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CITY OF HARRISBURG v. INTERNATIONAL SURPLUS LINES

October 31, 1984

CITY OF HARRISBURG and STEPHEN R. REED, as Mayor and Individually, Plaintiffs,
v.
INTERNATIONAL SURPLUS LINES INSURANCE COMPANY and WOOLF/STRITE ASSOCIATES, INC., Defendants


Caldwell, J.


The opinion of the court was delivered by: CALDWELL

Defendants, International Surplus Lines Insurance Co. (International Surplus), and Woolf/Strite Associates, Inc. (Woolf/Strite), have moved to dismiss plaintiffs' complaint pursuant to Fed. R. Civ. P. 12(b)(6). *fn1" In this dispute concerning coverage under a "claims-made" insurance policy, defendants contend that they have no obligation to pay for the costs and attorney's fees incurred by plaintiff, Stephen R. Reed, Mayor of the City of Harrisburg, in defending a libel and wrongful use of civil proceedings action brought against him. *fn2" The case hinges upon a legal interpretation of the policy so that a motion to dismiss is an appropriate vehicle to test the legal sufficiency of the complaint.

 Initially, however, we will dispose of a jurisdictional difficulty not addressed by any of the parties -- a lack of complete diversity of citizenship between them. "Parties to litigation can neither agree to nor create federal jurisdiction." Lang v. Windsor Mount Joy Mutual Insurance Co., 507 F. Supp. 967, 968 (E.D. Pa. 1981). "When the foundation of federal authority is, in a particular instance, open to question, it is incumbent upon the courts to resolve such doubts, one way or the other, before proceeding to a disposition of the merits." Carlsberg Resources Corp. v. Cambria Savings and Loan Ass'n, 554 F.2d 1254, 1256 (3d Cir. 1977). The complaint alleges that Harrisburg is located in the Commonwealth of Pennsylvania. (para. 1). It is therefore a citizen of Pennsylvania for diversity purposes. See Reeves v. City of Jackson, 532 F.2d 491, 495 n.5 (5th Cir. 1976). It further alleges that Mayor Reed is "also of the City of Harrisburg, Dauphin County, Commonwealth of Pennsylvania." (para. 1). Defendant, International Surplus, is alleged to be a citizen of Illinois (para. 2), but defendant, Woolf/Strite is alleged to be incorporated in Pennsylvania with its principal place of business in Harrisburg. (para. 3). Complete diversity is therefore lacking here because one of the defendants is a citizen of the same state as the plaintiffs. See American Fire & Casualty Co. v. Finn, 341 U.S. 6, 71 S. Ct. 534, 95 L.Ed 702 (1951).

 Ordinarily, the complaint should therefore be dismissed, see Schultz v. Cally, 528 F.2d 470 (3d Cir. 1975), but a party may be dropped to achieve diversity if its presence is not essential to a just adjudication. Gallo v. Yamaha Motor Corp., 488 F. Supp. 502 (E.D. Pa. 1980). Dropping a party depends upon whether it is indispensable to the action. Field v. Volkswagenwerk AG, 626 F.2d 293 (3d Cir. 1980). In Field, the court held that the plaintiff driver of a van involved in a single car collision could properly be dropped as a dispensable party to preserve diversity jurisdiction over the claims of the representatives of her passengers against the defendant manufacturer of the van. The defendant corporation was a citizen of West Germany and after suit was brought discovery revealed the driver to be a citizen of Czechoslovakia, not of New York as she had claimed. Thus, parties on both sides of the lawsuit were citizens of foreign states and complete diversity was lacking. Relying upon Fed. R. Civ. P. 19 in determining that the driver was dispensable, the court stated:

 Id. at 301-02 (brackets added) (footnote omitted).

 In the instant case, Woolf/Strite has been sued merely because it was International Surplus's agent in selling the policy to the City. No independent basis of liability is asserted against it. Plaintiffs are looking to the insurance policy, and, ultimately, International Surplus for payment of damages. Accordingly, Woolf/Strite is not an indispensable party to this action. Just as in Field, plaintiffs may obtain complete relief without Woolf/Strite's presence. By the same token, if plaintiffs cannot show that coverage is available under the policy, International Surplus has not been prejudiced by Woolf/Strite's dismissal. In short, complete relief as between the remaining parties would be available, and we will dismiss Woolf/Strite from this action to maintain our diversity jurisdiction.

 We turn now to the merits of plaintiffs' claim. The underlying cause of action arose from the mayor's remarks and actions shortly after he won the general election for mayor of Harrisburg on November 3, 1981. His conduct is set forth in the state court complaint attached as Exhibit "B" to plaintiffs' complaint in this action. On November 5, 1981, two days after becoming mayor-elect, Mayor-elect Reed publicly accused certain unnamed employees of the City Department of Public Works of "'official and criminal misconduct.'" (Exhibit "B", para. 13). He centered his accusations on the city's steam generating plant, supervised by the Deputy Director of Harrisburg's Department of Public Works, the plaintiff in the state court action. Mayor-elect Reed accused the employees of misappropriation of public property for private gain and other official misconduct, including abuse of bidding laws at the plant, fraudulently maintained payrolls and the hiring of ghost employees. (Exhibit "B", paras. 14, 15). The charges were widely disseminated in the local media. (Exhibit "B", para. 17).

 The following day Mayor-elect Reed filed a Petition for Injunction in the Dauphin County Court of Common Pleas. In it he named the Deputy Director of Public Works, among others, and sought to enjoin what the mayor-elect believed was the removal of public records from the steam generating plant for the purposes of destroying them. (Exhibit "B", paras. 18, 19). In connection with the filing of the Petition, Mayor-elect Reed held a press conference, listed other areas of official misconduct, and, naming the Deputy Director, asserted that the latter was the motivating factor behind his seeking the injunction. (Exhibit "B", paras. 30, 33). The complaint against Mayor Reed in state court further alleged that Mayor Reed occupied the position of Mayor-elect when he made these accusations. (Exhibit "B", para. 58). Mayor Reed was sworn in as mayor on January 4, 1982. (Exhibit "B", para. 12).

 The state court complaint against Mayor Reed was filed on November 4, 1982, and defendants received notice of it on April 24, 1984, and June 13, 1984. The policy term ran from March 25, 1981 to January 15, 1983. The defendants denied liability and refused to defend Mayor Reed because, in part, they received notice of the claim after the expiration of the policy term, (Complaint, paras. 23, 26), in violation of the policy's provisions. (Complaint, para. 8). The state court case came to trial and on June 22, 1984, a jury returned a verdict on the libel count in favor of the Deputy Director but found against him on the wrongful use of civil proceedings claim. Mayor Reed allegedly incurred $ 36,618.44 in attorney's fees and costs in defending the lawsuit, (Complaint, paras. 7, 28, and Exhibit "D"), and seeks those expenses as damages here. *fn3"

 Bearing in mind the Pennsylvania rule that interpretation policy of insurance requires the court to ascertain the intent of the parties by examining the written instrument, and when the writing is clear and unambiguous, a court is required to give effect to the language, *fn4" Standard Venetian Blind Co. v. American Empire Insurance Co., 503 Pa. 300, 469 A.2d 563 (1983), we conclude that the mayor was not an insured under the policy at the time of his actions giving rise to the underlying claim.

 The claims-made, "Public Officials and Employees Liability Insurance" policy, attached to the complaint as Exhibit "A", provides, in relevant part, as follows:

 
I. Coverages A and B
 
A. The Company will pay on behalf of the Insureds all Loss the Insureds shall be legally obligated to pay for any civil claim or claims first made against them because of a Wrongful Act, provided that the claim is first made during the policy period and written ...

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