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Brotherhood Mutual Insurance Co v. Salem Baptist Church of Jenkintown

April 26, 2012

BROTHERHOOD MUTUAL INSURANCE CO., PLAINTIFF,
v.
SALEM BAPTIST CHURCH OF JENKINTOWN, DEFENDANT.



The opinion of the court was delivered by: Joyner, C.J.

MEMORANDUM OF LAW

Before the Court are the Motion to Intervene filed on behalf of Walter Logan and the Delta Alliance, LLC (ECF No. 3) and memoranda in response thereto (ECF Nos. 12, 24, 25), the Petition to Intervene filed on behalf of the Estate of Lester Mack (ECF No. 22) and Plaintiff's Brief in Opposition thereto (ECF No. 26). For the reasons set forth in this Memorandum of Law, Walter Logan, Delta Alliance, LLC and the Estate of Lester Mack are JOINED as required parties. See Fed. R. Civ. P. 19(a)(2). The Motion to Intervene (ECF No. 3) and Petition to Intervene (ECF No. 22) are GRANTED in part and DENIED in part.*fn1

I. BACKGROUND

Plaintiff Brotherhood Mutual Insurance Company ("Brotherhood") is an Indiana corporation that issued a general liability insurance policy ("Policy") to Defendant Salem Baptist Church of Jenkintown, Pennsylvania ("Salem"), effective from January 1, 2009 to January 1, 2011. Movants Walter J. Logan, Jr. ("Logan") and The Delta Alliance, LLC ("Delta") are plaintiffs in a separate action, filed on January 12, 2010, in which Salem and others are accused of malicious prosecution and civil conspiracy to commit malicious prosecution. Logan v. Salem Baptist Church of Jenkintown, Civ. No. 10-144 (E.D. Pa.) ("Logan Action"). In yet another action, filed on October 10, 2010, Petitioner, the Estate of Lester Mack ("Mack"), sued Salem and others on claims similar to those alleged in the Logan Action.*fn2 Mack v. Salem Baptist Church of Jenkintown, Civ. No. 10-5536 (E.D. Pa.) ("Mack Action"). Delta was the contractor hired to do construction work for Salem and a dispute arose over the contract. Logan is Delta's owner and Mack was a Delta employee. Logan and Mack were allegedly falsely prosecuted on Salem's behalf in retaliation for the contract dispute.

Salem sought defense and indemnity from Brotherhood in the Logan Action. Plaintiff filed the instant declaratory judgment action in pursuit of a finding that the Logan Action is outside the scope of the Policy and Brotherhood has no duty to defend or indemnify Defendant.*fn3 Brotherhood argues, inter alia, that malicious prosecution falls outside the Policy's coverage of bodily injury claims. Logan and Delta filed a Motion to Intervene on December 14, 2010, intending to argue that Salem's acts are covered by the Policy. Logan and Delta assert the Policy's definition of "personal injury" includes coverage for malicious prosecution.

The day after the Motion to Intervene was filed, Salem notified the Court that it filed for bankruptcy protection. As a result, the present case, the Logan Action and the Mack Action were all placed in civil suspense in December 2010.*fn4 On November 21, 2011, the Court removed the instant case from civil suspense upon notice that the Bankruptcy Court lifted the stay in the present case only. On December 7, 2011, Plaintiff filed its response in opposition to Logan and Delta's Motion to Intervene. The Court issued an Order (ECF No. 19) requesting supplemental briefing on the Motion to Intervene. Specifically, the Court asked the parties to analyze the applicability of American Automobile Insurance Company v. Murray, 658 F.3d 311 (3d Cir. 2011) and whether or not Logan and Delta were required parties under Rule 19 of the Federal Rules of Civil Procedure. During the period for supplemental briefing, Mack sought to intervene in the present action (ECF No. 22), arguing its absence will prejudice its interests in the Mack Action.

II. ANALYSIS

Logan and Delta seek to intervene as of right under Rule 24(a), or alternatively, they argue their joinder is required under Rule 19(a). Mack seeks to intervene as of right under Rule 24(a) only.*fn5 Even in the absence of a request for joinder, the Court must order a person to be made a party where joinder is required. See Fed. R. Civ. P. 19(a)(2). For the reasons stated below, Logan, Mack and Delta cannot intervene under Rule 24(a) but their joinder is required pursuant to Rule 19(a).

A. Intervention

Logan, Delta and Mack (collectively, "Movants") contend they may intervene as of right. The Court must permit intervention where a movant: claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant's ability to protect its interest, unless existing parties adequately represent that interest.

Fed. R. Civ. P. 24(a)(2). To establish intervention as of right, four elements must be met: 1) a timely motion to intervene; 2) a sufficient interest in the litigation; 3) "a threat that the interest will be impaired or affected by the disposition of the underlying action," and 4) the existing parties do not "adequately represent the prospective intervenor's interests." Liberty Mut. Ins. Co. v. Treesdale, Inc., 419 F.3d 216, 220 (3d Cir. 2005) (citing Kleissler v. United States Forest Serv., 157 F.3d 964, 969 (3d Cir. 1998)).

The parties reach contrary conclusions as to whether the Movants have a sufficient interest in the present action. Logan and Mack contend Federal Kemper Insurance Company v. Rauscher, 807 F.2d 345 (3d Cir. 1986), gives them the right to intervene. In that case, the insurer (Federal Kemper) sued the insured motorist (Rauscher) and the parties injured in an automobile accident allegedly caused by Rauscher. See id. at 346-47. The suit was a declaratory judgment action to determine whether or not the insurer was obliged to defend and indemnify Rauscher in a personal injury suit filed by the injured parties against Rauscher. See id. at 347-48. Rauscher did not answer the complaint in the declaratory judgment action and a default judgment was entered against him. See id. at 348. The district court simultaneously entered a judgment against the injured parties, finding their rights against the insurer were "purely derivative" of Rauscher's rights as a policyholder. See id. at 348-49. The Third Circuit reversed, holding that an injured party has standing to defend a declaratory judgment action brought by an insurer. See id. at 352-53. The Third Circuit concluded a case or controversy existed between the injured parties and the insurer, even in the insured's absence. See id. at 353. In dicta, the court noted that the injured parties were indispensable parties for purposes of Fed. R. Civ. P. 19. See id. at 354 & n.5.

Plaintiff asserts the holding of Liberty Mutual Insurance Company v. Treesdale, Inc., 419 F.3d 216 (3d Cir. 2005), is controlling. In Treesdale, Liberty Mutual brought a declaratory judgment action against its insureds, PMP and Treesdale, Inc., to determine whether or not the insurance policy's benefits were exhausted. See id. at 219. Prior to the action, the insurer provided complete defenses to the insureds in their costly and numerous asbestos-related personal injury actions. See id. "A small subset of the plaintiffs" in those underlying tort actions sought to intervene as of right in the declaratory judgment action. Id. The district court denied the motion to intervene and the Third Circuit affirmed, finding that the intervenors had no legally protectable interest in the insurance policy. See id. at 222. The court reiterated the principle that "a mere economic interest in the outcome of litigation is insufficient to support a motion to intervene." Id. at 221-22 (citing Mountain Top Condo. Assoc. v. Dave Stabbert Master Builder, Inc., 72 F.3d 361, 366 (3d Cir. 1995)). The Third Circuit found that intervention was not permissible under Fed. R. Civ. P. 24(b) and the injured parties were not required parties under Fed. R. Civ. P. 19. See id. at 227, 229-30. Treesdale did not mention Rauscher, much less overrule it.

Treesdale and Rauscher come to disparate conclusions as to an injured party's legal interest in a declaratory judgment suit over a tortfeasor's insurance policy. Some court have followed the reasoning in Treesdale, in part, because it was the "most recent indication of how the Third Circuit would rule if presented with the issue." Nationwide Mut. Ins. Co. v. Garman, Civ. No. 09-1431, 2010 WL ...


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