Court Opinion

ID: 985446
Source: CourtListenerOpinion
Date Created: 2013-07-01 19:52:15.541027+00
Date Added: 2024-06-11T09:09:09.142381
License: Public Domain

NOT PRECEDENTIAL

                     UNITED STATES COURT OF APPEALS
                          FOR THE THIRD CIRCUIT
                               ___________

                                    No. 12-3767
                                   ___________

                    STATE AUTO PROPERTY & CASUALTY
                          INSURANCE COMPANY

                                         v.

                       FRANK LAGROTTA; SYLVAN
                    HEIGHTS REALTY PARTNERS, LLC;
                 AMERICARE MANAGEMENT SERVICES, INC.

                                         Sylvan Heights Realty Partners, LLC;
                                         Americare Management Services, Inc.,
                                                                   Appellants
                           _______________________

                         On Appeal from the District Court
                      for the Western District of Pennsylvania
                            D.C. Civil No. 2-11-cv-00457
                             (Honorable Cathy Bissoon)
                                  ______________

                  Submitted Pursuant to Third Circuit LAR 34.1(a)
                                  June 10, 2013

        Before: SCIRICA, HARDIMAN, VAN ANTWERPEN, Circuit Judges

                               (Filed: June 26, 2013)

                               _________________

                           OPINION OF THE COURT
                              _________________

SCIRICA, Circuit Judge.

                                         1
       The District Court granted summary judgment in favor of State Auto Property &

Casualty Insurance Co., concluding that State Auto had no duty to defend and indemnify

Frank LaGrotta in an underlying state court action. We will affirm.

                                              I.

       Frank LaGrotta is a former member of the Pennsylvania House of Representatives

and, during the relevant period, held a State Auto Insurance Policy. The policy provided

coverage for “personal and advertising injury,” but excluded coverage if the injury was

caused “with the knowledge that the act would violate the rights of another and would

inflict „personal and advertising injury.‟”

       Hill View Manor was a nursing home in LaGrotta‟s district operated by Lawrence

County. The County sought to privatize Hill View, and entered in negotiations with

Sylvan Heights Realty Partners, LLC. Due to the pending sale, Hill View‟s current

management company decided to no longer manage Hill View, and the County entered

into an agreement with Americare Management Services, Inc., in which Americare

agreed to be the interim management company until the sale to Sylvan was finalized.

       Sylvan and Americare allege that LaGrotta took actions to intentionally thwart the

deal between the County and Sylvan. LaGrotta issued press releases stating that there

were improper associations between principals of Sylvan and Americare involving a

questionable transfer of funds. LaGrotta also informed the Pennsylvania State Police

Commissioner that the Hill View sale was entangled with organized crime. Allegedly due

to LaGrotta‟s actions, the Department of Health withdrew its approval of the sale of Hill

View to Sylvan and Sylvan became unable to secure financing. As a result, the County‟s

                                              2
deal with Sylvan fell through and the County reneged on its agreement with Americare.

         Sylvan and Americare brought a state court action against LaGrotta asserting

claims for tortious interference with contractual and prospective contractual relationships.

The state court complaint alleged that LaGrotta acted “with the intent to convince [the

County and Health Department] to withdraw their approval of the prospective sale.”

LaGrotta asked State Auto to defend and indemnify him under his insurance policy.

         State Auto brought the instant federal action against LaGrotta, Sylvan, and

Americare, seeking a declaratory judgment that it has no duty to defend or indemnify

LaGrotta in the state court action. The case was referred to a Magistrate Judge and State

Auto moved for summary judgment. The Magistrate Judge concluded the policy excludes

coverage for actions taken with an intent to cause harm and that the state court complaint

against LaGrotta alleged that he intended to thwart the deal between the County and

Sylvan. The Magistrate Judge therefore recommended that State Auto‟s motion for

summary judgment be granted. The District Court granted the motion, adopting the

Magistrate Judge‟s recommendations in whole. Sylvan and Americare timely appealed. 1

                                             II. 2

         Sylvan and Americare first contend the court erred by denying their motion to

dismiss State Auto‟s motion for summary judgment. When State Auto filed its motion for

summary judgment, it failed to include a separate statement of material facts, as required

1
    LaGrotta did not file an appeal.
2
 The District Court had jurisdiction of this diversity action under 28 U.S.C. § 1332. We
have jurisdiction under 28 U.S.C. § 1291. The parties agree Pennsylvania law applies.
                                              3
by the Local Rules of the Western District of Pennsylvania. When Sylvan and Americare

moved to dismiss State Auto‟s motion on this ground, State Auto requested leave to file a

statement of facts, explaining that because the only relevant evidence in the record was

the insurance policy and the state court complaint, it did not think it needed to file a

separate statement of material facts. The next day, the Magistrate Judge granted State

Auto‟s motion for leave to file a statement of facts, and State Auto merely relabeled the

exhibits it attached to its motion for summary judgment as a statement of material facts.

       We review a district court‟s decision to depart from its local rules for abuse of

discretion. See United States v. Eleven Vehicles, Their Equipment and Accessories, 200

F.3d 203, 214-15 (3d Cir. 2000). “[A] district court can depart from the strictures of its

own local procedural rules where (1) it has a sound rationale for doing so, and (2) so

doing does not unfairly prejudice a party who has relied on the local rule to his

detriment.” Id. at 215. Additionally, the Local Rule at issue provides that a court may

decline to follow it “based on the particular facts and circumstances of the individual

action.” W.D. Pa. LCvR 56(A). 3

       As the Magistrate Judge explained, there is no disagreement about the underlying

facts of the case. The relevant record consists only of the insurance policy and the state

action complaint. Additionally, Sylvan and Americare have not argued they suffered any

prejudice as a result of State Auto‟s failure to file a statement of material facts. They

3
 Sylvan and Americare argue the court effectively extended the deadline for filing the
summary judgment motion, and thus the issue should be analyzed under Fed. R. Civ. P.
6(b), which pertains to the extension of deadlines. We disagree and, like the lower court,
consider the issue to be whether strict compliance with the local rule was required.
                                              4
were still able to file a complete and timely response to State Auto‟s motion for summary

judgment. Accordingly, we see no abuse of discretion.

                                             III.

       Sylvan and Americare next contend the court erred in granting State Auto‟s

motion for summary judgment. They argue the policy is ambiguous about whether it

excludes coverage for intended harm. Alternatively, they contend the state action

complaint alleges recklessness, so the exclusion does not apply. 4

                                              A.

       The policy provides coverage for “personal and advertising injury,” which the

parties appear to agree encompasses the injuries asserted in the state court complaint. The

policy excludes coverage for personal and advertising injuries “[c]aused by or at the

direction of the insured with the knowledge that the act would violate the rights of

another and would inflict „personal and advertising injury.‟” The policy later explains

that personal and advertising injury arises from, inter alia, false arrest, malicious

prosecution, wrongful eviction, slander and libel, invasions of the right of privacy, and

use of another‟s advertising idea or copyright in an advertisement.

       Sylvan and Americare contend that the definition of personal and advertising

injury creates an ambiguity because it defines such injury with examples of intentional

torts. Accordingly, they argue, the policy cannot be understood as unambiguously barring

4
  We review the grant of summary judgment de novo, drawing all inferences in favor of
the nonmoving party. N.J. Transit Corp. v. Harsco Corp., 497 F.3d 323, 326 (3d Cir.
2007). Summary judgment is appropriate when there is no genuine dispute of material
fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a).
                                              5
coverage for intentional conduct. We disagree. The exclusion is not inconsistent with the

definition of “personal and advertising injury,” as the definition is not limited to

intentional torts. For example, defamation can be based on negligence. See Rutt v.

Bethlehems’ Globe Publ’g Co., 484 A.2d 72, 83 (Pa. Super. Ct. 1984). Additionally,

“[t]he courts of Pennsylvania have refused to require an insurer to defend an insured for

his own intentional torts and/or criminal acts” because it would be against public policy.

Germantown Ins. Co. v. Martin, 595 A.2d 1172, 1175 (Pa. Super. Ct. 1991). Accordingly,

the policy excludes coverage for intended harm.

                                             B.

       Sylvan and Americare next argue that the state court complaint alleges

recklessness in addition to intentional conduct, so the exclusion does not apply and State

Auto is required to defend and indemnify LaGrotta. Under Pennsylvania law, the duty to

defend is determined solely by the allegations contained within the four corners of the

complaint. Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co.,

908 A.2d 888, 896-97 (Pa. 2006). It is the facts alleged in the underlying complaint, not

the cause of action pled, that will determine if there is coverage. Donegal Mut. Ins. Co. v.

Baumhammers, 893 A.2d 797, 811 (Pa. Super. Ct. 2006), aff’d in part and rev’d in part

on other grounds, 938 A.2d 286 (Pa. 2007).

       Sylvan and Americare argue the complaint alleges recklessness because the

complaint states LaGrotta‟s actions were “unprivileged, improper, and reckless.” We

disagree. Those allegations are legal conclusions, and when determining whether an

insurance policy applies, we look to the factual allegations. See Mut. Benefit Ins. Co. v.

                                              6
Haver, 725 A.2d 743, 745 (Pa. 1999). We agree with the trial court that the facts allege

an intent to harm, not recklessness. The complaint states, inter alia, that LaGrotta acted

“with the intent to convince [the County and the Department of Health] to withdraw their

approval of the prospective sale,” and “with intent to cause or induce the County to not

sell Hill View to Sylvan.” The County‟s decision not to sell Hill View to Sylvan was “the

intended result” of LaGrotta‟s actions. Accordingly, the court correctly concluded the

exclusion applies and that State Auto is not required to defend or indemnify LaGrotta in

the state court action.5

                                             IV.

         For the foregoing reasons, we will affirm the entry of judgment in State Auto‟s

favor.

5
  Based on our conclusion, we need not reach the issue of whether an “occurrence” is
required to trigger coverage for personal and advertising injury.
                                              7