Court Opinion

ID: 616887
Source: CourtListenerOpinion
Date Created: 2011-11-08 17:42:22+00
Date Added: 2024-06-11T17:50:39.124597
License: Public Domain

NOT PRECEDENTIAL

  UNITED STATES COURT OF APPEALS
       FOR THE THIRD CIRCUIT
            _____________

                No. 10-3396
               _____________

   YELLOWBIRD BUS COMPANY, INC.,

                                Appellant

                      v.

  LEXINGTON INSURANCE COMPANY;
         CARMEN BATISTA;
           JOSE ROSADO;
          BRENDI LOPEZ;
          NEENA MEEKER;
          FANNY CEPEDA
            _____________

                No. 10-3859
               _____________

   YELLOWBIRD BUS COMPANY, INC.,

                                Appellant

                      v.

  LEXINGTON INSURANCE COMPANY;
         CARMEN BATISTA;
           JOSE ROSADO;
          BRENDI LOPEZ;
          NEENA MEEKER;
          FANNY CEPEDA
            _____________

On Appeal from the United States District Court
   for the Eastern District of Pennsylvania
            (Civ. No. 2:09-5835)
                     District Judge: Hon. Eduardo C. Robreno, Jr.
                                    _____________
                               Argued September 21, 2011

           Before: AMBRO, CHAGARES, and VANASKIE, Circuit Judges.

                               (Filed: November 8, 2011)

James L. Griffith, Esq. (Argued)
Robert S. Tintner, Esq.
Eric. E. Reed, Esq.
Fox Rothschild LLP
2000 Market Street, 20th Floor
Philadelphia, PA 19103

      Counsel for Appellant Yellowbird Bus Company, Inc.

Scott. J. Tredwell (Argued)
McCormick & Priore, P.C.
Four Penn Center
1600 John F. Kennedy Boulevard
Suite 800
Philadelphia, PA 19103

      Counsel for Appellee Lexington Insurance Company

                                     ____________

                                       OPINION
                                     ____________

CHAGARES, Circuit Judge.

      Yellowbird Bus Company (“Yellowbird”) appeals the District Court’s dismissal of

their complaint against Lexington Insurance Company (“Lexington”) and five

individuals: Carmen Batista, Jose Rosado, Brendi Lopez, Neena Meeker, and Fanny

Cepeda (collectively, the “individual defendants”). For the reasons stated below, we

                                            2
possess jurisdiction over the appeal docketed as 10-3396 and will affirm. We will

dismiss the appeal docketed as No. 10-3859.

                                              I.

       We write for the parties’ benefit and recite only the facts essential to our

disposition. Yellowbird is a transportation company whose business includes the daily

operation of school buses. On July 5, 2006, a Yellowbird school bus collided with a

tractor owned by Cowan Systems, Inc. (“Cowan”). Numerous personal injury lawsuits

were subsequently filed against both Yellowbird and Cowan in Pennsylvania state court.

Although Yellowbird and Cowan dispute their respective responsibility for the accident,

the two parties were able to resolve the majority of the personal injury claims through

settlement. The only claims that remain are the ones asserted by the five individual

defendants. These claims have been consolidated for resolution and are currently

pending in Pennsylvania state court.

       During the relevant time period, Yellowbird had an excess insurance policy with

Lexington (referred to as the “Lexington Policy” or the “policy”) that had an annual

premium of $90,193 and was effective for the period between October 7, 2005 and

October 7, 2006. Appendix (“App.”) 132. This case involves a disagreement between

Yellowbird and Lexington pertaining to the extent of Yellowbird’s remaining coverage

under this policy in regard to the July 5, 2006 accident.

       Several provisions of the Lexington Policy are salient to this dispute. The first is

the “Coverage” provision, which obliges Lexington to “pay on behalf of [Yellowbird]
                                              3
that portion of the loss which [Yellowbird] will become legally obligated to pay . . .

subject to[] . . . [Lexington’s] Limit of Liability as stated in Section IC of the

Declarations.” App. 134 (emphases omitted). 1 Section IC of the Declarations then

states:

          C)   Limits of Liability: $4,000,000

               Aggregate Limits – separately as respects:

               1.     Products Hazard and Completed Operations            $4,000,000
                      Hazards Combined

               2.     All Other Coverage Combined                 $4,000,000
                      (Except Automobile Liability, which is not subject to any
                      aggregate limit.)

App. 132. The third relevant provision is entitled “Limits of Liability,” and explicates

several key terms:

          A.   Aggregate

               This policy is subject to an aggregate limit of liability as stated in the
               Declarations. This aggregate of liability is the maximum amount
               which will be paid under this policy for all losses in excess of the
               underlying policy limits occurring during the policy period applying
               separately to:

               1.     the products hazard and completed operations hazard
                      combined:

               2.     all other coverages combined, except automobile liability,
                      which is not subject to any aggregate limit.

1
  Lexington’s obligation to pay under the policy is also subject to the “exhaustion of all
applicable underlying limits.” App. 134. In this case, the parties do not dispute that
Yellowbird’s underlying primary insurance policy with National Casualty Company has
been exhausted.
                                            4
       B.     Occurrence Limit

              Subject to the above provision respecting aggregate, the Limit of
              Liability stated in the Declarations as per occurrence is the total limit
              of our liability for ultimate net loss including damages for care, loss
              of services or loss of consortium because of personal injury and
              property damage combined, sustained by one or more persons or
              organizations as a result of any one (1) occurrence.

       C.     Limit Exhaustion

              This policy shall cease to apply after the applicable limits of liability
              have been exhausted by payments of defense costs and/or judgments
              and/or settlements.

App. 135 (emphases omitted). Finally, the Lexington Policy defines an “occurrence” as

“an event, including continuous or repeated exposures to conditions, neither expected nor

intended from the standpoint of [Yellowbird]. All such exposure to substantially the

same general condition shall be one occurrence.” App. 138 (emphases omitted).

       Pursuant to these provisions, Lexington paid approximately $4 million on behalf

of Yellowbird in order to effectuate the various settlements arising from the July 5, 2006

accident. After so paying, however, Lexington informed Yellowbird that its coverage

under the Lexington Policy for claims arising out of that accident was nearly exhausted.

As a result, Lexington maintained that it would not indemnify or defend fully Yellowbird

in regard to the five remaining claims filed by the individual defendants.

       Yellowbird responded by filing suit in the Philadelphia Court of Common Pleas on

November 17, 2009, seeking a declaratory judgment that the Lexington Policy is not

subject to any coverage limits in regard to claims arising out of the July 5, 2006 accident.
                                              5
Yellowbird also asserted claims for breach of contract and bad faith. On December 8,

2009, Lexington removed Yellowbird’s suit to the District Court on the basis of diversity

jurisdiction. On May 11, 2010, the District Court denied Yellowbird’s remand motion.

Lexington subsequently moved to dismiss Yellowbird’s claims pursuant to both Federal

Rules of Civil Procedure 12(b)(1) and (12)(b)(6) on December 15, 2009. On July 13,

2010, the District Court denied the 12(b)(1) motion, granted the 12(b)(6) motion, and

dismissed the declaratory judgment claim with prejudice and the breach of contract and

bad faith claims without prejudice.

       Yellowbird chose to appeal without amending its complaint and filed a notice of

appeal on August 9, 2010, which was docketed at No. 10-3396. On August 13, 2010, the

Clerk of this Court entered an order directing the parties to address whether the District

Court’s July 13, 2010 opinion was final within the meaning of 28 U.S.C. § 1291. The

parties responded as ordered, but on August 23, 2010, the District Court, at Yellowbird’s

request, filed a second order dismissing Yellowbird’s complaint in its entirety.

Yellowbird then filed a second notice of appeal on September 22, 2010, which was

docketed at No. 10-3859. On March 17, 2011, this Court filed an order consolidating the

two appeals for all purposes.

                                             II.

       Although not disputed by the parties, we must initially assess whether the District

Court correctly exercised removal diversity of citizenship jurisdiction over this matter

                                             6
pursuant to 28 U.S.C. §§ 1441 and 1332 and whether we possess appellate jurisdiction

under 28 U.S.C. § 1291.

       We, of course, have an independent duty “to examine [] subject matter jurisdiction

at all stages of the litigation sua sponte if the parties fail to raise the issue,” and “[t]hat

obligation extends to removal cases.” U.S. Express Lines, Ltd. v. Higgins, 281 F.3d 383,

388-89 (3d Cir. 2002). In this case, the propriety of the District Court’s jurisdiction

raises two issues. First, the District Court determined that Yellowbird’s claims were ripe

for review in denying Lexington’s motion to dismiss pursuant to Rule 12(b)(1). Second,

in denying Yellowbird’s remand motion, the District Court held that the individual

defendants “are not indispensable parties to this action” and that their “actual interests . . .

in this litigation dictate that they be realigned as plaintiffs . . . for purposes of diversity

jurisdiction.” App. 328 n.1. We are satisfied that the District Court was correct in both

regards, and therefore hold that the District Court properly exercised subject matter

jurisdiction in this matter.

       The issue surrounding our appellate jurisdiction is more technical in nature. This

appeal has two separate docket numbers because, as noted, Yellowbird filed two separate

notices of appeal. In filing the first notice of appeal from the District Court’s July 13,

2010 opinion, Yellowbird “convert[ed] a dismissal with leave to amend into a final order

by electing to stand upon the original complaint.” Shapiro v. UJB Fin. Corp., 964 F.2d

272, 278 (3d Cir. 1992). We therefore possess jurisdiction over this first appeal,

docketed as No. 10-3396. The filing of that appeal, however, was “an event of
                                                7
jurisdictional significance, immediately conferring jurisdiction on a Court of Appeals and

divesting a district court of its control over those aspects of the case involved in the

appeal.” Venen v. Sweet, 758 F.2d 117, 120 (3d Cir. 1985). The District Court was

therefore without jurisdiction to issue its subsequent August 23, 2010 order of dismissal.

We consequently lack jurisdiction over Yellowbird’s appeal from that order, docketed as

No. 10-3859. Accordingly, we possess jurisdiction over the appeal docketed as No. 10-

3396 and will dismiss the appeal docketed as No. 10-3859 for lack of appellate

jurisdiction.

                                             III.

       We review an order granting a motion to dismiss de novo. McTernan v. City of

York, 564 F.3d 636, 646 (3d Cir. 2009). To withstand a Rule 12(b)(6) motion to dismiss,

“a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to

relief that is plausible on its face.’” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)

(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also Fowler v.

UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009).

       The parties do not dispute that Pennsylvania law applies to this diversity matter.

Under Pennsylvania law, “the interpretation of the scope of coverage of an insurance

contract is a question of law properly decided by the court, a question over which we

exercise plenary review.” Med. Protective Co. v. Watkins, 198 F.3d 100, 103 (3d Cir.

1999). We recently noted that “[t]he rules of analysis of insurance policies in

                                              8
Pennsylvania are well established.” Meyer v. CUNA Mut. Ins. Soc’y, --- F.3d ----, 2011

WL 2040857, at *7 (3d Cir. May 26, 2011). Specifically:

       The goal of interpreting an insurance policy, like that of interpreting any
       other contract, is to determine the intent of the parties. It begins with the
       language of the policy. A policy must be read as a whole and its meaning
       construed according to its plain language.

       The burden of drafting with precision rests with the insurance company, the
       author of the policy. An ambiguity in contract language exists when the
       questionable term or language, viewed in the context of the entire policy, is
       reasonably susceptible of different constructions and capable of being
       understood in more than one sense. Where a term is ambiguous, it is to be
       construed against the insurer, in favor of the insured. The policy rationale
       underlying strict application of the doctrine is that because most insurance
       agreements are drafted by the insurance industry, they are essentially
       contracts of adhesion.

       Where, however, the language of the contract is clear and unambiguous, a
       court is required to give effect to that language. Courts should not distort
       the meaning of the language or strain to find an ambiguity. A contract is
       not rendered ambiguous merely because the parties disagree about its
       construction.

Id. (citations and quotation marks omitted).

                                            IV.

       Yellowbird appeals the dismissal of its claims for declaratory judgment, breach of

contract, and bad faith. All three of these claims are essentially predicated on the

assertion that “the policy of excess insurance issued by Lexington is not subject to any

limits for the automobile-related claims at issue.” Yellowbird Br. 7. Yellowbird seeks a

declaration to that effect, as well as damages for Lexington’s purported breach of contract

and bad faith for failing to abide by Yellowbird’s interpretation of the Lexington Policy.

                                               9
       As an initial matter, we must distinguish between two of the policy’s key terms:

“aggregate limits” and “occurrence limits.” The provision of the Lexington Policy

entitled “Limits of Liability” explains the distinction. “[A]ggregate limit of liability . . .

is the maximum amount which will be paid under this policy for all losses . . . occurring

during the policy period,” while the occurrence limit is “the total limit of [Lexington’s]

liability for ultimate net loss . . . sustained by one or more persons or organizations as a

result of any one (1) occurrence.” App. 135 (emphases added). Aggregate limit thus

pertains to the maximum amount that Lexington will pay Yellowbird under the policy

during a single policy period, which in this case is October 7, 2005 to October 7, 2006.

Occurrence limit, by contrast, refers to the maximum amount that Lexington will pay

Yellowbird for any one particular “occurrence” – such as the July 5, 2006 accident – that

takes place during that policy period.

       The parties do not dispute that the July 5, 2006 accident implicates “automobile

liability” and that the Lexington Policy provides no aggregate limit in regard to such

liability. See App. 132 (stating that automobile liability “is not subject to any aggregate

limit”); see also App. 135 (same). Yellowbird argues, however, that the policy also

contains no occurrence limit in regard to automobile liability. Pursuant to Yellowbird’s

interpretation, the Lexington Policy would not only provide unlimited automobile

liability coverage during the entire policy period (the aggregate limit), but would also

provide unlimited automobile liability coverage for each single occurrence during that

period (the occurrence limit). In effect, Yellowbird seeks limitless coverage in regard to
                                              10
any losses arising out of the July 5, 2006 accident. Simply to say this—the policy

allowed unlimited liability for any occurrence for an annual premium of just over

$90,00—shows on its face the unreasonableness of Yellowbird’s claim.

       Yellowbird’s argument relies on linguistically twisting the language of the “Limits

of Liability” provision of the policy, which, as noted, states that “[s]ubject to the above

provision respecting aggregate, the Limit of Liability stated in the Declarations as per

occurrence is the total limit of [Lexington’s] liability for ultimate net loss . . . sustained

by one or more persons or organizations as a result of any one (1) occurrence.” App.

135. According to Yellowbird, this passage means that the “per occurrence” “Limit of

Liability stated in the Declarations,” that is, the $4 million amount, is “subject to,” or, in

Yellowbird’s reading, “completely subsumed by,” the aggregate limit. Yellowbird thus

posits that “it is clear that this policy language borrows as the occurrence limit the same

declaration of no applicable aggregate limit in automobile cases.” Yellowbird Br. 20-21.

       This reading is contrary to the plain language of the policy. Pursuant to the

language just quoted, the $4 million “per occurrence” amount “stated in the Declarations”

is the occurrence limit, or the maximum amount that Lexington will pay for any single

occurrence. This occurrence limit is then “subject to,” or “governed by,” Black’s Law

Dictionary 1465 (8th ed. 2004) – rather than completely subsumed by, as Yellowbird

contends – the stated aggregate limit, or the maximum amount that Lexington will pay in

any given policy period. Here, as noted, the parties agree that the policy provides for an

unlimited amount of aggregate automobile liability. The resultant meaning is thus clear:
                                               11
Yellowbird may assert automobile liability claims for an infinite number of occurrences

per policy year, but the coverage for each particular occurrence is limited to $4 million.

       Accordingly, we hold that the unambiguous language of the Lexington Policy

contradicts Yellowbird’s proposed interpretation. 2 We will therefore affirm the District

Court’s dismissal of Yellowbird’s request for a declaratory judgment seeking unlimited

coverage in regard to the July 5, 2006 accident. We will also affirm the dismissal of the

claims for breach of contract and bad faith, which similarly rely on Yellowbird’s

erroneous interpretation of the Lexington Policy. 3

                                             V.

       For the reasons stated above, we possess jurisdiction over the appeal docketed as

10-3396 and will affirm. We will dismiss the appeal docketed as No. 10-3859.

2
  In light of the policy’s clear and unambiguous language, we reject Yellowbird’s request
to consider its “reasonable expectations in purchasing the Lexington Policy” or to remand
for “some discovery regarding the meaning of the policy terms.” Yellowbird Br. 23.
3
  Yellowbird’s bad faith claim is also meritless insofar as it purports to rely on other
conduct – such as “Lexington’s failure to honor Yellowbird’s requests for earlier
engagement in discussions to settle.” Yellowbird Br. 26.
                                            12