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Markel International Insurance Company v. Western Pa Child Care

March 7, 2012

MARKEL INTERNATIONAL INSURANCE COMPANY, PLAINTIFF,
v.
WESTERN PA CHILD CARE, LLC, ROBERT J. POWELL, GREGORY ZAPPALA, PA CHILDCARE, LLC, MID-ATLANTIC YOUTH SERVICES CORP., AND VISION HOLDINGS, LLC, DEFENDANTS,



The opinion of the court was delivered by: (judge Caputo)

MEMORANDUM

Presently before the Court are Plaintiff Markel International Insurance Company's Motion for Summary Judgment Against All Defendants and the Cross-Motion for Summary Judgment by Defendants Western PA Child Care, LLC ("WPACC"), Gregory Zappala, PA Child Care, LLC ("PACC"), and Mid-Atlantic Youth Services Corporation ("MAYS"). Because Markel has no duty to defend or indemnify the Defendants, its motion will be granted and the Defendants' motion will be denied.

I. Background

Plaintiff Markel is an insurance company seeking a declaration that it has no obligation to defend or indemnify any of the Defendants in several underlying lawsuits.

A. The Underlying Suits

Defendants have been sued in several different actions filed in the Middle District of Pennsylvania that have been consolidated as Wallace v. Powell, No. 3:09-cv-0286. This opinion only outlines the facts necessary to address the instant motions for summary judgment; a more extensive factual background can be found in Wallace v. Powell, No. 3:09-cv-0286, 2009 WL 4051974 (M.D. Pa. Nov. 20, 2009). There are two complaints in the underlying suit: the Master Individual Complaint ("MIC") and the Master Class Action Complaint ("MCAC").

The MIC contains the following allegations: Defendants PACC and WPACC are corporations that own and operate juvenile detention facilities (MIC, ¶¶ 8-9); Defendant MAYS also operated the PACC and WPACC facilities by virtue of a contractual agreement (id. ¶ 19). Defendants Robert Powell and Gregory Zappala are "owner[s], officer[s], shareholder[s], and operator[s]" of the three Defendant Corporations (id. ¶¶ 5, 12). All Defendants were part of a conspiracy to defraud the juveniles of the Commonwealth of Pennsylvania and deprive them of their rights (id. ¶ 29). As part of this conspiracy, the Defendants made payments of more than $2.6 million to two judges of the Court of Common Pleas for Luzerne County in exchange for those judges facilitating the construction and expansion of the PACC and WPACC juvenile detention centers and then ensuring that juveniles were placed at those facilities (id. ¶¶ 30-32). The Defendants then employed several schemes in order to hide their payments to the judges (id. ¶ 33). The MIC charges all Defendants 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 Mr. Powell and Mr. Zappala were owners of the Defendant Corporations (MCAC, ¶¶ 4, 11). 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 the Defendants 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 Markel Policies

Western PA Childcare, LLC is the named insured on four Markel policies that were in effect from July 1, 2005 to July 1, 2009. There are two policy sections that are pertinent to the motion at bar. Coverage A of the Markel policies provides coverage for "sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies. . .." The bodily injury or property damage must be caused by an "occurrence." Exclusion (a) ("Expected or Intended Injury") of Coverage A states that the insurance does not apply to "'bodily injury' or 'property damage' expected or intended from the standpoint of the insured." Coverage B of the Markel Policies provides coverage for "sums that the insured becomes legally obligated to pay as damages because of 'personal injury or advertising injury' to which this insurance applies." The Markel Policies define "personal or advertising injury" to mean specifically enumerated offenses, including false arrest, detention or imprisonment and malicious prosecution.

Exclusion (a) of Coverage B states that the insurance does not apply to "'personal injury and advertising injury' caused by or at the direction of the insured with knowledge that the act would violate the rights of another and would inflict 'personal injury and advertising injury'.

C. Procedural History

Pursuant to the insurance policies, WPACC, Mr. Powell, and Mr. Zappala tendered defense of the underlying complaints to Markel, which denied the defense and indemnity. Markel filed its declaratory judgment action on May 28, 2010. PACC, WPACC, MAYS, and Mr. Zappala moved to dismiss; their motion was denied on April 12, 2011.

On April 29, 2011, Markel filed its motion for summary judgment. PACC, WPACC, MAYS, and Mr. Zappala filed a cross-motion for summary judgment on May 20, 2011. The motions have ...


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