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TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA v. MERICLE
TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, f/k/a The Travelers Indemnity Company of Illinois,
v.
ROBERT K. MERICLE; MERICLE CONSTRUCTION, INC., Appellants.
No. 10-3887.
United States Court of Appeals, Third Circuit.
Argued January 10, 2012.
Filed: June 20, 2012.
R. TED CRUZ, ESQUIRE (ARGUED), Morgan, Lewis & Bockius, 1000 Louisiana Street, Suite 4000, Houston, Texas 77002.
SAMUEL J. ARENA, JR., ESQUIRE (ARGUED), KARL S. MYERS, ESQUIRE, Stradley, Ronon, Stevens & Young, 2600 One Commerce Square, 2005 Market Street, Philadelphia, Pennsylvania 19103, Attorneys for Appellee.
Before: SCIRICA, RENDELL and SMITH, Circuit Judges.
NOT PRECEDENTIALOPINION OF THE COURTSCIRICA, Circuit Judge. Travelers Property Casualty Company sought a declaratory judgment that a commercial general liability insurance policy issued to Robert Mericle and Mericle Construction did not oblige it to defend or indemnify Mericle in a lawsuit brought by the victims of a corrupt kickback scheme. The District Court found Travelers had no duty to defend or indemnify Mericle and entered judgment in favor of Travelers. For the following reasons, we will affirm. IThe underlying complaint stems from a tragic judicial kickback scheme. Mark Ciavarella and Michael Conahan, two judges of the Luzerne County Court of Common Pleas, engaged in a scheme exploiting and debasing their position as judges in adjudicating juvenile cases. Each accepted money from Robert Mericle, the owner of Mericle Construction and builder of two private juvenile facilities, and others1 in exchange for facilitating the construction of private juvenile detention facilities and then imposing harsh sentences on juveniles in order to ensure the facilities would be used. As a result of Mericle's role in the illegal scheme, several civil suits, consolidated in the Master Individual Complaint ("MIC") and the Master Class Action Complaint ("MCAC"), were filed by the aggrieved juveniles against Mericle.2 The case before us is a dispute about insurance coverage. Robert Mericle and Mericle Construction (collectively "Mericle") had an insurance policy with Travelers Property Casualty Company of America ("Travelers"). Under the General Liability section of the policy, coverage is provided for claimed damages of "Bodily Injury and Property Damage" (Coverage A) or "Personal and Advertising Injury" (Coverage B). The policy only applies to "Bodily Injury and Property Damage" caused by an "occurrence" taking place during the policy period. The policy defines an "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Moreover, the policy excludes coverage for "bodily injury" "expected or intended from the standpoint of the insured" under the exclusions articulated in the policy. The policy also provides coverage for claimed damages of "Personal and Advertising Injury," which the policy defines as "injury, other than `bodily injury', arising out of one or more of the following offenses: (a) False arrest, detention, or imprisonment ... ." Coverage is excluded for "personal injury" that "aris[es] out of the willful violation of a penal statute or ordinance committed by or with the consent of the insured."
1. Two of the named parties in the complaint are parties in the related appeals docketed at Nos. 10-2833 and 10-2887, Colony Insurance Co. v. MAYS and Powell, and Nos. 10-4198 and 10-4780, General Star Indemnity Co. v. MAYS and Powell.
2. On February 28, 2012, the District Court conditionally approved the class and preliminarily approved a settlement agreement. Under the agreement, Mericle agreed to pay $17.75 million to a settlement fund to compensate the juvenile victims who suffered physical or psychological harm. A hearing on final settlement will be held on September 10, 2012. See Order Conditionally Certifying Settlement Class and Preliminarily Approving Proposed Settlement, Wallace v. Powell, No. 3:09-CV-0286 (M.D. Pa. 2012) ECF No. 1084.
3. The District Court had jurisdiction under 28 U.S.C. § 1332(a). We have jurisdiction under 28 U.S.C. § 1291. Pennsylvania law governs this diversity case.
4. We exercise plenary review over a district court's decision resolving cross-motions for summary judgment. State Farm Fire & Cas. Co. v. Estate of Mehlman, 589 F.3d 105, 110 (3d Cir. 2009). We review a district court's interpretation of Pennsylvania state law de novo. Koppers Co. v. Aetna Cas. & Sur. Co., 98 F.3d 1440, 1445 (3d Cir. 1996).
5. During oral argument, Mericle argued that one interpretation of the complaint could conceivably be that "Mericle did a bribe at the outset that made it part of the whole broader conspiracy and ... [Mericle] knew or should have known [that the juveniles were being unlawfully detained] ... [and] it's not a knowing criminal conduct, it's negligence." Transcript at 5-6. But the factual allegations in the complaint do not support this contention.
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