The opinion of the court was delivered by: A. Richard Caputo United States District Judge
Presently before the Court are a Motion for Judgment on the Pleadings by Defendants Mid-Atlantic Youth Services ("MAYS") and Gregory Zappala (Doc. 14), and a Cross Motion for Judgment on the Pleadings by Plaintiff General Star Indemnity Company, Inc., ("General Star") (Doc. 22). For the reasons discussed more fully below, Plaintiff's Motion will be granted and Defendant's Motion will be denied.
In the instant case, Plaintiff General Star Indemnity Company, Inc., ("General Star") has filed a Complaint seeking a declaration that the Luzerne County Litigation that all three Defendants are involved in is not covered under Coverage A and the Professional Liability Coverage Part of Defendants' liability policies (Count I); that the 'Knowing Violation of Rights' Exclusion bars coverage for the Luzerne County Litigation under Coverage B of the policies (Count II); that the 'Criminal Acts' Exclusion bars coverage for the Luzerne County Litigation under the policies (Count III); that the coverage under the policies for the Luzerne County Litigation is barred in whole or in part on other grounds (Count IV); and finally, that even if coverage is not barred, the Luzerne County Litigation is subject to a single policy limit under a single policy (Count V).
The instant suit arises out of the following cases filed in the Middle District of Pennsylvania: Wallace v. Powell, No. 3:09-cv-0286, Conway v. Conahan, No. 3:09-cv-0291, H.T. v. Ciavarella, No. 3:09-cv-0357, and Humanik v. Ciavarella, No. 3:09-cv-0630. These suits have all been consolidated under civil action number 3:09-cv-0286 by this Court's Case Management Order of May 14, 2009. The factual background of the underlying consolidated case can be found in Wallace v. Powell, No. 3:09-cv-0286, 2009 WL 4051974 (M.D. Pa. Nov. 20, 2009). This opinion will only relate the facts necessary for an understanding of the current declaratory judgment suit.
There are two complaints in the underlying suit, the Master Individual Complaint ("MIC") and the Master Class Action Complaint ("MCAC"). The MIC alleges that MAYS was an entity responsible for operating juvenile detention facilities, that Powell is "an owner, officer, shareholder, and operator" of MAYS, and that Zappala also is "an owner, officer, shareholder, and operator" of MAYS. MAYS, Powell, and Zappala were part of a conspiracy in which two Luzerne County judges received kickbacks for maintaining a high rate of occupancy in the juvenile detention facilities run by Powell and managed by MAYS. As part of this conspiracy, the judges would often violate the civil rights of the juveniles appearing before them by denying them right to counsel and ensuring disproportionately large sentences, among other things. The MIC charges Powell, Zappala and MAYS with Violation of the RICO Act (Count I), Conspiracy to Violate the RICO Act (Count II), Deprivation of Substantive and Procedural Due Process pursuant to 42 U.S.C. § 1983 (Count III), Deprivation of Rights Pursuant to 42 U.S.C. § 1983 (Count IV), Deprivation of Substantive Due Process pursuant to 42 U.S.C. § 1983 (Count V), Civil Conspiracy (Count VIII), and False Imprisonment (Count IX).
The MCAC alleges that Powell and Zappala were owners of MAYS. The factual allegations that make up the MCAC are, for the purposes of this Motion, very similar to those in the MIC. The claims against MAYS, Zappala, and Powell in the MCAC are Conspiracy to Violate Plaintiffs' Right to an Impartial Tribunal Guaranteed by the Fifth, Sixth and Fourteenth Amendments, pursuant to 42 U.S.C. § 1983) (Count II), Conspiracy to Deprive Youth of Their Right to Counsel an/or Knowing, Intelligent, and Voluntary Guilty Plea in violation of the Fifth, Sixth and Fourteenth Amendments, pursuant to 42 U.S.C. § 1983 (Count IV), Civil RICO Act violations pursuant to 18 U.S.C. § 1962(c) (Count V), Civil RICO Act violations pursuant to 18 U.S.C. § 1962(b) (Count VI), Civil RICO Act violations pursuant to 18 U.S.C. § 1962(d) (Count VII), and Wrongful Imprisonment (Count IX).
B. The General Star Policy
MAYS had a Liability Insurance Policy with General Star that ran from May 24, 2005 until May 24, 2008. There are four policy sections that are potentially pertinent to this case. The first two are the "Bodily Injury and Property Damage Liability" in Coverage A and the Professional Liability Coverage, both of which provide that General Star "will have the right and duty to defend the insured" against any suit seeking damages for "bodily injury" or "property damage." Bodily injury is defined as "sickness disease, assault, battery, or mental anguish or 'damages' claimed by any person or organization for care, loss of services or death resulting from any of these at any time." However the bodily injury coverage only applies if the "'bodily injury' . . . is caused by an "occurrence" that takes place in the 'coverage territory.'" Occurrence is defined as "[a]n accident, including continuous or repeated exposure to substantially the same general harmful conditions." Thus, in order for the coverage to apply, the bodily injury must have been the result of an accident.
Also at play is Coverage B, which provides coverage for "Personal and Advertising Injury Liability." This coverage gives General Star the right and duty to defend MAYS in suits that claim damages for "personal and advertising injury." For the purposes of this case, personal and advertising injury includes false arrest, detention or imprisonment and malicious prosecution. However, Coverage B excludes acts that are a "knowing violation of [the] rights of another." Under this policy exclusion, the insurance coverage does not apply to any "'personal and advertising injury' caused 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.'"
Finally, there is the so-called 'Criminal Acts' Exclusion found in Section V of the policies. This exclusion states that General Star: will not defend or pay for any "occurrence," "claim," including any injury, "damages," legal liability, "claims expense," loss, cost or expense, arising out of, resulting from, caused or contributed to by. . . [a]ny criminal, malicious, dishonest or ...