The opinion of the court was delivered by: Judge McLaughlin
Plaintiffs City of Warren, Pellegrino Food Products, Inc. ("Pellegrino Foods"), and three of its corporate officers - Anthony Pellegrino, Angela Pellegrino, and Thomas Pellegrino (collectively, "Pellegrinos") - filed the instant declaratory judgment action seeking a declaration from the Court that the Defendant, American Automobile Insurance Co ("AAIC"), a wholly-owned subsidiary of Fireman's Fund Insurance Company ("FFIC"), is obligated to indemnify them. This matter is before the Court upon cross motions for summary judgment.
For many years prior to the events underlying this lawsuit, FFIC had been the underwriter of most of Warren's insurance policies. Gayle Mohney, Secretary and/or Administrative Assistant to Warren's City Manager, was the Warren employee responsible for maintaining and renewing Warren's various insurance policies. (See Gayle Mohney Deposition, Plaintiff's Motion, Ex. C, pp. 10, 13). Mohney had no prior experience with insurance-related matters, but acquired a general understanding of insurance coverage issues through her twenty years of experience in purchasing policies for the City of Warren, reviewing proposals, keeping policies up to date, reviewing disclaimer letters and comparing them to policy terms, conversing with insurance agents, and generally maintaining the Warren policies. (Mohney Depo., pp. 12-13). In making decisions as to insurance-related matters and coverage issues, Mohney relied heavily upon the expertise of David W. Pearson, an agent for Garrison-Simonsen, Inc. ("Garrison"), Warren's insurance agent at all times relevant to the instant litigation. (See Mohney Depo., pp. 12-15; David Pearson Deposition, Plaintiff's Motion, Ex. D, pp. 8, 46).
Sometime in 1992, Pearson procured property, general liability, automobile liability, crime, and inland marine coverage for Warren through a program offered by AAIC and marketed and sold by The HDH Group ("HDH") known as the Pennsylvania Municipalities Insurance Program ("PMI Program"). The PMI program offered a variety of coverages to municipalities with populations ranging from 5,000 to 250,000. (See Plaintiff's Motion, Ex. A, p. 20). William Merrell, on behalf of HDH, assisted Pearson and Garrison in procuring the insurance for Warren. Merrell advised Pearson both orally and in writing that the PMI program excluded coverage for Public Officials Liability and Law Enforcement Liability. (William Merrell Affidavit, Defendant's Appendix 11, ¶¶ 18-20). Pearson was aware of and understood the features of the Program, including the Public Officials Liability exclusion. (Pearson Depo., p. 16). Pearson subsequently recommended to Mohney that Warren enroll in the PMI program, explained its features to her and advised her as to the need to procure "professional liability coverage for public officials in a separate policy." (Pearson Depo., p. 18).*fn1 Based on Pearson's understanding that an endorsement in the AAIC policy styled "Exclusion - Designated Professional Services" excluded liability for public officials, he procured separate coverage for "Public Officials and Employee Liability" from the Coregis Insurance Company. (Pearson Depo., pp. 16-18, 24, 42; Merrell Aff., ¶ 20).
Pearson and Mohney jointly reviewed the City of Warren's insurance policies annually as a part of their regular business relationship, including the policy exclusions. (Pearson Depo., pp. 35, 37-40; Mohney Depo., pp. 32-33). Pearson informed Mohney that the AAIC policy excluded coverage for "public officials liability" and that, consequently, he had procured alternate coverage for claims against public officials. (Pearson Depo., pp. 37-38). Although she couldn't recall the specifics of the conversation, it was her general understanding that the city had separate coverage for public officials liability because it was not covered by the AAIC policy. (Mohney Depo., pp. 64-65).
On October 22, 1999, Pellegrino Foods filed an action styled a Complaint Seeking Mandamus to Compel Issuance of a Building Permit against the city of Warren. Pellegrino Foods alleged that Warren had illegally and improperly denied Pellegrino Foods' application for a building permit to expand its plant. Upon receipt of the Complaint, Mohney forwarded it to David Pearson and requested that he forward the Complaint to AAIC. (See Mohney correspondence, Plaintiffs' Motion, Ex. M). On April 10, 2000, AAIC denied coverage relying on the "Exclusion - Designated Professional Services" endorsement. (See April 10, 2000 Denial Letter, Plaintiffs' Motion, Ex. N).
On May 26, 2000, the Pellegrino Plaintiffs filed a lawsuit against Warren before the undersigned (referred to hereinafter as "Pellegrino Foods Litigation") alleging that from 1993 through 1999, Warren engaged in a pattern of conduct of improperly and unreasonably handling zoning decisions, property sales, and other matters involving Pellegrino Foods with the intent to damage Pellegrino Foods' business and to block its expansion plans. (See Pellegrino Complaint, Plaintiffs' Motion for Summary Judgment, Exhibit O). Specifically, the Pellegrinos alleged that Warren improperly contested the Pellegrinos' purchase of a parcel of land adjacent to their business property, refused to rezone property purchased by the Pellegrinos from residential to industrial despite doing so for many other area businesses, imposed unreasonable and cost-prohibitive restrictions on the Pellegrinos' application for a special exception, and improperly denied a building permit despite all conditions having been met. Based on this conduct, the Complaint alleged substantive and procedural due process violations under 42 U.S.C. § 1983 as well as conspiracy to violate 42 U.S.C. § 1983, tortious interference with prospective business and contractual relationships, and other state law claims. (Id.)
Warren timely notified Pearson of the pending Pellegrino Foods Litigation to ensure that the appropriate insurance carriers were put on notice. (Pearson Depo., pp. 23-24). Although he "had a reasonable idea that coverage wouldn't have been provided" under the AAIC policy, Pearson forwarded the complaint to AAIC and requested coverage. He wanted to make the "extra effort" to explore every potential insurance option because, in his experience, insurance companies will occasionally "pay for things that may not be covered under the letter of the policy" because of a mistaken belief that coverage is owed or for unanticipated business reasons. (Id. at 50-51).
By correspondence dated June 30, 2000, AAIC denied coverage for the Pellegrino Litigation. The denial letter stated in pertinent part:
The allegations contained in the Complaint do not seek damages which arise from bodily injury or property damage caused by an occurrence. Nor do the allegations seek damages caused by advertising injury to which this insurance applies. Although [an] endorsement expands the definition of Personal Injury, please be advised that you[r] policy contains endorsement #CG 2116 7/98 entitled, Exlusion - Designated Professional Services which states "This insurance does not apply to bodily injury, property damage or personal and advertising injury due to the rendering of or failure to render any professional service. The professional service designated on your policy is "PUBLIC OFFICIALS."
Considering the above reasons, Fireman's Fund will be unable to provide you with either indemnification or defense with regard to the pending litigation.
(Plaintiff's Motion, Ex. P, Denial Letter).
The "Personal and Advertising Injury Liability" provision referenced in the denial letter provides as follows:
(a) We will pay those sums that the insured becomes legally obligated to pay as damages because of personal injury or advertising injury to which this insurance part applies. . .
(b) This insurance applies to:
(1) Personal injury caused by an offense arising out of your business, excluding advertising; publishing, broadcasting or telecasting done by or for you;
(2) Advertising injury caused by offense committed in the course of advertising your goods, products or services, but only if the offense was committed in the coverage territory during the policy period.
(Ex. I, p. 28; Ex. J, p. 29; Ex. K, p. 30). "Personal injury" is defined in the policies as, inter alia, "injury, other than bodily injury, arising out of . . . [t]he wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies by or on behalf of its owner, landlord, or lessor." (Ex. I, p. 37; Ex. J, p. 38; Ex. K, p. 39).
In 2003, Pearson wrote to AAIC and requested reconsideration of its previous denial of coverage. (Pearson Depo., p. 47). In response, AAIC reiterated its position that it would not defend or indemnify Warren with regard to the Pelligrino Foods Litigation. (Id. at 47-48).
Warren defended the lawsuit and prevailed in having several claims dismissed. See Pellegrino Food Products Co., Inc. v. City of Warren, 136 F.Supp.2d 391 (W.D. Pa. 2000), aff'd, 2004 WL 2650998 (3rd Cir. 2004). However, the substantive due process, equal protection, and tortious interference claims against Warren, Mayor John R. Nemcovsky, City Manager A. Kenneth Dupont, Solicitor William F. Morgan, Zoning Officer/Community Safety Officer Donald A. Worley, and Chairman of the Zoning Hearing Board George W. Crozier survived ...