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Westfall Township v. Darwin National Assurance Co.

United States District Court, M.D. Pennsylvania

January 7, 2015

WESTFALL TOWNSHIP, Plaintiff,
v.
DARWIN NATIONAL ASSURANCE COMPANY and ALLIED WORLD ASSURANCE COMPANY, Defendants.

MEMORANDUM

A. RICHARD CAPUTO, District Judge.

Presently before the Court is Plaintiff Westfall Township's Motion to Remand this matter to the Pike County Court of Common Pleas (Doc. 9). Also before the Court is a Motion to Dismiss Counts I and III of the Complaint filed by Defendants Allied World Assurance Company ("Allied") and Darwin National Assurance Company ("Darwin") (Doc. 15). Because Defendants have properly stated diversity of citizenship and remand to state court would not serve the interests of the Declaratory Judgment Act, 28 U.S.C. § 2201, or diversity jurisdiction as set out by 28 U.S.C. § 1332, the motion to remand will be denied. Because the claim for declaratory relief serves no purpose, the Motion to Dismiss Count I of the Complaint will be granted. Because a plaintiff may include a claim on the basis of estoppel in Pennsylvania so long as it does not stand alone, the Motion to Dismiss Count III of the Complaint will be denied.

I. Background

This claim arises out of a lawsuit brought against Westfall Township ("Westfall") by a former employee, Robert Dombrosky. Defendant Darwin issued a Public Officials Professional and Employment Practices Liability Insurance Policy ("the insurance policy") to Westfall. (Doc. 2, 2.) Defendant Allied administered this policy for Darwin. (Id. at 3.)

Mr. Dombrosky filed the underlying civil rights action for monetary damages because the town did not reinstate him as a police officer following a leave of absence. (Id.) The underlying litigation took place in this court: Dombrosky v. Banach, No. 3:09-CV-2579, 2012 WL 1899656 (M.D. Pa. May 24, 2012) aff'd, 557 F.App'x 107 (3d Cir. 2014). Defendants undertook the defense of the claims against Westfall pursuant to the insurance policy, and continued to do so throughout the litigation from 2010 to 2012. (Doc. 2, 3.) On August 21, 2012, Defendants disclaimed coverage under the insurance policy. (Id.) On September 14, 2012, I entered an order dismissing the lawsuit with prejudice because the matter was settled. Plaintiff alleges that as a result of the improper denial of coverage, it was in a prejudiced position, and so was "forced to enter" into this settlement with Mr. Dombrosky for payments to him totaling $702, 800. (Id. at 4.) Defendants assert that they rightfully disclaimed coverage when they discovered that Mr. Dombrosky first made this claim prior to the insurance policy's inception, thus negating any liability on their part.

On August 8, 2014, Westfall commenced this action by filing a Complaint "for Declaratory and Compensatory Relief" in the Court of Common Pleas of Pike County (Doc. 2; Notice of Removal, Ex. A ). Westfall alleges that the disclaimer of coverage by Defendants was "wanton, willful, wrongful and reckless." (Id. at 4.) Westfall alleges that the defendants were required to provide indemnity to Westfall in connection with the claims of Mr. Dombrosky, and the failure to do so resulted in harm to Westfall. (Id.)

Plaintiff claims that Defendants breached their obligations under the insurance policy by disclaiming coverage. Plaintiff alleges that Defendants are estopped from denying coverage, they received timely notice of Mr. Dombrosky's claims, and were not prejudiced by any alleged late notice. Count I of the Complaint requests declaratory relief: a declaration that Plaintiff was entitled to coverage under the Policy for all claims of Mr. Dombrosky. Counts II, III and IV-brought under theories of breach of contract, estoppel and bad faith, respectively-seek reimbursement of the money paid to Mr. Dombrosky in the settlement, and all other money spent in the settlement after the disclaimer of coverage.

On August 25, 2014, the defendants, Allied and Darwin, filed a Notice of Removal (Doc. 1), removing this case to United States District Court for the Middle District of Pennsylvania, based upon diversity of citizenship. On September 19, Plaintiff Westfall filed a Motion to Remand this matter to the Pike County Court of Common Pleas, pursuant to 28 U.S.C. § 1447. On October 3, Defendants filed a Response to this motion (Doc. 17), and a Brief in Opposition (Doc. 18).

On October 2, 2014, Defendants filed a Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), failure to state a claim upon which relief can be granted (Doc. 15). On October 24, Plaintiff filed a Response (Doc. 23) and a Brief in Opposition (Doc. 22) to Defendants' Motion to Dismiss. On November 7, Defendants filed a Reply Brief in further support of the motion to dismiss (Doc. 24). These matters are fully briefed and ripe for disposition.

II. Plaintiff's Motion to Remand

As it poses a question of jurisdiction, I first examine Plaintiff's Motion to Remand (Doc. 9). Defendants removed this case from the Court of Common Pleas in Pike County to the Middle District of Pennsylvania, alleging diversity jurisdiction pursuant to 28 U.S.C. § 1332. Section 1332(a)(1) gives district courts original jurisdiction to hear cases where the matter in controversy exceeds the value of seventy-five thousand dollars ($75, 000) and is between citizens of different states. There must be complete diversity, meaning that all defendants must be a citizen of a different state from all plaintiffs. Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373 (1978).

A. Diversity of Citizenship

Plaintiff argues that removal to district court was improper, "as the defendants' Notice of Removal lacks the requisites necessary to establish diversity of citizenship." (Doc. 13, 11.) "A corporation shall be deemed to be a citizen of every State... by which it has been incorporated and of the State... where it has its principal place of business." 28 U.S.C. § 1332(c)(1). The Supreme Court has interpreted the term "principle place of business" to refer to a corporation's "nerve center." Hertz Corp. v. Friend, 559 U.S. 77, 81 (2010).

Plaintiff argues that Defendants did not demonstrate citizenship because the Notice of Removal (Doc. 1) states where the defendants are incorporated, but does not use the term "nerve center." (Doc. 13, 13.) Plaintiff's argument is unfounded. Defendants state not only that the two companies, Darwin and Allied, are incorporated in Delaware, but also that New York is the principal place of business for both. This averment is sufficient to establish that the corporations are citizens of New York. Defendants need not use the specific term "nerve center." The citizenship of Westfall Township is not disputed: it is a town in ...


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