed that jurisdiction is conferred upon this

Court by 28 U.S.C. $1254(1).

2

STATUTES INVOLVED

This case involves the interpretation and application

of 28 U.S.C. §1291, which states:

Final Decisions of District Courts

The courts of appeals (other than the United

States Court of Appeals for the Federal Circuit)

shall have jurisdiction of appeals from all final

decisions of the district courts of the United States,

the United States District Court for the District of

the Canal Zone, the District of Guam, and the

District Court of the Virgin Islands, except where a

direct review may be had in the Supreme Court. The

jurisdiction of the United States Court of Appeals

for the Federal Circuit shall be limited to the

jurisdiction described in section 1292(c) and (d) and

1295 of this title.

The case also involves the interpretation and

application of 28 U.S.C. §2201(a), which states:

Creation Of Remedy

(a) In a case of actual controversy within’ its

jurisdiction, except with respect to Federal taxes

other than actions brought under section 7428 of the

Internal Revenue Code of 1986, a proceeding under

section 505 or 1146 of title 11, or in any civil action

involving an antidumping or countervailing duty

proceeding regarding a class or kind of merchandise

of a free trade area country (as defined in section

516A(f(10) of the Tariff Act of 1930), as determined

by the administering authority, any court of the |

United States, upon the filing of an appropriate

pleading, may declare the rights and other legal

relations of any interested party seeking such

declaration, whether or not further relief is or could

be sought. Any such declaration shall have the force

and effect of a final judgment or decree and shall be

reviewable as such.

3

STATEMENT OF THE CASE

First Mercury Syndicate, Inc., (‘First Mercury”)

commenced this declaratory judgment action in the

United States District Court for the Western District of

Pennsylvania to obtain declarations that it had no duty

under a public officials liability insurance policy it had

issued to the Township of Buffalo (“the Township”) to

either defend or indemnify the Township and the other

parties to the present action from the claims asserted

against them in an action pending in the Court of

Common Pleas of Butler County, Pennsylvania. The

state court case is a class action which seeks to hold the

Township, the members of its Board of Supervisors and

solicitor liable for having allegedly converted an

abandoned railroad right of way into a public trail in

violation of the rights of the owners of reversionary

interests in the land involved. Federal jurisdiction of the

present action in district court was based upon diversity

of citizenship in accordance with 28 U.S.C. $1332.

After the pleadings were closed the parties filed

cross-motions for judgment with respect to both First

Mercury’s duty to defend and to indemnify the

defendants in the state court action. However, the

district court found only the duty to defend issue to be

ripe for decision, explaining:

“In the instant matter, the utility of declaratory

judgment is patent. Without it, First Mercury runs

the risk of breaching its duty to defend under the

contract, and the Township could be hampered in its

defense against the class action. These factors make

the issue of First Mercury’s duty to defend suitable

for resolution by dispositive motion.

However, to the extent that the parties also

seek a ruling on First Mercury's duty to indemnify

under the policy, this Court will exercise its

discretion not to issue declaratory relief. Not only

4

are there a myriad of potentially applicable policy

provisions and exclusions, but resolution of

Mercury’s duty to indemnify is not yet ripe. Some of

the provisions which First Mercury seeks to have

construed may never even be at issue in the class |

action. The class action itself may yet be amended

or withdrawn. The Township may prevail on all

claims, either at trial, or by way of pretrial

dispositive motion. By waiting until any future

indemnification claim becomes more certain, legal

efficiency, which is one of the goals of the

Declaratory Judgment Act, is better served.”

(App. All-A12).

The district court found the policy exclusions relied upon

by First Mercury to be inapplicable to the underlying

claims in question and, therefore, granted the

defendant’s motion for summary judgment with respect

to the duty to defend and ordered that “plaintiff shall

defend the defendants in the state court action, Jones, et

al. v. Township of Buffalo, et al, No. A.D. 94-10907.”

(District court order of February 27, 1997, App. A16.) It

dismissed First Mercury’s complaint with respect to its

request for a declaratory judgment on the duty to

indemnify and further ordered that “‘the clerk shall mark

this case CLOSED.”’ Id.

First Mercury appealed the district court’s decision

to the United States Court of Appeals for the Third

Circuit. The defendants moved to have that appeal

dismissed, asserting that the district court’s order of

February 26, 1997, was not final under 28 U.S.C. §1291

and citing the Third Circuit’s decision in The Fidelity &

Casualty Co. of New York v. Carl & Ramagosa, Inc., 365

F.2d 303 (3d Cir. 1996). (Motion to Dismiss Appeal for

Lack of Jurisdiction, 44, App. A18.) On June 12, 1997,

the court of appeals entered an order granting that

motion without opinion.

iii lal

5

REASONS FOR GRANTING THE WRIT

The decision of the Third Circuit in the present case

is in conflict with the practice of the Seventh Circuit.

The question is of importance because the practice of the

Third Circuit limits the effectiveness of the remedy

created by the Declaratory Judgment Act, 28 U.S.C.

$2201(a).

In Nationwide Insurance v. Zavalis, 52 F.3d 689 (7th

Cir. 1995), the plaintiff insurance company appealed the

district court’s dismissal of a declaratory judgment

action seeking a declaration that it had no duty to either

defend or indemnify a defendant in an underlying state

court tort action. Jd. at 690. The Seventh Circuit

affirmed the dismissal of the indemnification issue but

vacated the dismissal of the request for a declaration

concerning the duty to defend. Jd. at 697. On remand the

district court held that Nationwide had no duty to

defend the underlying suit by the Board of Trustees of

the University of Illinois and both they and Nationwide’s

insured appealed. Nationwide Insurance v. Board of

Trustees of the University of Illinois, 116 F.3d 1154,

1155 (7th Cir. 1997). While the Seventh Circuit

demonstrated a sensitivity to the procedural aspects of

the case by holding that the Board of Trustees lacked

standing to appeal this decision (id.), it considered the

insured’s appeal on the merits and affirmed the summary

judgment that had been entered in favor of Nationwide

with respect to the duty to defend. Jd. at 1158. Under

the Third Circuit’s decision in the present case, the

district court’s decision would not, of course, have been

reviewable.

In addition to establishing the existence of a conflict

between the courts of appeals, Nationwide Insurance

indicates the desirability of a uniform rule regarding the

6

appealability of declaratory judgments. Since the

homeowners policy involved in that case was issued in

Pennsylvania, the substantive law of that state, rather

than the law of Illinois, was controlling. Nationwide

Insurance v. Zavalis, 52 F.3d at 693. While many factors

may influence the choice of venue in such a situation, it

is submitted that the question of whether a district court

decision will be appealable should not be among them.

The district court order appealed from in the present

case was final in both form and practical effect. It was

formally final because it either entered judgment on or

dismissed all of the claims in the case and directed the

clerk to mark the case closed. Its practical effect was

also final because the summary judgment ordering First

Mercury to defend the defendants in the underlying state

court action could not meaningfully be reviewed at a

later time. The Third Circuit has previously held that a

declaration that an insurer has no duty to provide a

defense does not entitle it to recover any costs that

it has previously expended on behalf of its insured.

Terra Nova Insurance Co. Ltd. v. 900 Bar, Inc., 887

F.2d 1213, 1220 (3d Cir. 1989). The Third Circuit’s

holding in the present case is thus tantamount to

holding that a decision on the duty to defend cannot be

reviewed until after it has become moot.’

It is questionable whether the Third Circuit’s

decision would make it possible for any part of the

dispute originally submitted to the district court to ever

be reviewed by the court of appeals. If a judgment is

ultimately entered against the defendants in the

underlying state court action, the plaintiffs in that action

‘Even if the applicable state law did not bar an insurer from

recovering defense costs from its insured, it would, of course, often be

difficult or impossible for an insurer to actually obtain repayment.

Oe ett ee ame: NP meena

7

could assert in a state court garnishment proceeding that

First Mercury is obligated to indemnify the defendants.

Helms v. Chandler, 423 Pa. 77, 223 A.2d 30 (1966);

Butterfield v. Giuntoli, 448 Pa. Super. 1, 12, 670 A2d.

646, 651 (1995), appeal denied, 546 Pa. 635, 683 A2d. 875

(1996). If First Mercury were then to refile its request for

a declaratory judgment by the district court on the

indemnification issue, the district court would have

discretion to dismiss or stay the action in deference to

the state court proceeding. Wilton v. Seven Falls Co.,

515 U.S. 227 (1995); Brillhart v. Excess Insurance Co. of

America, 316 U.S. 491 (1942). While the indemnification

question would then ultimately be resolved in state

court, it is not seen how the district court’s declaration

of a duty to defend (even if not moot) would then be

subject to review in any forum.

As the district court recognized in the present

action, the early resolution of the duty to defend issue is

important to both parties to a liability insurance policy

because “Without it, {the insurer] runs the risk of

breaching its duty to defend under the contract, and the

finsured] could be hampered in its defense against the

...funderlying] action.” (District court opinion of

February 26, 1997, App. All-A12). This is but one

example of the general objective of the Declaratory

Judgment Act to provide a means to clarify legal

relationships as expeditiously as possible and before

actual injury has occurred. 12 JAMES W. MookrE, ET AL.,

Moore’s FEDERAL PRACTICE $57.02{1})(3d ed. 1997). The

practice adopted by the court of appeals in the present

case would frustrate this objective.

8

Further, the refusal to permit an appeal from a

declaratory judgment concerning insurance coverage is

contrary to overall efficiency in judicial administration.

While a decision regarding the duty to defend may not

be dispositive of the duty to indemnify, it is usually

nearly so.’ An early final decision on the duty to defend

will thus often provide the parameters for a settlement of

the underlying action. The importance of this practical

consideration has been recognized by this Court in the

rule requiring the initial disclosure of insurance in all

civil actions. Fed.R.Civ.P. 26(a)(1)(D).

The subsection of the Declaratory Judgment Act |

which creates that remedy ends with the direction that:

“Any such declaration shall have the force and |

effect of a final judgment and decree and shall be

reviewable as such.’’ 28 U.S.C. §2201(a).

For this statutory directive to be effective a declaratory

judgment entered in circumstances like those of the

present action must be considered final and appealable

when entered. Cf. Mitchell v. Forsyth, 472 U.S. 511, 525

(1985) (holding that the denial of a government official’s

claim of qualified immunity is “final’’ and appealable

when the right involved cannot effectively be vindicated

at a later time).

? While other factors may become important in particular cases, the

major difference between the two is that the duty to defend is !

primarily determined by applying the policy to the underlying

complaint while the duty to indemnify is determined by applying it to |

the factual and legal basis for the judgment actually entered against

the insured. See Nationwide Insurance v. Zavalis, 52 F.3d at 693-94.

eee

9

CONCLUSION

For the reasons set forth above, a writ of certiorari

should be issued to the United States Court of Appeals

for the Third Circuit.

Respectfully submitted,

JoHN W. JoRDAN IV

Counsel of Record

GACA MATIS & BAUM

A PROFESSIONAL CORPORATION

300 Four PPG Place

Pittsburgh, Pennsylvania 15222-5404

Telephone: (412) 338-4750

Facsimile: (412) 338-4742

Attorneys for Petitioner

First Mercury Syndicate, Inc.

Al

APPENDIX

Order of the United States Court of Appeals

for the Third Circuit, Dated June 12, 1997.

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

May 29 1997

B-126

No. 97-3167

FIRST MERCURY SYNDICATE,

Appellant,

v.

TOWNSHIP OF BUFFALO; ALBERT T. ROENIGK;

CECIL D. FURER TERRY L. BERGBGLER;

HERMAN J. STEPPLING; JOHN J. MORGAN

(D.C. Civil No. 96-cv-00261 DBS)

PRESENT: STAPLETON, COWEN AND SEITZ,

Circuit Judges

1. Motion by appellee to dismiss appeal for lack of

jurisdiction.

s/ SUSAN M. ACERBA

Susan M. Acerba 597-3014

Case Manager

ORDER

The foregoing motion by appellee to dismiss the

appeal for lack of jurisdiction is granted.

By the Court,

/s WALTER K. STAPLETON

Circuit Judge

Dated: JUN 12, 1997

SMACC TO: DPH, WDK

A2

Memorandum Order of the United States District

Court of the Western District of Pennsylvania,

Dated March 17, 1997.

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT |

OF PENNSYLVANIA

Civil Action No. 96-261

FIRST MERCURY SYNDICATE, INC.,

Plaintiff

vs.

TOWNSHIP OF BUFFALO, ALBERT T. ROENIGK,

CECIL D. FURER, TERRY L. BEGBIGLER,

HERMAN J. STEPPLING and JOHN MORGAN,

Defendants.

MEMORANDUM ORDER

Plaintiff First Mercury Syndicate, Inc. seeks an

order vacating my previous Memorandum Order, and an

order granting it oral argument regarding its motion to

vacate.

Previously, I held that First Mercury had a duty to

defend the Township of Buffalo under an insurance

policy it had issued to the Township. I rejected First

Mercury's contention that a deleted policy exclusion

(exclusion C) remained subject to other exclusions in the

policy. I noted that “in interpreting an insurance

contract which is as detailed as this one in providing

exclusions, I would expect the endorsement deleting

exclusion C to state explicitly that the deletion remains

subject to all other exclusions. it does not so state, and

A3

because First Mercury has not directed this Court to any

policy language supporting its contention, I must reject

it.’’ Docket no. 15.

In the instant motion, First Mercury contends that

my previous ruling was based on the fact that “the

endorsement which deleted First Mercury’s policy’s

exclusion for claims based on violations of civil rights

failed to state specifically that all other policy exclusions

remained in effect.’’ First Mercury goes on to state that

“the Court’s reasoning is incorrect because the logical

extension of that reasoning would compel the conclusion

that all of the policy’s exclusions have been negated as

to any covered claims, not merely claims for violations of

civil rights.”

First Mercury then quotes the following language

from the preface of the policy: “IN CONSIDERATION

OF THE PAYMENT OF THE PREMIUM, IN

RELIANCE UPON THE STATEMENTS IN THE

APPLICATION MADE A PART HEREOF, AND

SUBJECT TO ALL OF THE TERMS, COVENANTS,

DEFINITIONS, CONDITION, EXCLUSIONS AND

LIMITATIONS OF THIS POLICY:”. According to

First Mercury, this “‘policy{ ] language clearly supports

the contention that coverage for the civil rights claims

asserted in the underlying action was subject to the

policy’s remaining exclusions.’

I deny First Mercury’s motion. First, the logical

extension of my previous ruling in no way compels the

conclusion that all of the policy’s exclusions have been

negated as to all covered claims. I simply found that the

deletion of exclusion C meant that all civil rights claims

were covered under the policy.

Ad

In making my previous ruling, I was fully aware of

the prefatory language that First Mercury contends

allows it to avoid defending the Township in the

underlying action. However, in construing a policy, a

judge must consider ‘‘the ‘policy in its entirety, giving

the words their plain and proper meaning.’”’ Anglo-

American Ins. Co. v. Molin, 673 A.2d 986, 988 (Pa.

Cmwilth. 1996) (citation omitted).' I determined that this

prefatory language was merely a tautological recital and

provided no evidence regarding the manner in which

deleted exclusions were to be applied.

My ruling was made in recognition of the principle

that “{[wJhere ambiguous, insurance contracts are to be

construed strictly against the insurer.’’ Pacific Indem.

Co. v. Linn, 766 F.2d 754, 761 (3d Cir. 1985) (citing Mohn

v. American Guaranty Life Insurance Co., 692 F.2d 289,

291 (1974). Furthermore, “{alny doubts regarding an

insurer's duty to defend must be resolved in favor of

{the] insured.’’ Atlantic Mut. Ins. Co., Inc. v. Acker, 1993

WL 536133 at *5 (E.D. Pa. Dec. 17, 1993) (citing

American Contract Bridge v. Nationwide Mut. Fire Ins.,

752 F.2d 71, 76 (3d Cir. 1985)).

I reaffirm my previous order that First Mecury must

defend the Township of Buffalo in the underlying action.

Plaintiff's motion to vacate my previous memorandum

order is denied. Because Plaintiff has not designated any

new issues for the consideration of this Court, its request

for oral argument is also denied.

‘ Aithough such a finding was not necessary to my original ruling,

First Mercury would be required to defend the underlying action,

regardless ox its contentions in the present motion, if the complaint

could be construed as one able to ‘“‘reasonably be amended to state a

claim under the policy.” Britamco Underwriters, Inc. v. Emerald

Abstract Co., 855 F. Supp. 793, 798 (E.D. Pa. 1994) (citing Safeguard

Scientifics, Inc. v. Liberty Mut. Ins. Co., 766 F. Supp. 324 (E.D. Pa.

1991), aff'd in part without op., 961 F.2d 209 (3d Cir. 1993)).

A5

ORDER

AND NOW, this 17th day of March, 1997, Plaintiff's

Motion for Relief From Order Dated February 26, 1997,

docket no. 16, is DENIED.

BY THE COURT,

/s D. BROOKS SMITH

D. Brooks Smith

United States District Judge

ce: All Counsel

A6

Memorandum Order of the United States District

Court of the Western District of Pennsylvania,

Dated February 26, 1997.

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT

OF PENNSYLVANIA

Civil Action No. 96-261

FIRST MERCURY SYNDICATE, INC.,

Plaintiff,

vs.

TOWNSHIP OF BUFFALO, ALBERT T. ROENIGK,

CECIL D. FURER, TERRY L. BEGBIGLER,

HERMAN J. STEPPLING and JOHN MORGAN,

Defendants.

MEMORANDUM ORDER

Smith, District Judge

I. INTRODUCTION

Plaintiff, First Mercury Syndicate (First Mercury),

has filed a motion for judgment on the pleadings

pursuant to Federal Rule of Civil Procedure 12(c)

requesting this court to declare that the company has no

duty to defend or indemnify under an insurance policy it

issued to the Township of Buffalo (Township). The

defendants, the Township, its supervisors and _ its

solicitor (referred to collectively as Township), have

opposed Mercury’s motion by filing a motion for

summary judgment raising the same coverage issue.

A7

Federal district courts are authorized to issue

declaratory judgments under 28 U.S.C. $2201. This

Court has jurisdiction pursuant to 28 U.S.C. $1332, and

venue is proper under 28 U.S.C. §1391(a), as the actions

alleged herein took place in the Western District of

Pennsylvania.

II. APPLICABLE DISPOSITIVE MOTION

STANDARDS

A. Summary Judgment

Summary judgment is to be “rendered forthwith if

the pleadings, depositions, answers to interrogatories,

and admissions on file, together with the affidavits, if

any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a

judgment as a matter of law.” Fed. R. Civ. P. 56(c). This

court must view the facts and draw all inferences in the

light mest favorable to the non-moving party. Ambruster

v. Unisys Corp., 32 F.3d 768, 777 (3d Cir. 1994).

To withstand a motion for summary judgment, the

nonmoving party must produce evidence which would be

sufficient for a jury to render a verdict in its favor. If the

evidence is merely colorable or not significantly

probative, summary judgment should be granted. Id. “A

disputed fact is ‘material’ if it would affect the outcome

of the suit as determined by the substantive law.” Jd.

(quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

248 (1986)). Thus, a party opposing summary judgment

may not rely on mere allegations or denials in the

pleadings; rather, it must respond by setting forth

specific facts that show there is a genuine issue for trial.

Anderson v. Liberty Lobby, Inc., 477 U.S. at 247.

A8

B. Rule 12(c) Motion for Judgment on _ the

Pleadings

First Mercury has moved for judgment on the

pleadings under Federal Rule of Civil Procedure 12(c).

“After the pleadings are closed but within such time as

to not delay the trial, any party may move for judgment

on the pleadings.” Fed.R.Civ.P. 12(c). The Third Circuit

will not allow judgment on the pleadings “ ‘unless the

movant clearly establishes that no material issue of fact

remains and that he is entitled to judgment as a matter

of law.’”’ Kruzits v. Okuma Machine Tool, Inc., 40 F.3d

52, 54 (3d Cir. 1994) (quoting Society Hill Civic Ass'n v.

Harris, 632 F.2d 1045, 1054 (3d Cir. 1980)). The district

court must “‘view the facts presented in the pleadings

and the inferences to be drawn therefrom in the light

most favorable to ... the non-moving party.” Institute

for Scientific Info., Inc. v. Gordon and Breach, Science

Publishers, Inc., 931 F.2d 1002, 1004 (3d Cir. 1991). If

the plaintiff alleges facts that, if proven, would allow

recovery, a 12(c) motion must be denied. Jd. at 1005.

Because First Mercury’s motion for judgment on the

pleadings was followed by the Township’s motion for

summary judgment, this Court will engage in the type of

analysis called for by Rule 56(c). Regardless of whether

one deems this procedurally as making First Mercury’s

12(c) motion moot, or as converting it to a motion for

summary judgment under Rule 56(c), the result is the

same. The less inclusive 12(c) motion has been subsumed

into the more inclusive Rule 56(c) motion.

lil. FACTS

The matter before me concerns the extent of

coverage under an insurance contract. First Mercury, the

insurer, is an Illinois corporation with its principal place

A9

of business in Southfield, Michigan. The Township, a

municipal subdivision located in Butler County,

Pennsylvania, is the insured. The contract obligated

First Mercury to provide the Township with a policy of

Public Officials Liability insurance (policy number DOL

201740) which was effective from August 1, 1994 until

August 1, 1995.

The policy specifies that the duty to defend is not

separate from the duty to indemnify. The policy also

provides that there is no duty either to defend or

indemnify when one of the many coverage exclusions

applies. Docket no. 1, exh. 1. Among the claims excluded

from coverage under the contract are, inter alia, those

claims involving: inverse condemnation, regulatory

takings, adverse possession, equitable relief, punitive

damages, wrongful acts of an attorney, damage or

destruction to property, wrongful entry, as well as all

reasonably pending claims not disclosed by the Township

in its application for coverage. The preprinted contract

also excluded coverage for civil rights violations under

Exclusion C, although this exclusion was deleted by a

policy endorsement. Jd.

The instant dispute stems from a class action lawsuit

filed in November of 1994 in the Court of Common Pleas

of Butler County naming the Township as a defendant.

See Jones v. Township of Buffalo, No. AD 94-10907,

docket no. 1, exh. 2. The plaintiff class is composed of

those persons, and their successors in title, who own

the real property which comprises the former railroad

right of way known as the “Butler Branch.” Docket no.

1.

The plaintiff class alleges that on June 8, 1987,

Conrail, then holder of the right of way, sought approval

for abandonment of the Butler Branch, pursuant to 45

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U.S.C. §748. The Interstate Commerce Commission

approved the abandonment by final order on September

14, 1987.

According to the class, the Township then attempted

to file a request for “‘Interim Trail use’’ with the ICC, as

provided under the National Trails Systems Act and the

rules of the ICC. Allegedly, the ICC advised the

Township that, before the ICC could proceed with the

request, it would be necessary for the Township to show

that Conrail had not “‘consummated abandonment of the

line."’ The complaint avers that the Township then

withdrew its request for interim trail designation by a

letter to the ICC dated September 12, 1990. The

Township allegedly withdrew its request because it

would be unable to prove that abandonment had not

been consummated since the rails and ties had already

been removed. Docket no. 1, exh. 3, 4413-22.

Thereafter, the Township allegedly sought other

means of acquiring control over the property comprising

the Butler Branch, and made such attempts with full

knowledge that the class had reversionary interests in

the land in question.

The plaintiff class alleges several wrongful actions on

the part of the Township. It alleges the wrongful

removal of ballast, as well as trespassing and removal of

fixtures by employees or agents of the Township. It also

alleges false characterization of the property in question

as a public trail, and charges that the Township of

Buffalo encouraged members of the public to trespass

upon the properties in question. Finally, the class claims

that the Township has wrongfully received income,

payments and rents for properties allegedly belonging to

the class. Id.

All

According to the underlying complaint, all of these

actions have been committed by the Township, but

without resorting to its powers of condemnation under

the Pennsylvania Eminent Domain Code. The class

alleges that they “have been denied by ... Buffalo

Township ... their Constitutional rights to their

property, and Due Process of Law under the

Constitution of the United States and the Constitution of

Pennsylvania, and under the provisions of Article I,

section 10 of the Constitution of Pennsylvania, and the

specific protections provided by the Eminent Domain

Code by the Defendants unlawful acts... .” Id.

IV. DISCUSSION

A. Declaratory Judgment

Each party seeks a declaratory judgment in its favor

concerning the duty of First Mercury to defend and

indemnify the Township in the underlying class action.

The Declaratory Judgment Act is a procedural

device which permits district courts to “declare the

rights and other legal relations of any interested party

seeking such declaration.” 28 U.S.C. §2201. “Whether a

district court decides to entertain jurisdiction under the

act is a matter of judicial discretion.”’ Atlantic Mut. Ins.

Co., Inc. v. Acker, 1993 WL 536133 at *3 (E.D. Pa. Dec.

17, 1993) (citing Zemel v. Rusk, 381 U.S. 1, 19 (1965)).

Declaratory judgment should be granted only when it

will serve a useful purpose by clarifying and settling the

legal relations at issue, or by affording relief from the

uncertainty, insecurity, and controversy from which the

proceeding stems. Jd.

In the instant matter, the utility of declaratory

judgment is patent. Without it, First Mercury runs the

risk of breaching its duty to defend under the contract,

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and the Township could be hampered in its defense

against the class action. These factors make the issue of

First Mercury’s duty to defend suitable for resolution by

dispositive motion.

However, to the extent that the parties also seek a

ruling on First Mercury’s duty to indemnify under the

policy, this Court will exercise its discretion not to issue

declaratory relief. Not only are there a myriad of

potentially applicable policy provisions and exclusions,

but resolution of Mercury’s duty to indemnify is not yet

ripe. Some of the provisions which First Mercury seeks

to have construed may never even be at issue in the

class action. The class action itself may yet be amended

or withdrawn. The Township may prevail on all claims,

either at trial, or by way of pretrial dispositive motion.

By waiting until any future indemnification claim

becomes more certain, legal efficency, which is one of

the goals of the Declaratory Judgment Act, is better

served.

B. First Mercury's Duty to Defend

Under Pennsylvania law,’ an insurer’s duty to defend

is “fixed solely by the allegations in the underlying

complaint{ ].’’ Aetna Cas. and Sur. Co. v. Roe, 650 A.2d

94, 98 (Pa.Super. 1994) (citations omitted). ‘“The insurer

is obligated to defend if the factual allegations of the

complaint on its face comprehend an injury which is

actually or potentially within the scope of the policy.”

‘Under Pennsylvania law, the interpretation of an insurance contract

is governed by the law of the state where the contract was made.”

Jamison v. Miracle Mile Rambler, Inc., 536 F.2d 560, 562 n.1 (3d Cir.

1976) (citing Crawford v. Manhattan Life Ins. Co. of N.Y., 221 A.2d

877, 880 (Pa.Super. 1966)). The issue of where the contract was made

has not been raised by the parties, who both admit that the contract

is governed by Pennsylvania law. Docket nos. 8 and 10.

aot ee weseien)

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Id. at 99 (citations omitted). ‘Any doubts regarding an

insurer’s duty to defend must be resolved in favor of

[the] insured.” Atlantic Mut. Ins. Co., Inc. v. Acker, 1993

WL 536133 at *5 (E.D. Pa. Dec. 17, 1993) (citing

American Contract Bridge v. Nationwide Mut. Fire Ins.,

752 F.2d 71, 76 (8d Cir. 1985)).

When interpreting an insurance policy governed by

Pennsylvania law, a district court must consider the

“policy in its entirety, giving the words their plain and

proper meaining.’’ Anglo-American Ins. Co. v. Molin, 673

A.2d 986, 988 (Pa.Cmwlth. 1996) (citation omitted). This

requires looking at the four corners of the complaint to

determine whether the claim is one either covered by the

insurance policy or one that “could reasonably be

amended to state a claim under the policy.’ Britamco

Underwriters, Inc. v. Emerald Abstract Co., 855 F. Supp.

793, 798 (E.D. Pa. 1994) (citing Safeguard Scientifics,

Inc. v. Liberty Mut. Ins. Co., 766 F. Supp. 324 (E.D. Pa.

1991), aff'd in part without op., 961 F.2d 209 (3d Cir.

1993)). ‘Thus, if this Court can identify at least one

claim ... which could potentially come within the

coverage of [the] policy ... then it must find ... a duty

to defend.’’ Home Ins. Co. v. Perlberger, 900 F. Supp.

768 (E.D. Pa. 1995).

The Pennsylvania rule is based upon the sound

policy that ‘{tlo make pleadings determinative and

ignore whether a claim potentially may become one

which is within the scope of the policy, would ... turn

the issue of coverage over to the vagaries of an

opponent's pleadings.” Britamco, 855 F. Supp. at 798-99.

Applying the above test to the matter at hand, I

conclude that First Mercury has a duty to defend the

claim in the underlying action. Key to that determination

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is the recognition that First Mercury deleted Exclusion C

of the pre-printed contract by an endorsement. The

exclusion reads, in relevant part, as follows:

EXCLUSIONS.

THE DUTY TO DEFEND IS NOT

SEPARATE FROM THE DUTY TO PAY AND

WE SHALL NOT HAVE ANY DUTY TO

DEFEND WHEN ANY EXCLUSION APPLIES.

WE SHALL NOT BE LIABLE TO MAKE ANY

PAYMENT FOR ‘LOSS’ IN CONNECTION WITH

ANY ‘CLAIM’ OR ‘CLAIMS’ BASED UPON OR

ATTRIBUTABLE TO:

* bd x

C. the deprivation of any rights, privileges or

immunities secured by the Constitution of the

United States of America or of any State or by

the civil rights statutes of the United States of

America, 42 U.S.C. 1983, or any other statute

of the United States of America or of any State.

Docket 1, Exh. 1.

The allegations in the class action complaint allege:

The defendants Buffalo Township, Buffalo Township

Supervisors, individual defendants Albert T.

Roengk, Cecil D. Furer, Terry L. Begbigler, Herman

J. Steppling, and John J. Morgan and the Township

of Jefferson and the Township of Winfield in

concert, together and individually, and with full

knowledge of the rights of the Plaintiffs, and with

willful, wanton, and conscious disregard for the

property rights of the Plaintiff, and in complete

disregard of the rights of the Plaintiff Property

owners, and acting as public officers were oppressive

in their conduct in denying the Plaintiff property

owners of their rights to their property as

guaranteed in the Constitution of the United States

and the Constitution of the Commonwealth of

Ald

Pennsylvania, and the Eminent Domain Code of

Pennsylvania by initiating a series of trespasses and

continuing trespasses. .. .

Docket no. 1, Exh.2.

This averment asserts a claim based upon a

deprivation of the rights and privileges secured by not

only the United States Constitution, but also the

Pennsylvania Constitution. It is, therefore, squarely

within the coverage of the policy. Pennsylvania law

imposes a duty to defend if there is ‘‘at least one claim’”’

that is potentially within the coverage of the policy.

Perlberger, 900 F.Supp. at 771-72.

First Mercury argues in its brief opposing summary

judgment that, in spite of the deletion of Exclusion C, it

has no duty to defend or indemnify because there are

other applicable policy exclusions’ which negate

coverage. First Mercury, however, provides no support

beyond a bald assertion of this proposition. The

endorsement deleting Exclusion C states only that the

exclusion has been deleted. No other conclusion can be

reached than that First Mercury agreed to cover all civil

rights claims made against the Township. In interpreting

an insurance contract which is as detailed as this one in

providing exclusions, I would expect the endorsement

deleting exclusion C to state explicitly that the deletion

remains subject to all other exclusions. It does not so

state, and because First Mercury has not directed this

Court to any policy language supporting its contention, I

must reject it.

* First Mercury contends that the following exclusions apply: B(3) for

wrongful entry; P for inverse condemnation; M for wrongful acts of

any attorney; A for damage to tangible property including loss of

use; Q for actions seeking relief in any form other than money

damages; V for punitive damages; and W for any wrongful act with

respect to which the insured had knowledge prior to the effective

policy date. Docket nos. 8 and 13.

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Thus, in accordance with Pennsylvania law and the

terms of the endorsement, First Mercury is required to

defend the underlying action against the Township until

it can ‘‘confine the claim to a recovery that is clearly

excluded from the scope of the policy.’’ See Anglo-

American, 673 A.2d at 994.

ORDER

AND NOW, this 26th day of February, 1997,

consistent with the foregoing Memorandum, it is hereby

ORDERED and DIRECTED that the defendants’

Motion for Summary Judgment, docket no. 9, is

GRANTED IN PART and DENIED IN PART. The

motion is GRANTED to the extent that there is a duty

to defend. Therefore, plaintiff shall defend the

defendants in the state court action, Jones et al, v.

Township of Buffalo, et al, No. AD 94-10907. The

motion is DENIED with respect to the duty to

indemnify and plaintiff's complaint seeking a declaratory

judgment on the duty to indemnify is DISMISSED

without prejudice. Plaintiff's Motion for Judgment on

the Pleadings, docket no. 7, is DENIED as moot. The

clerk shall mark this case CLOSED.

BY THE COURT

ls D. BROOKS SMITH

D. Brooks Smith

United States District Judge

cc: All Counsel

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Motion to Dismiss Appeal for Lack of

Jurisdiction, Dated May 14, 1997.

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 97-3167

FIRST MERCURY SYNDICATE, INC.,

Appellant,

vs.

TOWNSHIP OF BUFFALO; ALBERT T. ROENIGK;

CECIL D. FURER; TERRY L. BERGBIGLER;

HERMAN J. STEPPLING; JOHN J. MORGAN,

Appellees.

MOTION TO DISMISS APPEAL FOR

LACK OF JURISDICTION

AND NOW come the Appellees, the Township of

Buffalo; Albert T. Roenigk; Cecil D. Furer; Terry L.

Bergbigler; Herman J. Steppling; John J. Morgan;

(hereinafter referred to as ‘‘the Township’’), and move

this court to dismiss the appeal of First Mercury

Syndicate, Inc. and in support thereof state the

following:

1. The action in the court below was a

declaratory judgment action seeking declaration of

rights and duties pursuant to a contract of

insurance.

2. Motions for Summary Judgment and for

Judgment on the Pleadings were filed by all parties.

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3. On February 26, 1997, the court entered an

order granting in part and denying in part the

Township’s Motion for Summary Judgment: the

court granted the Township’s Motion regarding the

issue of the duty to defend; the court denied the

Township’s Motion regarding the issue of duty to

indemnify. The court dismissed without prejudice

First Mercury’s Complaint regarding the issue of

duty to indemnify for the reason of lack of ripeness.

4. The order of February 26, 1997, which First

Mercury is now attempting to appeal, is not a final

appealable order as required by 28 U.S.C.A. Sec.

1291, and as such is an interlocutory order form

which no appeal can be taken. The Fidelity and

Casualty Company of New York v. Carll and

Ramagosa Inc., 365 F.2d 303 (1966).

WHEREFORE, Appellees move this court to

dismiss Appellant’s Appeal for lack of jurisdiction.

Respectfully submitted,

/s WILLIAM D. KEMPER

William D. Kemper

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Sur Petition for Panel Rehearing of the

United States Court of Appeals for the

Third Circuit, Dated July 23, 1997.

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 97-3167

FIRST MERCURY SYNDICATE, INC.,

Appellant,

v.

TOWNSHIP OF BUFFALO; ALBERT T. ROENIGK;

CECIL D. FURER; TERRY L. BERGBGLER;

HERMAN J. STEPPLING; JOHN J. MORGAN.

(D.C. Civil No. 96-cv-00261 DBS)

SUR PETITION FOR PANEL REHEARING

BEFORE: SraPLeton, COWEN AND SEITz,

Circuit Judges

The petition for panel rehearing filed by appellant in

the above-entitled case having been submitted to the

judges who participated in the decision of this court and

no judge who concurred in the decision having asked for

panel rehearing, the petition for panel rehearing is

denied.

By the Court,

/s WALTER K. STAPLETON

Circuit Judge

Dated: JUL 23, 1997

SMACC TO: DPH, WDK