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UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

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No. 12-3141

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BOROUGH OF MOOSIC; MOOSIC BO ROUGH COUNCIL; MO OSIC BOROUGH PLANNING COMMISSION; MOOSIC BOROUGH ZONING BOARD OF ADJUSTMENTS; JOSEPH ME RCATILI, individually and in his official capacity as President of Moosic Boro ugh Council; JOSEPH DENTE, individually and in his official capacity as Vice President of Moosic Borough Council and member of the Moosic Bo rough Planning Commission; THOMAS HARRISON, Individually and in his off icial capacity as Moosic Borough Manager; BRYAN FAUVER, individually and in hi s official capacity as Chairman of Moosic Borough Planning Commission; JA MES DURKIN, Individually and in his official capacity as Moosic Borough Zoning a nd Enforcement Officer, Appellants

v. DARWIN NATIONAL ASSURANCE COMPANY*

*(Amended pursuant to Clerk Order of 4/22/13)

On Appeal from the Un ited States District Court for the Middle District of Pennsylvania (D. C. No. 3-11-cv-01689) District Judge: Honorable Robert D. Mariani
Argued on July 18, 2013 Before: RENDELL, SMITH and ROTH, Circuit Judges (Opinion filed: February 4, 2014) David J. Strasser, Esquire ( Argued) William B. Pentecost, Jr., Esquire2 Eckert, Seamans, Cherin & Mellott 44 thFloor, US Steel Tower 600 Grant Street Pittsburgh, PA 15219 John J. Brazil, Esq. Solicitor Borough of Moosic 310 Adams Avenue Suite 200 Scranton, PA 18503 Counsel for Appellants

Anthony L. Miscioscia, Esquire (Argued) Gale White, Esquire White & Williams 1650 Market Street Suite 1800 Philadelphia, PA 19103 Counsel for Appellee

O P I N I O N

ROTH, Circuit Judge : This appeal involves a dispute over insurance covera ge. The appellants – the Borough of Moosic, the Moosic Borough Council, th e Moosic Borough Planning Commission, the Moosic Borough Zoning Board of Adjustments, and five individuals associated with these organizations (collectively, the Insureds ) – sought a declaration in the District Court that their in surer, Darwin National Assura nce Company, had a duty to3 defend and indemnify them against a lawsuit brought by two residents of the Borough of Moosic. The District Court granted Darwin ’s motion to dismiss for failing to state a claim on June 29, 2012, and the Insureds appe aled. For the reasons that follow, we will remand this case to the District Court. I. Background On December 23, 2010, Ed ward and Jeanne Zaloga brou ght a lawsuit against the Insureds under 42 U.S.C. § 1983 allegi ng violations of the Zalogas’ civil rights (Underlying Action). The Un derlying Action provided as factual background that the Zalogas lived next door to and, since 2005, had been in an on going dispute with Jack Williams Tire & Auto Service Center over land use issues. The Zalogas had further alleged that their attemp ts to resolve the dispute had caused the Insureds to violate the Zalogas’ First Amendment and Due Process rights. The Insureds notified Darw in about the Underlying Acti on. The Insureds had a “claims made” Public Officials Pr ofessional Liability Policy fro m Darwin that provided coverage for all of the defendants named in the Underlying Action. The insuring agreement provided that Darwin would pay for loss that was the result of any claim made during the policy period against th e Insureds for a public off icial’s wrongful act. Darwin denied coverage for the defense or indemnity of the Underlying Acti on in a letter dated June 2, 2011. Darwin e xplained that the Un derlying Action and several other actions brought by the Zalogas were related claims under the policy. As a result of the policy’s related claims provision, “this ma tter constitutes a single Claim against Insureds for a Public Officials Wrongful Act first made on A ugust 5, 2005[,]” when the first of the4 related claims was made. Darw in concluded that the Underly ing Action was thus first made before the policy period b egan on August 1, 2010, and th erefore not covered by the Insureds’s policy. 1 Most pertinent to this app eal, the Zalogas had previo usly brought a mandamus complaint against the Bo rough of Moosic and affiliated i ndividuals on February 10, 2006, in the Superior Court of Lackawanna Co unty, Pennsylvania (Ma ndamus Complaint). The Mandamus Complaint allegedthat the Borough of Moosic and its zoning officer had failed to investigate zoning vi olations committed by Jack W illiams Tire & Auto Service Center or to bring appropriate enforcement acti ons. The Zalogas sough t injunctive relief. The Mandamus Complaint was d ismissed on June 5, 2006, t hough the court ordered that “upon proper application, the [Zalogas] shall be granted a hearing before the Moosic Zoning Hearing Board.” After Darwin denied coverage, the Insure ds brought suit in the U.S. District Court for the Middle District of P ennsylvania, seeking a declaration that Darw in owed them a duty to defend and to i ndemnify with respect to the Underl ying Action. Darwin filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that the Insureds had not demonstrated that the Underly ing Action was covered by their policy for the reasons stated in the denial letter. The In sureds opposed the moti on. Darwin filed a reply brief on January 12, 2012, and attached to its brief ten documents which consisted of (1) the insurance policy, (2) the denial lette r, (3) six letters from the Zalogas to the

1 Darwin contends that the policy period beg an on August 1, 2010, but the Borough of Moosic Insureds argue that th e policy inception date is actu ally August 1, 2006. This difference does not matter for purposes of this appeal.5 Borough of Moosic and various government officials, (4) the Mandamus Complaint, and (5) the Borough of Moosic’ s motion to dismiss the Unde rlying Action. The District Court dismissed the Insure ds’s complaint on June 29 , 2012, and they appealed.
II. Discussion 2 The Insureds first argue that the District Court erred by considering documents outside of the pleadings in d eciding Darwin’s moti on to dismiss. Wh ile the Insureds do not specify which documents th e District Court improperly c onsidered, they argue that Darwin “sandbagged” themby attaching documents to Darwin’s reply brief. Generally, a district court ruling on a mo tion to dismiss may not consider matters extraneous to the pleadings. In re Burlington Co at Factory Sec. Litig. , 114 F.3d 1410, 1426 (3d Cir. 1997); see Pension Benefit Guar. Corp. v. White Consol. Indus. Inc. , 998 F.2d 1192, 1196 (3d Cir. 1993) (noting that courts usually consider only the allegations in the complaint, attached exhib its, and matters of public reco rd). If matters outside the pleadings are presented to and not excluded by the court, the motion to dismiss must be converted to a motion for su mmary judgment under Rule 56 and the court must give all parties a reasonable oppo rtunity to present pertin ent evidence. Fed. R. Civ. P. 12(d). “However, an exception to th e general rule is that a ‘docum ent integral to or explicitly relied upon in the complaint’ may be c onsidered ‘without converting the motion [to dismiss] into one for summary judgment.” In re Burlington Coat Factory Sec. Litig. , 114 F.3d at 1426 (quoting Shaw v. Digital Equip. Corp. , 82 F.3d 1194, 1220 (1st Cir. 1996)).

2 The District Court had jurisdiction pursuant to 28 U.S.C. § 1332 because the Insureds are citizens of Pennsylvania while Darwin is a citizen of C onnecticut, and the amount in controversy exceeds $75,000. We have ju risdiction pursuant to 28 U.S.C. § 1291.6 “A court may consider an undisputedly au thentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff’s claims are based on the document.” Pension Benefit Guar. Corp. , 998 F.2d at 1196. Here, the attached documents meet that definition of “integral to or explicitly relied upon in the complaint. ” They were therefore pr operly considered by the District
Court. The Insureds next argue that the Distr ict Court erred in granting Darwin’s motion to dismiss. We exercise plen ary review over a district court’s grant of a Rule 12(b)(6) motion for failure to state a claim. Grier v. Klem , 591 F.3d 672, 67 6 (3d Cir. 2010). To withstand a Rule 12(b)(6) motion to dismiss, “a comp laint must contain sufficient factual matter, accep ted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009) (in ternal quotation marks and citation omitted). “We do not inquire whether a plaintiff w ill ultimately prevail when considering a motion to dismiss, only whether the plaintiff is entitled to o ffer evidence to support his or her claims.” Grier , 591 F.3d at 676. We begin with the text of the insurance policy that Darwin issued to th e Insureds. Under Pennsylvania law, the in terpretation of insurance contr acts is a matter of law for the courts to decide. Allstate Prop. & Cas. Ins. Co. v. Squires , 667 F.3d 388, 391 (3d Cir. 2012) (citing Paylor v. Hartford Ins. Co. , 640 A.2d 1234, 1235 (P a. 1994)). “When the language of an insurance contract is clear and unambiguous, a court is required to enforce that language.” Med. Protective Co. v. Watkins , 198 F.3d 100, 103 (3d Cir. 1999). The insuring agreement in th e Insureds’ policy states that:7 The Insurer will pay on behalf of any Insured, subject to the Limit of Liability set forth in ITEM (3)(a) of the Declarations, Loss which the Insured is legally obligated to pay as a result of any Claim first made again st any Insured during the Policy Period or any applicable Extended Reporting Period for a Public Officials Wrongful Act which occurred on or after the Retroactive Date and before the end of the Policy Period. The policy defines a claim as, inter alia , “any written demand for monetary damages or non-monetary relief,” and a claim is “deemed to have been first ma de when an Insured receives notice of the claim.” The Policy Period is August 1, 2010, to August 1, 2011, and the policy defines a Pub lic Official’s Wrongful Act as, inter alia , “any actual or alleged violation of civil rights protected under 42 U. S.C. 1981 et seq. or similar federal, state or local law” by an insured and committed in the pe rformance of his or her duties for the Named Insured. Fi nally, the policy has no retroactiv e date, so the wrongful act could have occurred at any time in the past before the end of the policy period. Looking only to the language of the insu ring agreement, its de fined terms, and the Underlying Action, we must conclude that the Underlying Action is a claim that would be covered. The Underlying Action is a claim under the policy because it sought monetary damages, and this claim was first ma de during the policy period because the Insureds received notice of it on December 23, 2010, when the Un derlying Action was filed. The Underlying Action alleged civil rights violations, which constitute a public official’s wrongful acts, and the alleged wro ngful action occurred on or after the policy’s retroactive date because the policy has no retroactive date.8 Our analysis, however, does not end here . In the “Conditions” section of the policy, it states that “All Related C laims will be treated as a si ngle Claim made when the earliest of such Related Claims was firs t made, . . ..” Under the policy, “Related Claims” means all Clai ms for Wrongful Acts based upon, arising out of, resulting from, or in any way involving the same or related facts, circumstances, situations, transactions or events or the same or related series of facts, circumstances situations, transacti ons or events, whether related logically, causally or in any other way. The District Court concluded that the Unde rlying Action was not covered under the policy because the Underlying Action an d the Mandamus Comp laint were Related Claims. As such, they we re treated as being made on Fe bruary 10, 2006, when the Mandamus Complaint was filed. Because this was before th e inception of the policy, the Insureds had failed to allege that the Under lying Claim was covered by the policy and, consequently, failed to state a claim upon which relief could be granted. By analyzing the Related C laims provision in this way, the District Court treated it as a condition precedent. If the Related Claims provision is a condition precedent to coverage, the Insureds initially bear the bur den of demonstrating that a claim falls within the policy’s grant of coverag e and must demonstrate that the Underlying Action and the Mandamus Complaint ar e not Related Claims. State Farm Fire & Cas. Co. v. Estate of Mehlman , 589 F.3d 105, 111 (3d Cir. 2009). On the other hand, if the Related Claims provision is an exclusion, then the insurer bears the burden of proving that any loss falls within the scope of an exemption in the insurance contract. Peters Twp. Sch. Dist. v. Hartford Accident & Indem. Co. , 833 F.2d 32, 37 (3d Cir. 1987). The Insureds argue that9 the District Court erred by treating the R elated Claims provision as a condition precedent and that it is instead an exclusion. We agree. 3 “A condition preceden t is either an act of a party that must be performed or a certain event that must happen before a contractual ri ght accrues or contractual duty arises.” 13 Williston on Contracts § 38:7 (4th ed.); see 44 Am. Jur. 2d Insurance § 1033 (2013) (“Conditions neither confer nor exclude coverage for a particu lar risk but, rather, impose certain duties on the in sured in order to obtain th e coverage provided by the policy.”). An exclusion in an insurance policy is a “limitation of liability or carving out of certain types of loss to which the coverage or protection of the po licy does not apply.” 17 Williston on Contracts § 49:111 (4th ed.). The Related Claims provision here acts to limit coverage under the policy. If a claim is related to previous claims, all of th e claims will be treated as one claim that was made at the same time as the old est claim. As a result, a clai m like the one at issue here that meets the requirements liste d in the insuring agreement may still be denied coverage because the Related Claims pr ovision operates to change th e date the claim was first made from a date within the policy period to a date before the policy period began. The Related Claims provision thus carves out certain types of loss – those related to claims made before the inception of the policy – from the pro tection provided by the policy.

3 The Insureds also assert that the District Court applied the exclu sion listed in Part III, Paragraph C(9) of the policy to find that they had failed to state a claim. This is incorrect. The District Court based its analysis on Paragraph F(4) in Part IV, which is described above.10 Furthermore, the Related Claims provision does not fit within the definition of condition precedent. There is no act the insu red must perform or certain event that must occur for there to be no relatedclaim that was first made befo re the policy period began. In fact, quite the opposite is tr ue. If a certain event occu rs, namely that the claim is related to a claim that was made before the policy period, the duty to provide insurance coverage is extinguished. While the Related Claims provision app ears in the section titled “Conditions,” rather than the section titled “E xclusions,” the location of th e provision in the policy is not determinative. “All provisions of an in surance contract must be read together and construed according to the plain meaning of the words involv ed, so as to avoid ambiguity while at the same time giving effe ct to all of its provisions.” Post v. St. Paul Travelers
Ins. Co. , 691 F.3d 500, 517 (3 d Cir. 2012) (quoting Masters v. Celina Mut. Ins. Co. , 224 A.2d 774, 776 (Pa. Super. Ct. 1966). Othe r courts have found that the location of a provision within an insuran ce policy does not determine whether it is a condition or an exclusion. See, e.g., Stonewall Ins. Co. v. Asbestos Claims Mgmt. Corp. , 73 F.3d 1178, 1205 (2d Cir. 1995) (“[U]nder New York law , the exclusionary effect of policy language, not its placement, controls allocation of the burden of proof.”).. Because the Related Claims provision limits coverage, we find that it is an exclusion to the in surance policy. See Peters v. World Mut. Hea lth & Acciden t Ins. Co. of Pa. , 213 A.2d 116, 117-18 (Pa. Super. 19 65) (finding that provisi on was an exclusion to the policy based on its language). As a result, Darwin bears the burden of proving that the loss caused by the Zalogas’ complaint falls w ithin the Related Claims provision.11 “Where an insurer relies on a policy exclusion as th e basis for its denial of coverage and refusal to defend, the insure r has asserted an affirmative defense and, accordingly bears the burden of proving such defense.” Canal Ins. Co. v. U nderwriters at Lloyd’s London , 435 F.3d 431, 435 (3d Cir. 2006). At this stage of this case, however, the District Court was not in a position to determine whether Darwin cou ld prevail on the affirma tive defense that the policy exclusion for Related Claims app lied. “Generally speaking, [this Court] will not rely on an affirmative defense . . . to trigger d ismissal of a complaint under Rule 12(b)(6).” Victaulic Co. v. Tieman , 499 F.3d 227, 234-35 (3d Cir. 20 07). The Insureds argue that the Mandamus Complaint was a misplaced zoning appeal and so does not constitute a Related claim. Darwin does not agree. We will remand th is case to the District Court for further proceedings to determine the applica bility of the Related Claims exclusion, the applicability of the Protection of Innocent Insureds provi sion and what further action is then required. 4
IV. Conclusion For the foregoing reasons, we will re mand this case to the District Court for further proceedings consisten t with this opinion.

4 In remanding, we are in no way determi ning the merits of either the underlying complaint, the Protection of Innocent Insureds provision or the Related Claims affirmative defense.