Opinion ID: 3009566
Heading Depth: 2
Heading Rank: 3

Heading: Township's Declaratory Judgment Action

Text: Once the Blanche Road federal litigation commenced, Township filed a claim with Insurers under the terms of the (..continued) the proceedings were initiated by Blanche Road. In one case, certain individual owners of lots within the Industrial Park filed a complaint in mandamus naming the Town Board of Supervisors as defendants. The owners sought to compel the Board to approve certain improvements they made to their property and to release the owners from their obligations under a letter of credit. In another related case, a Township official swore out a private criminal complaint in District Justice Court against one of Blanche Road's principals. The complaint related to a dispute over one of the lots in the Industrial Park. insurance policy. Township believed it was entitled to coverage because the civil rights complaint was filed during the policy period and it was the first time Blanche Road had filed a federal suit seeking money damages. Township had not filed a claim with Insurers for any of the prior state Blanche Road proceedings because they involved equitable relief not covered under the general provisions of the policy. After a dispute arose between Insurers and Township regarding coverage under the policy, Township filed the instant complaint in the Court of Common Pleas for Bucks County, Pennsylvania, seeking both declaratory and monetary relief. Insurers removed the action to the United States District Court for the Eastern District of Pennsylvania. Township alleged that the insurance policy covered the Blanche Road litigation and that Insurers had a contractual duty to pay defense costs. Township also alleged that certain aspects of the policy were ambiguous and should be construed in favor of coverage. Insurers filed a motion to dismiss Township's complaint for failing to state a claim upon which relief could be granted pursuant to Fed. R. Civ. P. 12(b)(6). They argued that the policy exclusion barred coverage because the Blanche Road federal litigation involved similar facts and issues as the five prior state proceedings for equitable relief. While under the former exclusion provision claims would only be barred if they related to prior litigation, Insurers maintained that the language in the new policy specifically barred claims relating to any prior administrative proceeding or matter. Township opposed Insurers' motion and in connection with this opposition requested that it be permitted to conduct discovery to demonstrate its reasonable expectation that litigation, such as the Blanche Road case, would be covered by the policy. Township gave the following explanation of the areas in which it needed to take discovery and the underlying reasons for this discovery: b. Defendants have relied, in their Motion to dismiss, on Endorsement No. 1 as an exclusionary clause, concerning prior claims and litigation. Plaintiff's need to discover what, if any, discussions, explanations or other information Defendants', their agents or representatives gave to the Plaintiff explaining this exclusion, how it would impact on the Township and relate to other conflicting exclusions in the said policy, i.e., § 111 Definition, ¶ 4(a), excluding all claims for non-money damages. Written discovery and depositions of Defendants' agents and employees would be necessary. c. Plaintiff needs to discover prior drafts and Defendants' internal memos and discussions concerning the insurance policy in issue as well as Endorsement No. 1. This, we believe, will also defelop proof that Defendants' generally do not enforce or even attempt to apply Endorsement No. 1 as they have in this case, i.e., to prior uninsurable claims. d. The instant policy does not define what an insurable claim is except by negative inference in III Definitions, ¶ 4(a), i.e., money damages only. Plaintiff needs to take written and oral discovery on this issue. Plaintiff believes that discovery will reveal that had the 'prior claims and facts related thereto' been timely filed under Defendants' policy, Defendants would have rejected the claims anyway. Thus., Plaintiff will be able to prove that Defendants' prior claim exclusion, if not ambiguous (but it is), really meant prior insurable claims. g. Plaintiff will need to take the depositions of former Bensalem Township officials, representatives and/or employees, who no longer work for the Township, with respect to their knowledge, understanding and discussions with Defendants and their agents concerning the policy, claims and exclusions in issue... Appellant's Brief at 9 (footnote omitted). Insurers moved to stay discovery pending resolution of their motion to dismiss. The district court granted the stay on March 27. The issue of further discovery was then mooted when, by order entered June 15, 1992, the district court granted Insurers' motion to dismiss. In its memorandum, dismissing the complaint, the district court held that the policy exclusion expressly precluded coverage because the Blanche Road federal litigation involved the same underlying circumstances as the pre-policy state proceedings. It concluded that the exclusion was unambiguous and should be enforced according to its plain language.