Appeal from the order of the Commonwealth Court of Pennsylvania, No. 504 C.D. 1983, affirming the Order of the Court of Common Pleas of Lycoming County, Civil Action - Law, Declaratory Judgment, No. 81-2776.
Nix, C.j., and Larsen, Flaherty, McDermott, Hutchinson Zappala and Papadakos, JJ. Papadakos, J., filed a dissenting opinion.
Appellant Employers Mutual Casualty Company appeals from the order of the Commonwealth Court affirming the decision of the Lycoming County Court of Common Pleas, directing the Appellant to provide insurance coverage for losses arising out of surcharges imposed upon former township supervisors, pursuant to liability policies issued to Lewis Township.
As a result of actions taken in 1978 by former township supervisors, Donald Chute, Edward Deljanovan, and James Remick, involving the construction of a weigh station, the auditors surcharged the supervisors in the amount of $801.37 in the 1978 annual audit and financial report. No appeal was taken and judgment was entered on July 2,
. In March, 1980, the auditors again imposed a surcharge upon Chute and Deljanovan in the 1979 audit and financial report in the amount of $15,278.10. On appeal to the Court of Common Pleas, the surcharge was affirmed in the amount of $10,833.66. Judgment was entered in that amount on July 1, 1981.
On September 28, 1981, a declaratory judgment action was filed on behalf of Lewis Township by Appellees Indie E. Snyder, Richard Johnston, James Remick, Ethan Messinger, and Veryl Simmons, the township supervisors, seeking coverage for the surcharged amounts under insurance policies issued by the Appellant to the township. The Appellant denied coverage, asserting that the coverage of surcharges is contrary to public policy and is statutorily proscribed by Section 702(XIII) of The Second Class Township Code, Act of May 1, 1933, P.L. 103, as amended, 53 P.S. § 65713. The trial court concluded that the Appellant was required to provide coverage for the surcharges. Judgment was entered against the Appellant in the amount of $11,635.03, and the Appellant was ordered to reimburse the township for reasonable attorney's fees. The Commonwealth Court affirmed. 83 Pa. Commw. 419, 477 A.2d 607.
The question presented is whether the insurance policies issued by the Appellant provided coverage to the township for the surcharges imposed upon the former township supervisors. We conclude that the insurance policies did not encompass losses sustained by the township as a result of surcharges and, therefore, reverse.
The insurance policies, which were effective for successive one-year periods from March 23, 1978 through March 23, 1982, provided for legal liability coverage and loss reimbursement. The named insured was defined in Subsection IV.A. of the policies as ". . . the Municipality named in the Declarations and includes the Municipal Council, each Council member, and any other duly elected or appointed official of the Municipality." Each of the policies provided inter alia:
I. A. The Company will pay on behalf of the Insured, individually or collectively, loss which the Insured shall become legally obligated to pay because of a Wrongful Act occurring during the policy period; . . .
IV. D. Wrongful Act means any and all of the following: actual or alleged errors, mis-statement or misleading statement, act or omission or neglect or breach of duty by the Insured, individually or collectively, in the discharge of Municipal duties, or any matter claimed against them solely by reason of being or having been the Insured during the policy period.
E. Loss means any amount which an Insured is legally obligated to pay or for which the Municipality may be required or permitted by law to pay as indemnity to an Insured, for a claim or claims made against the Insured, individually or collectively, for which insurance is provided herein ...